By Duncan Sutherland – Exclusive to Oil Investing News

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Market news

It is obvious that a barrel price below US$60 on the NYMEX is bad news for oil companies. Part of the drop reflects a strengthening American dollar, but recent demand forecast revisions are bleak.

Governments, companies and investors think a prolonged recession or period of low growth is in the offing, and everyone should take note.

Keep in mind though that canned food and guns are among the few investments that will perform well in a recession. People will still need oil and natural gas, even if they reduce consumption. If financially possible, hold on, and wait for the recovery. It is foolish to pull money out now, when there does not appear to be a better location for it.

The Canadian dollar has been dealt a body blow by the commodity slump, providing some relief for manufacturers in Eastern/Central Canada. TSX investors, however, have not been particularly happy, and the main index is at a two-week low.

Company news

The Australian has a well-written article about the likelihood of big mergers and acquisitions, internationally. With small companies unable to get new credit on favourable terms, the big names may go on a shopping spree. This dovetails with The Guardian’s report that Canadian Natural expects to acquire vulnerable companies next year.

Third quarter reports are still trickling out. They almost uniformly indicate near-record revenue and profits. This is all well and good, but larger factors have overshadowed the importance of these snapshots. Thus Benchmark intends to report more on the market and international news than these snapshots of the past quarter.

International news

It has been a busy week for international oil news. Big news emerging from Iraq, Iran, Russia and Nigeria, in addition to some welcome tidings from Cameroon.

The Tehran Times is reporting that China’s China National Petroleum Corporation has signed a $2.9 billion deal with the Iraqi government to develop the al-Ahdab field in Wasit province. The field is expected to produce some 110,000 barrels per day. Iraq’s government has thus far been solicitous to Chinese oil deals, partly due to widespread public mistrust of American-based multinational companies. China is certainly not objecting.

Iran’s government appears fairly worried about the slumping oil prices, with Oil Minister Gholamhossein Nozari appearing to call for an emergency OPEC meeting. The last OPEC conference decided to institute a 1.5 million bpd production cut, a decision that has obviously not had the desired impact on prices. According to the current schedule, OPEC’s next meeting will be in Algeria in mid-December. It should become apparent in the next week whether the group will preempt the schedule.

Russian Prime Minister Vladimir Putin also appears concerned over oil prices. The AFP has quoted him as saying, ”The country cannot stand aside from formulation of global prices…”. It is unclear exactly what Putin meant by this remark, but some analysts believe it signals Russia’s intent to cooperate with OPEC in an attempt to stabilize prices.

Nigeria’s ‘Movement for the Emancipation of the Niger Delta’ seems willing to do its part to bolster oil prices, declaring that they will renew their “oil war” if the Nigerian government attempts a crack down. Nigeria’s President Umaru Yar’Adua is apparently in poor health, and has not been effective in fulfilling his campaign promise to end the unrest in the country’s oil rich Delta.

The unifying thread in most of the international oil news this week was concern over price declines. Benchmark fully expects some incendiary remarks by Hugo Chavez to round out the trend. We will have to wait and see whether OPEC and Russia can coordinate their output in any meaningful manner. Even if they can, the global economic climate may overwhelm their efforts.

Finally, some good news out of Cameroon. The month-long captivity of ten oil-workers has been ended. West Africa remains a dangerous place to be an oil-worker, but the release of these hostages is certainly a good sign.

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