Rita causes record damage to oil rigs

Hurricane Rita has caused more damage to oil rigs than any other storm in history and will force companies to delay drilling for oil in the US and as far away as the Middle East, initial damage assessments show....

More...

I was waiting for this....

Not good, folks. Not good at all.


[edit on 27-9-2005 by loam]

Originally posted by loam

Hurricane Rita has caused more damage to oil rigs than any other storm in history and will force companies to delay drilling for oil in the US and as far away as the Middle East, initial damage assessments show....

More...

I was waiting for this....

Not good, folks. Not good at all.


[edit on 27-9-2005 by loam]

I had a feeling this was the case, especially when ALL of the media was saying how 'un-damaged' oil related equipement was............

Ack! You beat me to it. I saw it just before leaving work.

I also found this at The Oil Drum today:

Aren't a lot of people's lives changing for the worse?

Posted by Prof. Goose in Supply/Production
Sun Sep 25 at 10:03 PM EDT

[old link] (warning .pdf!)

Update [2005-9-27 1:41:53 by Prof. Goose]:Here's today's document (change the number in the date for tomorrow... www.electricity.doe.gov...

Browse through this interesting pdf from the DOE that the MSM seems to completely miss the point of...it lays out explicitly refinery damage, oil shut in, and other interesting energy stats (found this at peakoil.com)

100% of GOM oil out (and look at the percentage figures for the past month below), 20% of the country's refineries down, NG Henry Hub down, lots of lives displaced, things feeling amok...in a nutshell, virtually 3/4 of the script for the 'Oil Storm' is playing out, and prices go down...must be one hell of a recession looming one wonders...

just to make the point:

Date -------- % of GOM Oil Shut-in --- % of GOM Gas Shut-in
========================================
August 30 ------- 95.20 ---------------- 87.99
August 31 ------- 91.45 ---------------- 83.46
September 1 ---- 90.43 ---------------- 78.66
September 2 ---- 88.53 ---------------- 72.48
September 3 ---- 78.98 ---------------- 57.80
September 4 ---- No data reported No data reported
September 5 ---- 69.57 ---------------- 54.13
September 6 ---- 58.02 ---------------- 41.06
September 7 ---- 57.37 ---------------- 40.36
September 8 ---- 60.12 ---------------- 40.20
September 9 ---- 59.88 ---------------- 38.29
September 10 --- 59.84 ---------------- 38.21
September 11---- No data reported -- No data reported
September 12 --- 57.38 ---------------- 37.84
September 13 --- 56.45 ---------------- 37.20
September 14 --- 56.25 ---------------- 35.18
September 15 --- 56.14 ---------------- 34.11
September 16 --- 56.06 ---------------- 33.84
September 19 --- 55.84 ---------------- 33.75
September 20 --- 58.49 ---------------- 34.82
September 21 --- 73.16 ---------------- 47.13
September 22 --- 91.93 ---------------- 65.95
September 23 --- 99.13 ---------------- 72.04
September 24 --- 100 ------------------ 74.88
September 25 --- 100 ------------------ 80.47
September 26 --- 100 ------------------ 78.43

(perspective: The GOMEX produces 1.5 MBOPD (oil) and 10 BCFPD (NG). Overall US consumption is 20ish MBOPD for oil and 62.4 BCFPD for NG. (thanks marek))

I'll say this the easy way: WTF?

Something is terribly awry.

The Oil Drum

Shut-in from Katrina only had time to move from 95% down to the mid fifties. The last five days have been total shutdowns. See the reports on the closed refineries in that PDF?

Anybody good at math (and patient)?

Percent shut-in multyplied by 1.5billion for oil and 10 billion for natural gas for each day, add it all up and you get the total amount of crude and natural gas removed from the market over the last month.

Same excercise can be done for gasoline due to the shut-in refineries.

A barrel of crude oil contains 42 gallons. New technology developped in the 90s means you can get about 20 gallons of refined gasoline from that barrel of oil.

