IEA lowers oil demand forecast as economy slows
Reuters
Published: April 12, 2008, 00:39
London: World oil demand will rise much less than expected in 2008 because of slower economic growth in the United States and other industrialised countries, the International Energy Agency (IEA) said on Friday.
The IEA, adviser to industrialised countries, also pointed to a drop in oil inventories and said oil supply outside the Organisation of Petroleum Exporting Countries (Opec) was continuing to fall short of expectations.
Global oil consumption will rise by 1.27 million barrels per day (bpd) in 2008, 460,000 bpd less than the previous forecast, said the Paris-based agency in its monthly Oil Market Report.
The assessment follows the latest outlook from the International Monetary Fund (IMF), which this week issued lower economic growth forecasts, and the impact of record-high oil prices above $110 a barrel.
Supply surplus
"The latest GDP projections from the IMF suggest less robust oil demand growth in the coming months," the IEA said. "This report projects April and May oil balances tipping towards a supply surplus."
Lower demand in members of the Organisation for Economic Co-operation and Development (OECD) accounted for the bulk of the revision. The IEA cut expected OECD demand this year by 320,000 bpd to 48.9 million bpd.
The IMF trimmed its 2008 economic growth forecast for top oil consumer the United States to 0.5 per cent from 1.5 per cent.
China, the world's second largest oil consumer, was also predicted to use less oil than expected. The IEA lowered its estimate for 2008 demand in China by 70,000 bpd, partly because of weather-related effects in the first quarter.
Demand for oil, by contrast with other energy forms is regarded as inelastic because of a lack of viable alternatives for transport, but record high prices have played a part in changing consumption, especially in the US.
"A bit of demand shift is going on there, which is related to price ... The price has probably a more significant impact on consumers who are feeling the pinch," said Lawrence Eagles, head of the IEA's Oil Industry and Markets division. "This is happening at the margins in a number of countries."
The demand reduction brings the IEA's global demand forecast closer to that of Opec, which expects growth of 1.2 million bpd this year.
This news was from here : http://www.gulfnews.com/business/Oil_and_Gas/10204858.html
Friday, April 11, 2008
Thursday, April 10, 2008
Downside Risk in Crude Oil Prices Limited to The High $90s
Why Warmer Weather Is Not "Cooling Off" Oil Prices
Posted By:Sharon Epperson
Topics:Energy | Economy (Global)
Sectors:Oil and Gas
It's nearly 75 degrees in New York today, the sun is shining and it certainly feels like spring is here.
Yet, heating oil prices at the NYMEX continue to set new records, climbing past $3.32 a gallon this morning, and settling at $3.19.
European gas oil hit a new record today as well on the expiration on the April ICE contract. And due to unexpectedly strong demand, particularly from China. We're talking at the demand picture for diesel in particular. That is truly on fire around the world.
After power outages in South Africa, Chile and China, many companies have been forced to run diesel generators to offset interruptions in electricity supply. A severe winter in Southeast Asia also served to increase heating oil demand.
Also as energy analyst Andy Lipow points out, look at the European Union and China--both of those regions use more diesel than gasoline. Our diesel exports are heavily making up for overseas demand. Add to that the refinery snags which are occurring across the country and other parts of the world and what you'll find is record diesel prices and record heating oil prices as well.
Goldman Sachs says the late season surge in distillate demand is driving a "transient" price spike. In a research report released late this afternoon, Jeff Currie and his team report though "strong power-generation demand and a late winter cold snap have pushed gasoil prices and the complex higher...we believe weak-near term transportation fundamentals are now likely to dominate."
So what impact will all this have on crude prices? Heating oil's 20 percent surge so far this year has certainly helped inspire the 15 precent rally in crude during this time. But Goldman still sees the downside risk in crude oil prices limited to the high $90s.
Questions? Comments? energysource@cnbc.com
© 2008 CNBC, Inc. All Rights Reserved
See the source at : http://www.cnbc.com/id/24054207
Posted By:Sharon Epperson
Topics:Energy | Economy (Global)
Sectors:Oil and Gas
It's nearly 75 degrees in New York today, the sun is shining and it certainly feels like spring is here.
Yet, heating oil prices at the NYMEX continue to set new records, climbing past $3.32 a gallon this morning, and settling at $3.19.
