The Weekly Wrap: December 10, 2010

A nod to $100 oil, and another sign of OPEC’s wane. The Organization of Petroleum Exporting Countries (OPEC) is still closely watched for the minutest shift that could shake up oil prices, but yet again it’s clear that the group is trying simply to stay ahead of more powerful market forces. The latest evidence came this week when OPEC members — who control 40 percent of the world’s oil supply — gave their nod to $99.99-a-barrel oil prices. (This comes a month after the group expressed contentment with $90-a-barrel oil.) OPEC Secretary-General Abdalla El-Badri said that $100-a-barrel oil would be a sign that prices have gone out of whack with fundamentals, and that OPEC should act, presumably by loosening up its quota and adding supply to the market, report Bloomberg’s Juan Pablo Spinetto and Nathan Gill. This week, oil momentarily crossed over the $90-a-barrel line before falling back. As for O&G, we are betting on the contrarians who believe that the giddiness is premature, and that prices will remain at current (historically high) prices in the coming year.

The big spend. Oil junkies have fretted that petroleum companies have so curtailed their exploration spending in recent years that we are headed for a huge jump in prices starting in 2012 and stretching through the decade. Not so fast: Yesterday we learned that Chevron, for one, is seriously stepping up its investment next year. The company says it will spend a full 20 percent more than planned, or $26 billion, to drill a lot more in Australia (gas) and the Gulf of Mexico (oil), among a few other places, Sheila McNulty reports in the Financial Times. This puts Chevron in the same league as top-rank spender ExxonMobil, which already said it planned to lay out between $25 billion and $30 billion a year for the next five years on exploration and other capital expenditures.

A newly cautious BP? The first possible signs of a new, far more careful BP showed up this week in the company’s decision to forgo drilling in deep water off the coast of Libya until it can switch out the rig planned for the project. Eight months after the disastrous explosion of its Macondo well in the Gulf of Mexico, BP says it will not use Homer Ferrington, a rig owned by Noble Corp. that’s already on site in the Gulf of Sidra, but Deep Ocean Ascension, a rig belonging to Pride International. The Pride rig is currently being outfitted, the FT‘s Sylvia Pfeifer reports, and drilling is now supposed to begin next year. No one is saying why Ferrington is more suitable than Ascension.

Argentina’s big sale to China. Chinese oil companies continue their Latin American buying binge. In Argentina, a Sinopec subsidiary agreed to pay Occidental Petroleum $2.45 billion for oil and natural gas fields, report Jim Bai and Farah Master of Reuters. The deal includes 393 million barrels of oil equivalent (oil and gas) in what’s known in industry argot as proven and probable reserves. The fields produced some 51,000 barrels of oil equivalent last year – a respectable though not eye-popping volume. But the big news is that this is just China’s most recent deal in the region. In all, Chinese companies have spent $13.3 billion in Latin America on oil and gas deals this year; that is compared with no deals the previous year.