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Tuesday May 06, 2008

Large swathes of Myanmar completely flooded after cyclone, rice exports to be affected

This article belongs to the Global food crisis story arc.

channelnewsasia.com :

The deadly cyclone that struck Myanmar devastated its main rice-growing region, and could threaten exports meant to ease shortages in Sri Lanka and Bangladesh, the UN food agency said Tuesday [6 May 2008]. Flooding, which poured damaging salt water into paddy fields, could create long-term food insecurity for Myanmar and other poor Asian countries, World Food Programme spokesman Paul Risley warned. Before the cyclone hit, the UN's Food and Agriculture Organisation (FAO) had forecast that Myanmar would export 500,000 tonnes of rice this year. Sri Lanka and Bangladesh, which will not produce enough rice to meet their own needs this year, had clinched rice deals with Myanmar as world prices have soared. Part of Bangladesh's rice shortage stemmed from destruction of its own crops by Cyclone Sidr last November. Some countries, including major exporters such as Vietnam and India, have slapped limits on exports to ensure their own domestic supply. That had made even relatively small exporters like Myanmar all the more important to countries seeking to buy the grain.

- The NASA satellite images above show the Myanmar Irrawaddy river delta before and after the cyclone. The entire coastal plain is flooded after the area took a direct hit from the cyclone. The city of Yangon (red rectangle) is almost completely surrounded by floods. Another story from CNA tells us about the sweeping devastation in the region :

channelnewsasia.com :

Large swathes of southwestern Myanmar are under water after a devastating cyclone struck at the weekend, killing at least 15,000 people, satellite images showed. Tropical cyclone Nargis slammed into Myanmar late Friday [2 May 2008], wiping away entire villages in the Irrawaddy delta region and wreaking destruction on a country that is already one of the poorest on the planet. NASA pictures taken on Monday showed the entire coastal plain under water, with fallow agricultural areas of the delta - the country's main rice-growing region - particularly hard hit by flooding.

- This could not have come at a worse time, when worldwide rice supplies are already tight to the point of snapping. Just a day ago, the Philippines had to cancel a 675,000 metric ton rice tender due to a lack of offers. Remember earlier when they were trying to buy 500,000 tons on the American markets and fell short by over 100,000 tons because they had basically bought up the entire American rice market? And they said they would have to increase the amount to over 600,000 tons the next round to make up for it? Well, that next round has come and gone and they GOT NOTHING THIS TIME !! This is serious.

At the same time, Bangladesh, which being a poorer country than the Philippines, decided they couldn't compete on the American rice markets and opted out, even though they themselves were severely in need of supply. Apparently, according to the article above, they had gone and tried to make a deal with Myanmar to get what little supply they could. And now even that small amount of rice exports that could have helped the Bangladesh people has in all likelihood been wiped by the flood.

(2008-05-06 23:38:26 SGT) [Env] Permalink

Crude oil hits $120.36 record on Nigeria, economic data

This article belongs to the NYMEX crude oil price records story arc.

bloomberg.com :

Crude oil traded near a record $120.36 a barrel in New York after a report yesterday [5 May 2008] showed US service industries expanded in April, signaling higher energy use. The Institute for Supply Management's [ISM] index of non-manufacturing businesses, which make up almost 90% of the economy, grew for the first time since December, the group said. The report came after an oil-pumping station was attacked in Nigeria over the weekend.

"The U.S. is entering the summer driving season in three to four weeks. There's the Beijing Olympics and new refineries coming online in China, they are going to need to fill their stocks," said Jonathan Kornafel, the director for Asia at Hudson Capital Energy in Singapore. "There are bad news coming out everyday on the supply side, it's a scary picture right now."

- Right, and it's only going to get scarier. And of course they have to give a reason, whether on the upside or downside. One day it's demand destruction due to the economy slowing, and another day it's demand increasing due to the economy growing. Could somebody please make up their mind here?

Looking from a peakoiler's point of view, we see oil production in Mexico's Cantarell field crashing, we see Kuwait reporting that their reserves are actually only half of what was stated earlier, and we see Russian oil production about to peak. At the same time, demand continues to increase globally, and oil exporters like the Saudi's are starting to use more of their own product instead of exporting it out. If you were to talk about being bullish on oil prices, then peakoilers should be the super-bulls. Not that we are necessarily cheering it on or anything like that. Many of us are probably staring at the crude oil live quotes with a mixture of fascination and horror or something of the sort.

Back to the technicals. The $120 resistance level is breached, though I would not say decisively until at least the high $120's are achieved. We'll probably have some sort of pullback and consolidation pattern again, anywhere between the usual $5 range, $115-120, and the next resistance levels could be at $150, $180 and $200. Before that, the next $10 milestone would obviously be $130 and that'll be the next upside target. On the downside, support levels are $110, $100, $90 and $85.

(2008-05-06 12:45:01 SGT) [Energy] Permalink Comments [1]

Crude oil hits $120.21 record upon attack on Shell Nigeria facility

This article belongs to the NYMEX crude oil price records story arc.

bloomberg.com :

Crude oil rose above $120 a barrel to a record in New York on concern that production disruptions in Nigeria, Africa's biggest producer, will limit supplies. Crude oil futures for June delivery touched a record $120.21 a barrel in intraday trading. The price has gained 94% in the past year. Oil also climbed as the dollar weakened against the euro and a report showed that US service industries unexpectedly expanded in April, signaling stronger economic growth.

Militant attacks on an oil-transfer facility in the country forced Shell to reduce output, the Associated Press reported May 3 [2008]. The Nigerian Movement for the Emancipation of the Niger Delta, or MEND, claimed responsibility for the weekend assault. MEND "overran a heavily fortified Shell flow station in Bayelsa state and destroyed the facility," the group said in a statement. The strike led to the destruction of three well-heads, MEND said. The group said last month it will attack every oil and gas pipeline in the nation as part of its "Operation Cyclone" campaign.

- And with that, the $120 resistance level for NYMEX crude oil has been broken. The next resistance levels to look forward to are probably going to be around $150, $180 and $200. The $110 level has proven to be credible support, and the next support levels after that remain at $100, $90 and $85.

Shell's oil facilities in Nigeria have always been under some attack or another, but this one, if it is as reported, looks to be more serious than the previous ones so far. Depending on whom you ask, Nigeria accounts for 15% to 20% of Shell's total global crude oil output, so this is quite serious. They had better be able to repair the damaged facilities quickly, or oil prices will be quickly going for the next couple of resistance levels beyond $120.

And don't count on the Saudi's to quickly flood the market in response either, because, as the peakoilers would point out, a. they probably don't have any real spare capacity and b. even if they do have something to spare it's very likely to be Saudi Heavy crude as compared to Nigeria's much more desirable Bonny Light grade.