European gas oil hit a new record today as well on the expiration on the April ICE contract. And due to unexpectedly strong demand, particularly from China. We're talking at the demand picture for diesel in particular. That is truly on fire around the world.
After power outages in South Africa, Chile and China, many companies have been forced to run diesel generators to offset interruptions in electricity supply. A severe winter in Southeast Asia also served to increase heating oil demand.
Also as energy analyst Andy Lipow points out, look at the European Union and China--both of those regions use more diesel than gasoline. Our diesel exports are heavily making up for overseas demand. Add to that the refinery snags which are occurring across the country and other parts of the world and what you'll find is record diesel prices and record heating oil prices as well.
Goldman Sachs says the late season surge in distillate demand is driving a "transient" price spike. In a research report released late this afternoon, Jeff Currie and his team report though "strong power-generation demand and a late winter cold snap have pushed gasoil prices and the complex higher...we believe weak-near term transportation fundamentals are now likely to dominate."
So what impact will all this have on crude prices? Heating oil's 20 percent surge so far this year has certainly helped inspire the 15 precent rally in crude during this time. But Goldman still sees the downside risk in crude oil prices limited to the high $90s.
Questions? Comments? energysource@cnbc.com
© 2008 CNBC, Inc. All Rights Reserved
See the source at : http://www.cnbc.com/id/24054207
Drop-off Will Be Just 760,000 Barrels a Day
ENERGY MATTERS: 2Q Oil Demand Drop May Be Smaller Than Norm
NEW YORK (Dow Jones)--The traditionally weak second quarter in the oil market is expected to track its familiar course this year: higher prices and lower demand. In each of the past 10 years, global oil demand has dropped during April, May and June from the January-March quarter, reflecting the end of winter in the Northern Hemisphere and reliably clocking in as the weakest period of the year.
The average quarterly decline in the past decade has been 2.1% of global demand, or about 1.7 million barrels a day. But with oil prices already trading near record highs above $110 a barrel, the second-quarter global demand drop looks to be anything but typical this year.
The U.S. Energy Information Administration projects the drop-off will be just 760,000 barrels a day, or less than 0.9%. That's the slimmest decline since 2004, when raucous booming demand growth from China and other developing countries ignited the rally that has tripled the value of crude oil.
By the EIA's estimation, second-quarter global demand will average 85.66 million barrels a day this year - virtually the same level as the fourth quarter of 2006, which was the strongest for the year.
The EIA projects the average price for U.S. benchmark West Texas Intermediate crude oil will average a record $103.67 a barrel in the quarter, a 5.9% rise from the first quarter and nearly 60% above a year ago.
Nymex crude oil futures prices on Thursday settled at $110.11 a barrel, down 76 cents from a record high a day earlier. So far in April, prices are averaging near $107 a barrel. Heating oil futures settled 4.05 cents below the record high set Wednesday, at $3.194 a gallon, while gasoline blendstocks futures settled at a record $2.7921 a gallon, up 1.79 cents.
Retail gasoline and diesel fuel prices set fresh record highs Thursday, with regular gasoline at $3.357 a gallon, up 20% from a year ago, according to AAA Daily Fuel Gauge Report. Diesel fuel was priced at $4.045 a gallon, up 39% from a year ago.
Saudis Won't Pump To Dump Price
Crude oil futures stumbled last month after settling above $110 a barrel for the first time, sliding below $99 intraday before recovering to a record Wednesday. Analysts said the market may be in for a similar ride of slippage followed by fresh highs as the strength in the relative strength in the global market eclipses weakness in the U.S., the world's largest oil consumer.
The EIA said the global oil market will remain fundamentally tight in the second quarter. And there are clear fresh indications that the Organization of Petroleum Exporting Countries isn't troubled enough by record high oil prices to open the taps. Saudi Arabian Oil Minister Ali Naimi said Thursday at an industry conference in Paris that the de facto leader of OPEC won't "dump oil into the market" to cool down prices.
"If there are buyers, then we sell...more oil," said Naimi. "I believe the market is well supplied. Inventories are building...the world is producing more oil than is being consumed." Saudi Arabia is the world's largest oil exporter.