The stock market is stable and oil prices have eased?

Not for long...
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[edit on 9/27/2005 by Gools]

Originally posted by Gools
Ack! You beat me to it. I saw it just before leaving work.

OK, in case you haven't noticed, I'm a NEWS ADDICT, requiring serious clinical intervention.

I'll say this the easy way: WTF?
Something is terribly awry.
...
The stock market is stable and oil prices have eased?
Not for long...

Couldn't agree more. Strap on your seatbelts, folks, 'cause.....*coughs*....you're goin' nowhere!

[edit on 27-9-2005 by loam]

This can´t be true. No!!!
The End Times Prophet can´t be right again!
He has to be proved wrong, at least once!
BTW, from the article:

"Rita came to the west where there is a lot of [exploratory] rig activity.”

This suggests to the readers that there were hardly any oil platforms on the way.
That´s why the article doesn´t provide any data about the amount of destroyed or structurally damaged platforms.

The only reason why the oil price "only" rose 4 pct since yesterday is that the illuminati are now using, since the beginning of September, the IEA strategic reserves.
They have a few days left.
After which ....

posted on 23-9-2005 at 06:38 AM Post Number: 1704649 (post id: 1726542)

Last glimpse ... of an age coming to an end
www.abovetopsecret.com...

White House moves to prevent run on petrol supplies

President George W. Bush's call for the US public to conserve energy is aimed at preventing a run on petrol at a time when the US is precariously short of it...

“The president's best bet for the next two weeks is to try to see if he can get Americans to stop doing discretionary driving without creating panic,” said Amy Myers Jaffe, research fellow at the James A Baker III Institute for Public Policy. “He's in a very challenging position.”

...

This story is slowly perculating like a coffee pot... Will be very interesting to see what really happens.

Originally posted by loam
This story is slowly perculating like a coffee pot... Will be very interesting to see what really happens.

No doubt, but winter is around the corner and there is no real discussion on natural gas. The Gulf NG rigs are out of commission for a good length of time or have been destroyed.

.

Originally posted by cjf
No doubt, but winter is around the corner and there is no real discussion on natural gas. The Gulf NG rigs are out of commission for a good length of time or have been destroyed.

.

All I keep hearing is that the price of natural gas will be up about 50 to 60% over last year. I'm wondering if those numbers are still correct. I'm going to be trying to figure out if it's cheaper to run space heaters rather than use natural gas this winter. I think it's going to be a cold winter in many homes this winter.

Here ya go orionthehunter

Natural-gas rates boosted to record levels

State energy regulators approved higher natural-gas rates for more than 700,000 Western Washington customers yesterday, allowing the highest rates in state history.

Puget Sound Energy and Northwest Natural Gas customers in King, Snohomish, Pierce, Thurston, Lewis, Kittitas, Clark, Skamania and Klickitat counties will see their bills go up 12 to 15 percent starting next month.

The rates approved by the state Utilities and Transportation Commission (UTC) will increase the average Puget Sound Energy gas bill about $11 a month. Northwest Natural Gas customers will see average bills climb about $9.20 a month.

On Oct. 26, the UTC, which regulates natural-gas rates, will consider increases proposed for the rest of the state.

Puget Sound Energy (PSE), the state's largest natural-gas provider, serves more than 683,000 customers; Northwest Natural Gas, about 60,000.

The increases are the latest approved in the past several years and follow those for other energy sources, including gasoline. Natural-gas prices have risen annually except in 2002, UTC spokeswoman Marilyn Meehan said.

Last year, PSE raised its rates about 16 percent.

The companies blamed the increases on higher wholesale prices, which Meehan said are due to increased demand and limited supply.

Other parts of the country face dramatic increases in the aftermath of two Gulf Coast hurricanes, but the Washington increases aren't related to the storms, Meehan said. Because companies here buy natural gas in advance and on contracts, any effect of the hurricanes wouldn't be felt until next year.

