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World’s Biggest Trading Houses Are On An LNG Buying Frenzy

Oil prices took a bit of a hit this week, but the overriding sentiment is that we’ve got at least two more quarters of strong prices, though it may hit a snag near the end of the year. Keeping prices relatively high right now are OPEC cut commitments and blackouts in Venezuela that have even shut down all operations at the country’s key oil export port, Jose. High inventories in the US, though, continue to rain on the price parade to some extent. The most attention this week has been on the spending habits of the supermajors, who are focusing primarily on share buybacks and increasing dividends for shareholders who were forced to be extra patient during the first phase of the shale boom. The contrasts sharply with what is going on in China, where state-run companies are being ordered to produce more, even if the cost makes it questionably economic.

Take Sinopec, for example--China’s largest refiner and one of the two largest oil and gas producers. For this year, Sinopec has announced a fourfold increase in capital spending. This is a direct response to Beijing’s call for oil and gas companies to boost domestic production to feed local demand at a time when the country’s fields are maturing or becoming more difficult to develop. The alternative is far too much dependence on imports. When it comes to gas, Beijing’s priority is shale--and there’s a lot of it in the Sichuan province. They’re also developing their own fracking…

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