The EIA said in its Short-Term Energy Outlook on Tuesday that U.S. oil demand in the first quarter fell by a steep 480,000 barrels a day from a year earlier.
That was the biggest drop in any quarter since the fourth-quarter 2001, following the Sept. 11, 2001, attacks on the U.S. Second-quarter demand, in comparison, is expected to fall year-on-year by just 80,000 barrels a day - despite unusually sluggish gasoline demand. U.S. second-quarter oil demand is expected to rise 280,000 barrels a day, or 1.4%, from the first quarter.
Worst Of U.S. Demand Drop Passed?
If those projections hold true, then the worst of the U.S. demand slump may be past. "The darkest part of the night was February, March was better and April has begun strongly," said Paul Horsnell, analyst at Barclays Capital in London. He said the first sign of April gasoline demand is holding up well, in the face of record high prices, which were up 40% year-on-year in January, but are only up by half that level now.
Horsnell said in a report he believes year-on-year changes in U.S. gasoline demand are "strongly influenced" by year-on-year price changes, and thus the slowdown in the pace of the price rise implies that "demand might yet prove to be stronger this quarter than is generally expected."
The EIA sees a dip of around 40,000 barrels a day year-on-year in second-quarter gasoline demand and a drop of around the same size for the full April-September driving season. That would be the first drop since 1991 and contrasts with average year-on-year summer growth of 129,000 barrels a day since 1992.
Analysts at Goldman Sachs raised their forecast for oil prices in the second half of 2008, saying the "upside potential...is likely to be above $115" a barrel, instead of $105 projected earlier.
Goldman said it continues to expect "a modest inventory build this spring" that will weaken the timespread between forward contracts and the front-month futures contract. But it said it believes the downside risk is limited to $98 a barrel, not $90 as previously thought. Goldman also said it sees the tight global market for middle distillate fuels, like diesel fuel, easing soon as arbitrage trade evens out supplies.
The market is only tight in a few key regions, such as New York Harbor and Amsterdam-Rotterdam-Antwerp, helped by late winter-weather-related demand. Stocks elsewhere "are at comfortable levels," Goldman said in a research report.
"This suggests that, as arbitrages even out global supplies, the strong regional diesel markets that have been driving the overall complex higher will begin to ease," Goldman said. "Without strong diesel support from these regions, the market will have to rely on U.S. gasoline and the transportation markets, which remain extremely weak."
(David Bird is senior energy correspondent for Dow Jones Newswires.)
-By David Bird, Dow Jones Newswires; 201-938-4423; david.bird@dowjones.com
This article taken from : http://www.cattlenetwork.com/content.asp?contentid=212636
NEW YORK (Dow Jones)--The traditionally weak second quarter in the oil market is expected to track its familiar course this year: higher prices and lower demand. In each of the past 10 years, global oil demand has dropped during April, May and June from the January-March quarter, reflecting the end of winter in the Northern Hemisphere and reliably clocking in as the weakest period of the year.
The average quarterly decline in the past decade has been 2.1% of global demand, or about 1.7 million barrels a day. But with oil prices already trading near record highs above $110 a barrel, the second-quarter global demand drop looks to be anything but typical this year.
The U.S. Energy Information Administration projects the drop-off will be just 760,000 barrels a day, or less than 0.9%. That's the slimmest decline since 2004, when raucous booming demand growth from China and other developing countries ignited the rally that has tripled the value of crude oil.
By the EIA's estimation, second-quarter global demand will average 85.66 million barrels a day this year - virtually the same level as the fourth quarter of 2006, which was the strongest for the year.
The EIA projects the average price for U.S. benchmark West Texas Intermediate crude oil will average a record $103.67 a barrel in the quarter, a 5.9% rise from the first quarter and nearly 60% above a year ago.
Nymex crude oil futures prices on Thursday settled at $110.11 a barrel, down 76 cents from a record high a day earlier. So far in April, prices are averaging near $107 a barrel. Heating oil futures settled 4.05 cents below the record high set Wednesday, at $3.194 a gallon, while gasoline blendstocks futures settled at a record $2.7921 a gallon, up 1.79 cents.