Updated numbers from www.mms.gov...

Date ---------- % of GOM Oil Shut-in --- % of GOM Gas Shut-in
========================================
September 26 ------- 100 ---------------- 78.4
September 27 ------- 100 ---------------- 78.6
September 28 ------- 100 ---------------- 80.3
September 29 ------- 98.6 --------------- 78.9
September 30 ------- 97.8 --------------- 78.4
.
October 3 ------------ 92.8 --------------- 74.95

As damage reports slowly trickle in from both of the recent hurricanes we expect they will reveal severe, extensive, and long term damages to both onshore and offshore facilities that will take massive amounts of capital and manpower to repair.

Offshore oil and gas fields in the Gulf of Mexico in normal times supply approximately 20% of the nation’s natural gas production and around 25% of the crude oil production.

Hurricane Katrina and Rita have shut down a substantial amount of this crude oil and natural gas production - for an entire month. Possibly a substantial amount of this production may be out for many months to come.

In addition to the impact on natural gas and crude oil production Katrina shuttered four refineries constituting 4% of U.S. refining capacity. Hurricane Rita took additional refining capacity off line, of which 13% remains shut down. A sum total 17% of U.S. refining capacity is non-operating due to the hurricanes as of October 1st – an astoundingly large number.

Damaged refining facilities will be offline for a period of weeks to months as equipment repairs are made, pipelines are patched, electricity restored, facilities tested, and the workforce repopulates the stricken areas. - source

The Oil Drum is also carrying some snipets of a Salon article (registration required) about using the 2-million-barrel heating oil reserve (thats refined product) set up specifically for the Northeast during times of winter shortages.

Congress five years ago created a 2-million-barrel Northeast heating oil reserve that is to be used in case of supply shortages or delivery problems in nine states from Maine to Pennsylvania. Fuel oil is widely used in the Northeast to heat homes and businesses.

The government stockpile of heating fuel, which is rotated regularly while held at private terminals in New York Harbor and Connecticut, has never been used.

Bodman said that a decision to release additional government stocks of crude oil, or for the first time tap the government's Northeast heating oil reserve, will be considered by Bush.

"We are prepared to do what is necessary with regards to the strategic reserves," Bodman said, adding that the president has indicated "he is prepared to do whatever it takes" to meet supply needs. The Oil Drum

It's going to be a rough winter.
.

[edit on 10/3/2005 by Gools]

Today's report on GOM production shut-ins:

These evacuations are equivalent to 25.64% of 819 manned platforms and 3.73% of 134 rigs currently operating in the Gulf of Mexico (GOM).

Today’s shut-in oil production is 967,734 BOPD. This shut-in oil production is equivalent to 64.52% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.

Today’s shut-in gas production is 5.196 BCFPD. This shut-in gas production is equivalent to 51.96% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.

The cumulative shut-in oil production for the period 8/26/05-10/20/05 is 63,561,011 bbls, which is equivalent to 11.609% of the yearly production of oil in the GOM (approximately 547.5 million barrels).

The cumulative shut-in gas production 8/26/05-10/20/05 is 321.185 BCF, which is equivalent to 8.800 % of the yearly production of gas in the GOM (approximately 3.65 TCF). source

- over 25% of platforms still evacuated
- over 64% of oil production still offline
- over 50% of gas production still offline

and if I recall my recent readings correctly there are still 8 refineries offline.

I can't believe that the financial markets aren't in turmoil.
.

Originally posted by Gools
I can't believe that the financial markets aren't in turmoil.
.

I agree. In fact, that has me even more concerned.... Can there be that much of a disconnect????

How speculative have things really gotten?

Well since the oil market always seems to react to US numbers (how much we got stockpiled and whatnot) Oil should be falling as it is since we have more oil now (through the help of the IEA) than we had even last year at this time according to the latest data.

