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BP shuts down major Alaskan oil field

ANCHORAGE, Alaska - Oil giant BP has indefinitely shut down the nation's biggest oilfield after finding a pipeline leak, removing about 8 percent of U.S. oil production and stoking fears that already high gas prices will shoot up further.


http://news.yahoo.com/s/ap/20060807/ap_on_bi_ge/oil_field_shutdown

This should make for an interesting start on oil trading for a monday morning.

Tim
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Tim, that 8% of U.S. production only translates to about .5% of world production. World production tends to dictate oil prices. U.S. production tends to dictate trade deficit.

If you owned a sugar plantation and your kids bought candy at the grocery store, how much of a difference would it be in pricing of candy for your kids if your plantation burned?

That's the parallel.
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Tim, that 8% of U.S. production only translates to about .5% of world production. World production tends to dictate oil prices.

World spare capacity more like.

And 400kbpd represents 10-20% of spare capacity, aside from the fact that the most likely places for US refineries to replace North Slope production are a long tanker ride away so there are time issues and tanker fleet issues. So it's a bit more important than you make out, at least for US refineries. But the latest news seems to be that only half the field will be out of action, so you're getting back to more manageable numbers - it's a similar hit to losing the recently repaired Mars platform in the GoM.

As an aside, I'm surprised to see Brent ahead of WTI again - that's usually a sign for a pair trade until WTI regains the usual $2-3 advantage. The Dubai differential is also looking pretty small at the moment.
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bohl,

uh...Yes.

You are attempting to use logic on an issue that hasn't seen a lot of that in the last couple of years.

If there is a fire in a refinery in Texas, the markets gets nuts until someone figures out that it was a small refinery and production will only be down for a couple of days. If Putin calls a news conference, the business news people stop the presses. If a tropical storm gets a name in the Atlantic, short traders reach for the Malox. If some Nigerians occupy a rig off the coast, pre-market gets nasty...

I think I said that Monday would be "interesting", I didn't ask grandma how to suck eggs. ;-)

Thanx Hal

Tim
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And 400kbpd represents 10-20% of spare capacity, aside from the fact that the most likely places for US refineries to replace North Slope production are a long tanker ride away so there are time issues and tanker fleet issues.

The UK board's Dubai correspondent brings up an interesting issue, that the Gulf countries might be reluctant to increase supplies in the wake of the US/Israel devastation of Lebanon :

http://boards.fool.co.uk/Message.asp?mid=10118576

Worth a read. [log in with your fool.com username if need be]

Also been some discussion on of the leak on our general Companies board and the UK BP board. They seem to be looking at a restart in January - best hope that there's no more Katrinas, although AIUI the forecast for this hurricane season has been revised down.

FWIW, the press here are attributing the falls in spot prices to fears about airline demand after today's events, rather than anything to do with a hedge fund's problems.
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