Retail gasoline and diesel fuel prices set fresh record highs Thursday, with regular gasoline at $3.357 a gallon, up 20% from a year ago, according to AAA Daily Fuel Gauge Report. Diesel fuel was priced at $4.045 a gallon, up 39% from a year ago.
Saudis Won't Pump To Dump Price
Crude oil futures stumbled last month after settling above $110 a barrel for the first time, sliding below $99 intraday before recovering to a record Wednesday. Analysts said the market may be in for a similar ride of slippage followed by fresh highs as the strength in the relative strength in the global market eclipses weakness in the U.S., the world's largest oil consumer.
The EIA said the global oil market will remain fundamentally tight in the second quarter. And there are clear fresh indications that the Organization of Petroleum Exporting Countries isn't troubled enough by record high oil prices to open the taps. Saudi Arabian Oil Minister Ali Naimi said Thursday at an industry conference in Paris that the de facto leader of OPEC won't "dump oil into the market" to cool down prices.
"If there are buyers, then we sell...more oil," said Naimi. "I believe the market is well supplied. Inventories are building...the world is producing more oil than is being consumed." Saudi Arabia is the world's largest oil exporter.
The EIA said in its Short-Term Energy Outlook on Tuesday that U.S. oil demand in the first quarter fell by a steep 480,000 barrels a day from a year earlier.
That was the biggest drop in any quarter since the fourth-quarter 2001, following the Sept. 11, 2001, attacks on the U.S. Second-quarter demand, in comparison, is expected to fall year-on-year by just 80,000 barrels a day - despite unusually sluggish gasoline demand. U.S. second-quarter oil demand is expected to rise 280,000 barrels a day, or 1.4%, from the first quarter.
Worst Of U.S. Demand Drop Passed?
If those projections hold true, then the worst of the U.S. demand slump may be past. "The darkest part of the night was February, March was better and April has begun strongly," said Paul Horsnell, analyst at Barclays Capital in London. He said the first sign of April gasoline demand is holding up well, in the face of record high prices, which were up 40% year-on-year in January, but are only up by half that level now.
Horsnell said in a report he believes year-on-year changes in U.S. gasoline demand are "strongly influenced" by year-on-year price changes, and thus the slowdown in the pace of the price rise implies that "demand might yet prove to be stronger this quarter than is generally expected."
The EIA sees a dip of around 40,000 barrels a day year-on-year in second-quarter gasoline demand and a drop of around the same size for the full April-September driving season. That would be the first drop since 1991 and contrasts with average year-on-year summer growth of 129,000 barrels a day since 1992.
Analysts at Goldman Sachs raised their forecast for oil prices in the second half of 2008, saying the "upside potential...is likely to be above $115" a barrel, instead of $105 projected earlier.
Goldman said it continues to expect "a modest inventory build this spring" that will weaken the timespread between forward contracts and the front-month futures contract. But it said it believes the downside risk is limited to $98 a barrel, not $90 as previously thought. Goldman also said it sees the tight global market for middle distillate fuels, like diesel fuel, easing soon as arbitrage trade evens out supplies.
The market is only tight in a few key regions, such as New York Harbor and Amsterdam-Rotterdam-Antwerp, helped by late winter-weather-related demand. Stocks elsewhere "are at comfortable levels," Goldman said in a research report.
"This suggests that, as arbitrages even out global supplies, the strong regional diesel markets that have been driving the overall complex higher will begin to ease," Goldman said. "Without strong diesel support from these regions, the market will have to rely on U.S. gasoline and the transportation markets, which remain extremely weak."
(David Bird is senior energy correspondent for Dow Jones Newswires.)
-By David Bird, Dow Jones Newswires; 201-938-4423; david.bird@dowjones.com
This article taken from : http://www.cattlenetwork.com/content.asp?contentid=212636
Oil Demand Boom
Tall order to meet oil demand boom by 2012-Total
(Reporting by Marie Maitre and Benjamin Mallet )
PARIS, April 10 (Reuters) - The world will struggle over the next five years to meet surging oil demand, the chief executive of French oil company Total (TOTF.PA: Quote, Profile, Research) said on Thursday.
"Based on a very conservative scenario, we will need an extra 15 billion barrels of oil per day," by 2012, Total Chief Executive Christophe de Margerie told an oil conference.