The report "sent a clear bearish message to the market, with the build in crude stocks greater than expected and the jump in gasoline inventories a complete surprise," said Tim Evans, senior energy analyst with IFR Markets in New York. "Even the supportive 1.9-million-barrel decline in distillate inventories was within the range of expectations, limiting the bullish leverage it might provide."

www.thebusinessonline.com...

Add the unexpected build in stocks and record breaking imports to the demand destruction

Chart says demand is rebounding.

I'm under the impression that the more pictures and charts you post the better your post is so here are a couple more charts to compare



Funny thing I saw today. Most gas stations are selling regular unleaded at $2.63 one station goes down to $2.59 (a whopping four cents). I chose the $2.59 station, not because of the price, but because of its convinient location on my way to work.

I tried getting in at 1pm.. No pumps open. Tried again on way home... Again no place for me to park. I said F**K it and decided to go home.

I believe this relief is temporary. What scares me is $3 gas causes demand destruction. If supply falls fast enough it can outrun the fall in demand and send gas prices up to $5 or more. What happens then?

Something else that really ticks me off, is these polls

www.pollingreport.com...

They think Bush can and should handle it better and make it all better.


"Is the price of gasoline something a president can do a lot about, or is that beyond any president's control?"

Sept. 9 - Oct. 5

Can do alot 64%
Beyond Control 29%
Unsure 7%


"Do you approve or disapprove of the way Bush is handling the situation with gasoline prices?"


Sept. 8 - 11

Approve 25%
Disapprove 72%
Unsure 3%

When asked who should take the most blame, public enemy number one is the oil companies followed by the federal government.

Originally posted by loam
How speculative have things really gotten?

Ever hear of derivatives?

THE DANGER OF DERIVATIVES

Derivatives Defined

The arcane world of derivatives is easy to understand once you break it down to its simple components. Derivatives are financial instruments whose value depends on the value of something else. In contrast to financial assets, derivatives are financial instruments whose "payoff" depends on another financial instrument or security. Those other instruments on which they derive their value can be a stock, stock index, a bond, interest rates, currencies or a commodity such as oil.

Derivative contracts consist of four basic types of contracts. They are forward contracts, futures contracts, option contracts, option on futures, swap contracts or a derivation of the five. Another feature of derivatives is that they are generally not reported on balance sheets… a very important revelation.

The key to understanding these complex instruments is to think of them as a premium much like an insurance product. When you buy insurance, you pay a premium in order to obtain protection against an event such as an accident, fire, or death. Derivatives are similar. They have a payoff contingent upon the occurrence of some event. The buyer of a derivative pays a premium in advance.

Most investors are familiar with options on stocks, which are a form of derivatives. For example, an investor could buy 100 shares of IBM trading at $92 for $9,200 or instead buy an option on IBM instead. A 1-month call option on IBM with a strike price of $100, would give the investor the right, but not the obligation, to buy IBM within one month's time. Instead of paying $9,200 and receiving the stock, the option would cost only $300. If IBM goes up to $125, the investor would make the same $25 a share as if the stock was owned, less the cost of the option.

However, for the option investor, the rate of return is much higher, since the investor did not have to put up the entire amount necessary to buy the stock outright. The cash investor made a return of 36% ($3,300 on $9,200) while the option investor made a return of 733% ($2,200 on $300). The buyer of the option was able to leverage his return by controlling the same amount of stock with less money. Derivatives can enable investors to leverage returns or hedge against risk, providing flexibility with a different risk/reward profile.

"The Players" in Derivatives

The main players in the derivative markets are institutions. They include investment banks, commercial banks, and end users such as mutual funds, corporations, and hedge funds. These institutions use computer systems to manage risk, account for positions, and track events such as the expiration of contracts, and measure the amount of capital at risk. Derivatives have become more complex over the years because of the convexity of these products.

