Author: Vincent Fernando

According the Energy Information Administration’s (EIA) latest energy outlook, while world energy consumption is expected to grow in 2010, it will only be adding 1.1 million barrels of consumption and will remain below its past peak consumption.

This tepid demand growth will butt against production increases for many non-OPEC oil producers, which means that OPEC will be under substantial pressure to limit its output, and obviously will.

Yet this will require massive discipline for the member nations given that OPEC’s surplus crude oil production capacity will actually rise in 2010, after a huge increase is surplus capacity during 2009. 2010 will see the worst OPEC overcapacity situation since 2002, as shown below.

EIA: Through the forecast period, OPEC surplus crude oil production capacity should remain in excess of 4 million bbl/d, versus an average of 2.8 million bbl/d seen over the 1998-2008 period.

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• Stratfor: An Iraqi Oil Renaissance May Destroy OPEC
• Cash-Hungry Iraq Quadrupling Oil Production, OPEC Fears Price Collapse
• Falling Oil Demand Terrifies OPEC, Spurring It To Restrict Production

Russia’s Lukoil has won the rights to develop one of Iraq’s largest oilfields — the 12.9 billion barrel West Qurna Phase 2 field.

This upcoming mega-field is seen as the ‘crown jewel’ of 15 fields offered during the second post-war licensing round.

It’s just the beginning of what will likely be Iraq’s oil renaissance.

Canadian Press: The deal was a coup for Lukoil, which had been granted the rights to develop the field in 1997 by Saddam Hussein only to see the dictator rescind the $3.7 billion contract five years later.

Lukoil had been trying to revive the deal since 2003 after Moscow wrote off most of Iraq’s $12.9 billion in debts. Iraqi officials, however, eager to make sure that the reopening of the country’s oil sector to the world was as transparent as possible, shrugged off the Russian calls and insisted on putting the field up for bids.

Read more here.

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• Battling Forces Dig In, As Iraq-Iran Oil Well Standoff Continues
• Cash-Hungry Iraq Quadrupling Oil Production, OPEC Fears Price Collapse
• It’s Not Over: Iraq Sends Forces To Oil Well Seized By Iran

Not only has the U.S. passed a major 2007 peak in total oil consumption, but in particular it’s also consuming far less jet fuel than just a year ago… or even eight years ago.

The U.S. has yet to re-take its peak jet fuel consumption from 2001, pre-9/11. This despite the substantial economic growth since then.

Infectious Greed: The real peak came in August of 2001, before 9/11 changed everything in air travel. And we’re now down 23% from that particular peak.

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• Dwindling Oil Production Threatens To Blow The Trans-Alaska Pipeline
• Battling Forces Dig In, As Iraq-Iran Oil Well Standoff Continues
• Stratfor: An Iraqi Oil Renaissance May Destroy OPEC

The United States Natural Gas (UNG) performance nightmare continues. It even underperforms when it’s rallying.

Bespoke Investment Group: Since then, however, natural gas has made a major reversal and is actually up on the year. UNG, on the other hand, remains down over 55%. In essence, UNG holders have missed out on the entire rally.

While the explosion in popularity of ETFs has had many positive effects and created numerous efficiencies for investors, the boom in the industry hasn’t been void of some individual busts.

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• New York City Kills The Shale Gas Revolution
• American Shale Gas Revolution Threatened By Fracking Environmentalists
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Some believe recent breakthroughs in shale gas technology provide the U.S. with a gigantic source of cheap, domestic energy.

Others don’t.

Reuters: New York City urged New York state on Wednesday to ban natural gas drilling in its watershed, adding unprecedented support to critics who consider the chemicals used to mine for shale gas as poisonous to drinking water.

The biggest city in the United States joined environmentalists and small-town neighbors of drilling operations in trying to hinder the exploitation of one of the most promising sources of U.S. energy — the Marcellus Shale formation.

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Iraq's latest oil field auctions, mostly involving partnerships with Russian and Chinese companies due to a dearth of U.S. companies even tendering, could bring total oil production to 12 million barrels per day.

Believe it or not, Iraq is rapidly emerging as a rival to Saudi Arabia.

This has OPEC horrified, since a cash-hungry Iraq threatens to sink their global price-fixing regime.

Deutsche Welle: Once Iraq more than quadruples its output capacity, OPEC will have to take steps to prevent Iraq from flooding the market, and force Baghdad to realign its supply policy with other members and stick to an output target. If not, the current level of supply and demand which OPEC has worked hard to achieve, which provides oil at a price it deems reasonable to producers and consumers - currently around $75 a barrel - will come under threat.

"This will certainly cause ructions within OPEC because Iraq has huge resources and we can only assume that the Iraqis are going to pump as much as possible because they need the money," Judith Kipper, the director of the Energy Security Group of the Council on Foreign Relations in Washington, told Deutsche Welle. "If they get to the predicted number of barrels produced per day, this is really going to be a real issue within OPEC."

Read more here.

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See Also:

• Falling Oil Demand Terrifies OPEC, Spurring It To Restrict Production
• Iraq Doubling Its Oil Supply To China
• Why Harsh White-Collar Sentences, Like 14 Years For An Oil Trader, Are Totally Justified