"This implies that from 85 million we would reach 100 million barrels per day. I don't think this is feasible, certainly not in such a short period of time." De Margerie's comments came as oil prices CLc1 held steady around $111 a barrel on Thursday, within sight of the previous day's record high of $112.21.
De Margerie told Reuters on Tuesday he expected prices to continue rising due to tight supplies and a lack of spare production capacity among OPEC producers.
On Thursday, he again urged international oil and gas companies and hydrocarbon-rich countries to sit together and discuss ways of increasing production.
"The bad news is that there will not be enough production capacities. This is not a problem of resources of reserves," he said, adding that Western countries had "totally underestimated" the energy needs of emerging countries.
Original news at here.
(Reporting by Marie Maitre and Benjamin Mallet )
PARIS, April 10 (Reuters) - The world will struggle over the next five years to meet surging oil demand, the chief executive of French oil company Total (TOTF.PA: Quote, Profile, Research) said on Thursday.
"Based on a very conservative scenario, we will need an extra 15 billion barrels of oil per day," by 2012, Total Chief Executive Christophe de Margerie told an oil conference.
"This implies that from 85 million we would reach 100 million barrels per day. I don't think this is feasible, certainly not in such a short period of time." De Margerie's comments came as oil prices CLc1 held steady around $111 a barrel on Thursday, within sight of the previous day's record high of $112.21.
De Margerie told Reuters on Tuesday he expected prices to continue rising due to tight supplies and a lack of spare production capacity among OPEC producers.
On Thursday, he again urged international oil and gas companies and hydrocarbon-rich countries to sit together and discuss ways of increasing production.
"The bad news is that there will not be enough production capacities. This is not a problem of resources of reserves," he said, adding that Western countries had "totally underestimated" the energy needs of emerging countries.
Original news at here.
Wednesday, April 9, 2008
Energy Information Agency said
The Energy Report
EIA Away!
Wed, Apr 9 2008, 12:56 GMT
by Phil Flynn
Alaron
What a nice day for day-trading. Oil was locked in a tight technical trading range and gave day-traders some well defined ranges as the market awaited today’s oil inventory report. With the news front being relatively quiet, (Iran claiming they were installing thousands of new uranium-enriching centrifuges dose not cut the mustard for news these days) the most telling action about the mood and the concern of the market was the way heating oil rallied (distillates) and RBOB (gasoline) fell.
The market is telling you that the focus of this market is becoming the global tight supply of distillate. Cold weather across the globe and production of new, lower sulfur diesel is conspiring to tighten supply globally and is becoming a major focal point of the market action.
While the energies waited the weekly inventory report, the Energy Information Agency came out with its short term energy outlook. These are what the EIA said are the highlights. The EIA says that crude oil West Texas Intermediate (WTI) crude oil prices, which averaged $72.32 per barrel in 2007, are projected to average $101 per barrel in 2008 and $92.50 per barrel in 2009.
That is a dramatic jump for the EIA which seems to raise their projections to a lower price than the market is trading. Usually I think the EIA is low with their price projections but this year I think they are high.
The EIA said the projected higher costs for crude oil will contribute to higher petroleum product prices. (Which has been a major cause up until this point). The EIA says that motor gasoline prices are projected to average $3.36 per gallon at the pump in 2008, up 55 cents from last year.
They said diesel prices are projected to show even larger increases in 2008, averaging $3.62 per gallon, or 74 cents above the 2007 average price.(This is also, as I said, the market's focus in the short term. This is where the market is most driven by supply concerns).
As for the upcoming summer driving season the EIA says that the monthly average gasoline price is projected to peak at about $3.60 per gallon this spring, while monthly diesel prices are expected to Average about $3.90 per gallon in March and April. The EIA is holding their breath on this one as they acknowledge that weekly diesel prices have already crossed the $4.00 per gallon threshold in many regions of the country.
Yet at the same time the EIA is dramatically raising price projections they are also lowering demand expectations. According to the EIA U.S. consumption of liquid fuels and other petroleum is expected to decline in 2008 by about 85,000 barrels per day (bbl/d) as a result of the economic slow-down and high petroleum prices. (Alan Greenspan has declared that we are in a recession. Why shouldn’t the EIA?) The EIA said that after accounting for increased ethanol use, U.S. petroleum consumption is projected to fall by 210,000 barrels a day in 2008.The EIA said they expect U.S. real gross domestic product (GDP) to decline in the first half of the year and then start growing again, with annual growth in 2008 at 1.2%. The slowest annual rate since 2001.
