Tuesday, August 21, 2007

Mexico Produces Oil Too Folks

Pemex Abandons Oil Rigs As Dean Nears

MEXICO CITY (AP) -- Mexico's state-run Pemex oil company abandoned its offshore oil rigs just ahead of Hurricane Dean, evacuating more than 18,000 workers and shutting down production in its main oil-producing region.

Temporarily closing the 407 undersea wells that feed the rigs in Campeche Sound will mean a production loss of 2.7 million barrels of oil and 2.6 billion cubic feet of natural gas a day, the company said. Of that, about 1.7 million barrels of oil a day is exported from three Gulf ports, where Pemex loaded the final tankers on Monday.

Operations also were being suspended at Pemex's huge "Floating Production Storage and Offloading" vessel, which can store 2.2 million barrels of oil. Pemex bought it last year.

"This will be the first test of the storm-worthiness" of the vessel, said George Baker, a Houston, Texas-based energy analyst who follows Pemex closely.

Pemex produced an average of 3.2 million barrels a day of crude oil in the first six months of 2007, of which 2.6 million barrels a day came from its offshore deposits.

Mexico was the United States' second-largest source of foreign petroleum products in May, the latest month for which statistics were available, according to the U.S. Department of Energy.

The U.S. imported 1.6 million barrels of petroleum a day from Mexico in May, down from 1.7 million barrels in May 2006. The 1.6 million barrels was slightly more than Saudi Arabia's exports to the United States but well behind Canada's 2.5 million barrels.

Pemex's largest single source of crude oil is the Cantarell complex of oil fields, which is one of the world's biggest. The smaller Ku-Maloob-Zaap oil complex is located nearby, also directly in Dean's path. Together the two facilities produce more than 50 percent of Pemex's crude oil output.

Despite the threat to Pemex's facilities, oil prices dropped Monday on the New York Mercantile Exchange, on expectations Dean would spare key U.S. refining facilities in the northern Gulf of Mexico.

Six of the 834 manned oil and gas platforms along the U.S. Gulf Coast have been evacuated, the U.S. Interior Department's Minerals Management Service said yesterday. That's shut about 1.8 percent of the Gulf's 1.3 million barrels of daily oil production and 0.7 percent of the region's natural gas.

Okay, let's look at the math and try and figure out WHY oil prices have dropped because US gulf oil production, which is smaller daily than Mexico's, will not be disrupted by Hurricane Dean. By the way, Hurricane Dean is a Category 5 hurricane now.

Mexico's closing of gulf oil wells will shut in 2.7 million barrels of DAILY production. That is 1.4 million barrels MORE a day than the US produces from the gulf. ...but Oil prices went down? Mexico closed it's ports that export 1.7 million barrels of Oil each DAY. The US imports 1.6 million barrels of Oil from Mexico each DAY. ...and the price of Oil went down? 2.7 million barrels of Oil are disappearing from world supply...their future unknown until the storm passes...and the price of Oil went down?

But a thug pulls a gun on an Oil worker in Nigeria, where a mere 700,000 barrels of Oil a DAY has been shut in, and the price of Oil soars? What is wrong with this picture I ask...

Gold and Silver continue to flounder with the rest of the World Markets as some of the dust settles from last weeks crisis. Uncertainty is an understatement, and markets HATE uncertainty. Though Gold and Silver are supposed to blossom amidst market uncertainty as they are supposed to be "safe havens". Demand, rising 'monetary' inflation, and seasonality all point to higher Precious Metals prices going forward. I'll take a turtles pace over last weeks debacle any time.

At this hour Gold is trying to navigate through 658...this is paramount if Gold is to move higher. Silver continues to flounder and awaits guidance from it's big brother Gold. Gold has been consolidating near 658 since the "big bounce" last Friday morning. A break through will most likely find resistance at 663/664 and then 670.

Silver would do well just to get back over 12. It will find many mountains to climb once it does, beginning at 12.28 and then 12.57. I would be overjoyed just to see Silver close above the 20 hour moving average at 11.72 today. Silver opened strong Monday morning and got swatted at 11.95, Fridays bounce high. That is the mountain we face today.

I'll post up now at 8AM as Silver has now joined Gold in the green column.

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