NOTHING like some good manufacturing figures out of China and Germany to give the oil price a kick along.
Yet you have to wonder how any further rises in crude will help the global recovery rather than just reflecting it. But, don't worry, the supply picture is looking a lot more rosy, which should mean crude prices start going south again -- and perhaps helped by some bad economic news as the year progresses.
Over the past 40 years we've had the oil shocks of the 1970s that battered the global economy, the cheap-as-chips era of the 1990s (Brent crude hit $US9.80 a barrel in 1998), which discouraged exploration, then the surge in 2008 (Brent hit $US146 a barrel), fell back to $39 a barrel after the GFC, and this week was knocking on the door of $US115 a barrel.
Happy times are here again, it may seem.
Yet, a 2004 article in the Pittsburg-based Journal of Economic Perspectives, published by the American Economic Association, sets out an argument to show that, historically, increases in oil prices have triggered recessions, excessive inflation, reduced productivity and caused lower economic growth.
Fast forward to this week and we have Capital Economics predicting Brent will end this year below $US100 a barrel and go lower in 2014, and concluding: "Indeed, this may be a necessary condition for the global economic recovery to continue."
Indeed, yes.
And the key to those falling prices is summed up by a headline, "Supply, supply, supply" contained in the latest commodity review from Denmark's Danske Bank.
They cite not only the well-covered North American shale story, but throw in the growing output from Brazil along with Iraq's oil recovery. "The scene is set for a surge in supply which should dampen down upward price pressure," the bank says.
The present prices (Brent over $US110 and West Texas Intermediate averaging close to $US95 a barrel) means most sources of unconventional oil should be profitable.
According to International Energy Agency figures, the break-even cost range a barrel for shale oil has gone from between $US50 and $US110 in 2008 to between $US45 and $US75 now.
Brazil's oil hunt is gathering pace even though some basins are located in challenging places: the Campos and Santos basins lie some 5000m below the seabed (itself 2000m from ocean surface) and are covered by a thick layer of salt. And the targets are 250km offshore. Yet Danske predicts that, by 2035, these Brazilian fields will yield 5.7 million barrels a day.
A more immediate source is Iraq, where production is running at 3.3 million barrels a day. The IEA estimates that, in 2035, Iraq could be producing 8 million barrels a day and thus not far off the capability of Saudi Arabia. Iraq, due to the need to rebuild the country from oil revenue -- black gold accounts for 95 per of government revenues -- is exempt from OPEC quotas (for now).
The one area where logistical barriers still deter exploration is in the Arctic, where about 14 per cent of the world's technically recoverable reserves sit.
Uranium on the rise
SPOT uranium jumped all of $US1.50 a pound this week to $US44 a pound. The price has been creeping up slowly, which is encouraging proponents of nuclear power although still well below the level at which new mines could make a buck.
On the demand side, the Russian state-owned nuclear corporation, Rosatom, is pushing along as many projects as it can get itself involved in.
The Russians have agreed to provide loans for a 2000-megawatt plant in Bangladesh where Prime Minister Sheikh Hasina announced yesterday that construction would begin in October.
Rosatom is looking to help build new reactors in Slovakia, too.
In fact, Pravda -- yes, it's still alive -- reports Rosatom's nuclear order book stands at $US69.3 billion ($66bn), not including its work processing uranium from nuclear warheads into low-enriched material for power generation (and which, purportedly, will end this year -- although uncertainty is growing about that).
Rosatom is acquiring Canada's Uranium One, giving it uranium operations in Kazakhstan, and will be tendering for two nuclear reactors to be built in the Czech Republic.
One setback concerns Rosatom's $US10bn contract for the proposed Belene nuclear plant in Bulgaria. A referendum this week voted 60 per cent in favour of it being built, but the government -- opposed to the plant -- will ignore the voting result on the grounds of a low turnout.
No such escape clause for September in Australia, thanks to compulsory voting.
China boosts gold
THE China Securities Regulatory Commission has issued provisional guidelines for gold exchange-traded funds to operate on the Shanghai Gold Exchange. We don't know when these ETFs will launch or to what degree they will hold physical metal.
Chinese investors tend to prefer the physical metal as their way of investing in gold, so it will be interesting to watch how they take to ETFs -- and how much gold the ETFs will buy and store. Good news for gold demand (and price).