They then expect a modest economic recovery in 2009, combined with lower petroleum prices, is projected to boost total U.S. liquid fuels and other petroleum consumption by about 200,000 barrels per day.
Henry Hub oil I think the EIA projections are high but for gas I think they are low. The EIA says Henry Hub natural gas spot price averaged $7.17 per thousand cubic feet in 2007 and is expected to average $8.59 in 2008 and $8.32 per in 2009.The EIA says that higher prices this year and next reflect continued strong demand and high oil prices, and the need to replenish more stocks this year than last year. (So much for the record gas storage going into the season.)
For the big picture the EIA said that the global oil market remains fundamentally tight entering the second quarter, despite a slowdown in U.S. oil consumption and growing risks to global economic growth. The combination of rising world oil consumption and low surplus production capacity is putting upward pressure on oil prices.The EIA also tries to address speculators by saying the flow of investment money into commodities has contributed to crude oil price volatility.Yet the EIA says supplies are rising. The EIA said inventories are improving in the Organization for Economic Cooperation and Development Countries, but given the lack of surplus capacity and geopolitical concerns in Nigeria, Venezuela, and Iraq, a higher level of commercial inventories is desirable. (No mention of Iran? Maybe new centrifuges are not the threat they used to be.)
The EIA also rightly says that the magnitude, breadth, and duration of any global economic slowdown will certainly influence market conditions over the near term. The EIA expects non-OPEC production to increase in the second half of the year and that OPEC is expected to also increase capacity.The EIA also says that they expect world oil consumption to grow by1.2 million barrels per day in 2008. 1 million barrels a day of that growth will come from non OECD counties. On the other hand OECD consumption is expected to climb a mere 90,000 barrels per day.
And this is important for many traders. The EIA says that higher oil prices and slower economic growth have dampened consumption in the United States, but available partial data indicate global oil consumption is still increasing because of continued growth in China, India, Russia, and the Middle East.
This goes back to the question of oil decoupling. Can oil demand growth outside the US keep oil prices rising even if the world’s largest consumer slows down? I still say that if the US economic slowdown is severe there is no way to support these higher prices.
And why is the market not worried about Iran. Is it possible that $108 dollar oil has already priced in an Iranian showdown. No, I don’t think so but it sure is pricing in more than just simple supply and demand.
The dream may soon become a reality. For years oil companies have dreamed of building a pipeline from Alaska to the lower 48 to send gas and oil from where it is ample to where it is needed. The project was never embarked upon because of the immense cost and falling oil and gas prices. That is until now. Conoco Phillips and BP announced a joint venture to spend $30 billion dollars to build that pipeline. That of course never would have happened unless oil companies were making handsome profits. Now if we could only get the rights to drill in ANWAR perhaps we could start getting energy prices to a more reasonable level.
The big mover for today will be the weekly inventory report! Crude supply has risen 11 out of the last 12 weeks and we probably would have been 12 out 12 if it were not for the fog in the Houston Shipping Channel. Crude is expected to rise by 2.5 million barrels, gasoline is expected to fall by 2.5 million barrels and the all important distillates are expected to rise.
Don’t forget to sign up for your free trial of alaronenergies.com. Just call me at 800-935-6487 or email me at pflynn@alaron.com to open your account! Check me out on the Fox Business Network!
Sell May crude at 11180 - stop 11250.
We're short May RBOB from apprx 27850 - lower stop to 27700!
We're short May heating oil from apprx 31000 - stop 31500.
We're long May natural gas from apprx 940 - raise stop 955!!!
Have a GREAT day!
Taken form : http://www.fxstreet.com/futures/energy/the-energy-report/2008-04-09.html
EIA Away!
Wed, Apr 9 2008, 12:56 GMT
by Phil Flynn
Alaron
What a nice day for day-trading. Oil was locked in a tight technical trading range and gave day-traders some well defined ranges as the market awaited today’s oil inventory report. With the news front being relatively quiet, (Iran claiming they were installing thousands of new uranium-enriching centrifuges dose not cut the mustard for news these days) the most telling action about the mood and the concern of the market was the way heating oil rallied (distillates) and RBOB (gasoline) fell.