Because these instruments are so complex, they require a risk manager to oversee a derivative portfolio. There are different levels of risk management. At the micro level, a risk manager may be a trader with the responsibility for derivatives in one asset class. At the macro level, the risk manager is in charge of determining the firm's derivative positions in regards to the longer-term trends of the market. Lastly, there is the middle office, which has the responsibility of enforcing the policies, risk and investment objectives of the firm. Middle office risk managers keep senior or upper management informed of the financial price risks to which the firm is exposed. The risk manager is similar to a portfolio manager in that they both want to maximize return on capital. However, the derivative risk manager must focus his attention more on risk than just the return on capital.

One of the biggest problems risk managers face is the rogue trader. A rogue trader is one whose behavior and risk-taking is intentionally inconsistent with the aims of management or its shareholders. The risk manager must constantly ferret out trading irregularities and be on the lookout for the rogue trader.

Three Kinds of Risk

Derivatives are subject to three kinds of risk. The first is leverage because derivatives expand the amount of assets that can be controlled as in the case with options or futures. A second form of risk is liquidity. A liquidity vacuum can occur when the bid/offer spreads widen to levels that make it prohibitively expensive to deal. Over-The-Counter (OTC) contracts make up 91 percent of derivatives while exchange-listed contracts are 9 percent. OTC contracts can be custom-tailored to meet firm-specific risk management needs. Since they are more specifically tailored, they tend to be less liquid than exchange listed contracts, which are standardized and fungible [those items of which any unit is, by nature or usage of trade, the equivalent of any other like unit]. The final risk in derivatives is counter-party risk. With derivatives, there are always two parties to a contract. The risk here is that the other party doesn’t perform or is unable for financial reasons to deliver on their obligations.

Derivative Dilemmas

There are many risk black holes when dealing with derivatives. They have become more complex over the years as investors have found the means to hedge against risks. The world of hedging exposes investors to a lexicon of terms known as "The Greeks". Essentially, they are techniques for hedging against the behavioral characteristics of an option, futures, forward or cash position. There is "Delta" [ D ] which tries to capture gains from volatility by hedging a portion of the option’s value. The idea behind "Delta" is to make money on volatility. The more times you can delta-hedge an option, the more profit can be realized to help pay for the option investment.

Then there is "Gamma" [ G ]. Gamma is the second derivative of the option price, which deals with the sensitivity of the delta (rate of change of the delta) with respect to the cash price of the underlying asset. Because of the convexity of the option price curve, there is a greater opportunity for the change of the option price if the cash or spot price moves. In other words, the greater convexity delivers more bang for the buck if you’re long, and more pain if you are short.

Options become more expensive when volatility in the market is high, and less expensive when volatility is low. The sensitivity of an option’s price to changes in its implied volatility, all other things being equal, is called the "Vega". There are other Greeks such as "Rho " [ R ] which deals with an option’s sensitivity to changes in the domestic interest rate.

Formula for Disaster?

If you are getting the impression that this is a risky and quite complex business, you are beginning to get the picture. Derivatives are a difficult concept to grasp. Their explosion in size and use go back to a formula that was developed back in the 1970’s. In 1973 three economists ¾ Fisher Black, Myron Scholes, and Robert Merton ¾ developed the "Holy Grail" that revolutionized modern finance. The elegant formula they unleashed upon the world led to the creation of a multi-trillion dollar industry known as derivatives. Both Merton and Scholes would receive the Nobel Prize for their work in 1997. A year later, they would take part in one of the greatest financial disasters in modern history due to their reliance on their formula to predict risk.

See link to actual formula

The formula is known in the financial world as the Black-Scholes Option-Pricing Formula. It's usefulness was that it enabled investors to determine how much a call-option is worth at any given time. The combination of the Black-Scholes model with probability theory caused the world of derivatives to explode. Complex computer models have been developed to take advantage of every permutation and possibility of every financial instrument and market. Today the notional value of derivatives worldwide is estimated to approach $100 trillion.