The market is telling you that the focus of this market is becoming the global tight supply of distillate. Cold weather across the globe and production of new, lower sulfur diesel is conspiring to tighten supply globally and is becoming a major focal point of the market action.
While the energies waited the weekly inventory report, the Energy Information Agency came out with its short term energy outlook. These are what the EIA said are the highlights. The EIA says that crude oil West Texas Intermediate (WTI) crude oil prices, which averaged $72.32 per barrel in 2007, are projected to average $101 per barrel in 2008 and $92.50 per barrel in 2009.
That is a dramatic jump for the EIA which seems to raise their projections to a lower price than the market is trading. Usually I think the EIA is low with their price projections but this year I think they are high.
The EIA said the projected higher costs for crude oil will contribute to higher petroleum product prices. (Which has been a major cause up until this point). The EIA says that motor gasoline prices are projected to average $3.36 per gallon at the pump in 2008, up 55 cents from last year.
They said diesel prices are projected to show even larger increases in 2008, averaging $3.62 per gallon, or 74 cents above the 2007 average price.(This is also, as I said, the market's focus in the short term. This is where the market is most driven by supply concerns).
As for the upcoming summer driving season the EIA says that the monthly average gasoline price is projected to peak at about $3.60 per gallon this spring, while monthly diesel prices are expected to Average about $3.90 per gallon in March and April. The EIA is holding their breath on this one as they acknowledge that weekly diesel prices have already crossed the $4.00 per gallon threshold in many regions of the country.
Yet at the same time the EIA is dramatically raising price projections they are also lowering demand expectations. According to the EIA U.S. consumption of liquid fuels and other petroleum is expected to decline in 2008 by about 85,000 barrels per day (bbl/d) as a result of the economic slow-down and high petroleum prices. (Alan Greenspan has declared that we are in a recession. Why shouldn’t the EIA?) The EIA said that after accounting for increased ethanol use, U.S. petroleum consumption is projected to fall by 210,000 barrels a day in 2008.The EIA said they expect U.S. real gross domestic product (GDP) to decline in the first half of the year and then start growing again, with annual growth in 2008 at 1.2%. The slowest annual rate since 2001.
They then expect a modest economic recovery in 2009, combined with lower petroleum prices, is projected to boost total U.S. liquid fuels and other petroleum consumption by about 200,000 barrels per day.
Henry Hub oil I think the EIA projections are high but for gas I think they are low. The EIA says Henry Hub natural gas spot price averaged $7.17 per thousand cubic feet in 2007 and is expected to average $8.59 in 2008 and $8.32 per in 2009.The EIA says that higher prices this year and next reflect continued strong demand and high oil prices, and the need to replenish more stocks this year than last year. (So much for the record gas storage going into the season.)
For the big picture the EIA said that the global oil market remains fundamentally tight entering the second quarter, despite a slowdown in U.S. oil consumption and growing risks to global economic growth. The combination of rising world oil consumption and low surplus production capacity is putting upward pressure on oil prices.The EIA also tries to address speculators by saying the flow of investment money into commodities has contributed to crude oil price volatility.Yet the EIA says supplies are rising. The EIA said inventories are improving in the Organization for Economic Cooperation and Development Countries, but given the lack of surplus capacity and geopolitical concerns in Nigeria, Venezuela, and Iraq, a higher level of commercial inventories is desirable. (No mention of Iran? Maybe new centrifuges are not the threat they used to be.)
The EIA also rightly says that the magnitude, breadth, and duration of any global economic slowdown will certainly influence market conditions over the near term. The EIA expects non-OPEC production to increase in the second half of the year and that OPEC is expected to also increase capacity.The EIA also says that they expect world oil consumption to grow by1.2 million barrels per day in 2008. 1 million barrels a day of that growth will come from non OECD counties. On the other hand OECD consumption is expected to climb a mere 90,000 barrels per day.
And this is important for many traders. The EIA says that higher oil prices and slower economic growth have dampened consumption in the United States, but available partial data indicate global oil consumption is still increasing because of continued growth in China, India, Russia, and the Middle East.