Derivatives take leverage to the tenth degree. The opportunities for disaster are manifold. In the derivatives market, when you make a mistake, it can be deadly. When derivatives implode, they aren’t just bombs ¾ they are more like a nuclear explosion. Because they are highly leveraged and risky, they can produce high returns when they go right and catastrophe when they go wrong. -
Lots more in this Financial Sense article

More on derivatives:
Wiki - Derivative (finance)
Wiki - Derivatives market
Google of Financial Sense.com

There are trillions of dollars worth floating around. The speculation bubble is huge.

Smirkley started a thread about the stock exchange in relation to the hurricanes. See my link to the "Plunge Protection Team".

My guess is the PPT uses the leverage of derivatives.

Ever see my Great Depression thread? The article I mention there titled "As Good As it Gets" explains (among other things) how much inflationary debt has been pumped into the economy recently.

I don't pretend to understand it all, but my gut is telling me something is very wrong and it's not a matter of "if" but "when" the whole Greenspan inflationary ponzi scheme comes tumbling down.

We're way overdue for a correction IMO. The price of oil has doubled in the last year and trippled in the last two.
.

Japan to keep releasing oil from reserves via IEA

Japan will continue to release oil reserves held by the private sector for the fourth straight month starting Tuesday running through Jan. 4 in a concerted action with the International Energy Agency.

In a joint action by 26 IEA members following hurricane damage to U.S. oil production facilities, ...

The Paris-based energy watchdog announced Sept. 2 that its members would release a total of 60 million barrels from their strategic oil reserves after Hurricane Katrina severely damaged oil production facilities along the U.S. Gulf Coast.

The discharge target has not been achieved yet and no IEA member has ended releases from its oil stockpile, an agency official said.

Japan was asked to handle 12.2 percent of the release.

This IMO is the only reason that the price per barrel has not skyrocketed.

26 countries are still releasing oil from their strategic reserves and at some point they will have to stop as well as replenish them. But what I don't understand is that 60 million barrels is a drop in the bucket when you consider that as of today:

... evacuations are equivalent to 15.99% of 819 manned platforms and 0.00% of 134 rigs currently operating in the Gulf of Mexico (GOM).

Today’s shut-in oil production is 464,858 BOPD. This shut-in oil production is equivalent to 30.99% of the daily oil production in the GOM, which is currently approximately 1.5 million BOPD.

Today’s shut-in gas production is 2.442 BCFPD. This shut-in gas production is equivalent to 24.42% of the daily gas production in the GOM, which is currently approximately 10 BCFPD.

The cumulative shut-in oil production for the period 8/26/05-12/08/05 is 99,921,814 bbls, which is equivalent to 18.251% of the yearly production of oil in the GOM (approximately 547.5 million barrels).

The cumulative shut-in gas production for the period 8/26/05-12/08/05 is 516.890 BCF, which is equivalent to 14.161% of the yearly production of gas in the GOM (approximately 3.65 TCF).

source

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[edit on 12/8/2005 by Gools]

Interesting... So much new supply entering the market and oil still hovers in the $55 - $60 range. Where will it go when they start refilling their reserves?

not good guys..... The initial signs of the first hints of consolidation is taking place broadly... gold....real estate.... remember that London still has the largest trading in currencies daily in the world....like I said in a previous post i see Feb/March next year as visible and apparent signs of it about to take place in 2006.... maybe by then Gulp in relation to peak oil affecting all reserves... however as said above with currency markets in london are going to be affceted by the Iranian Euro looming change... the FTSE is around 25-30% consisted of wealth in Oil and related investements... it is known within the city that the london currency traders are always more twitchy of share trades than other centres globally...inflation is up.... with the immpending winter cold snap in europe and maybe china US well just simply somethings going to give very soon no matter how much external manipulation by secret societies or not you believe in.... Something just has to give..

Regards

Elf.