This goes back to the question of oil decoupling. Can oil demand growth outside the US keep oil prices rising even if the world’s largest consumer slows down? I still say that if the US economic slowdown is severe there is no way to support these higher prices.
And why is the market not worried about Iran. Is it possible that $108 dollar oil has already priced in an Iranian showdown. No, I don’t think so but it sure is pricing in more than just simple supply and demand.
The dream may soon become a reality. For years oil companies have dreamed of building a pipeline from Alaska to the lower 48 to send gas and oil from where it is ample to where it is needed. The project was never embarked upon because of the immense cost and falling oil and gas prices. That is until now. Conoco Phillips and BP announced a joint venture to spend $30 billion dollars to build that pipeline. That of course never would have happened unless oil companies were making handsome profits. Now if we could only get the rights to drill in ANWAR perhaps we could start getting energy prices to a more reasonable level.
The big mover for today will be the weekly inventory report! Crude supply has risen 11 out of the last 12 weeks and we probably would have been 12 out 12 if it were not for the fog in the Houston Shipping Channel. Crude is expected to rise by 2.5 million barrels, gasoline is expected to fall by 2.5 million barrels and the all important distillates are expected to rise.
Don’t forget to sign up for your free trial of alaronenergies.com. Just call me at 800-935-6487 or email me at pflynn@alaron.com to open your account! Check me out on the Fox Business Network!
Sell May crude at 11180 - stop 11250.
We're short May RBOB from apprx 27850 - lower stop to 27700!
We're short May heating oil from apprx 31000 - stop 31500.
We're long May natural gas from apprx 940 - raise stop 955!!!
Have a GREAT day!
Taken form : http://www.fxstreet.com/futures/energy/the-energy-report/2008-04-09.html
The Demand for Oil and Gas Continues to Grow
Oil: old supply, young demand
By Nadim Kawach on Wednesday, April 9 , 2008
The United States, China and India – which account for nearly a third of the global oil demand – must cut their crude consumption to avert a supply crisis triggered by dwindling reserves, according to a Chinese scholar.
Xiaojie Xu, chief professor at the Institute for Geopolitics and Energy Economists at East China Normal University in Shanghai, said efforts by the three countries to ensure their crude oil needs and meet the rapid growth in domestic demand were only temporary solutions on the grounds supply security is weak.
In a study published in a new book obtained by Emirates Business from the Abu Dhabi-based Emirates Centre for Strategic Studies and Research, Xu said the world was heavily reliant on what he described as ageing oilfields at a time when demand was growing fast, especially in China and India.
“In short, supply is too old and demand is too young,” he said in the research, published along with other oil studies in the 600-page book. The Clash of Age reflects the global dilemma and creates a huge challenge for the US as the largest energy consumer on the one hand and China and India as emerging energy consumers on the other. These three countries have to examine seriously these challenges and work out a common solution.
Xu’s figures showed about 14 giant world oilfields, each with a capacity of more than 500,000 barrels per day, produce nearly 13.9 million bpd, contributing about 20 per cent of the world’s oil output.
About 12 large fields with a capacity of more than 300,000 bpd and combined production of 4.1 million bpd contribute six per cent while 29 big fields with capacity of more than 200,000 bpd and output of 6.4 million bpd account for nine per cent. And 61 fields with a daily capacity of 100,000 barrels produce 7.9 million bpd, contributing 12 per cent of the global oil production while 4,000 small fields with a daily output of less than 100,000 bpd produce 36.2 million bpd, contributing 53 per cent of the world’s total oil output.
“The oil pyramid provides clear and convincing evidence that the world relies heavily on ageing giant fields. Saudi Arabia is a typical case and may be singled out as an example. The country depends on around six giant and super giant fields within the Kingdom. Iran, Kuwait and other producers in the region and beyond are following a similar extraction model,” Xu said.
“Both the US and China as major oil producers are no exception. These giant fields are over 40 or 50 years old already and are witnessing declining output.”
According to Xu, most of the giant fields in many major producers have passed their peak plateau and that peak may occur earlier even if advanced technologies of enhanced oil recovery are applied. Citing an oil theory by Mathew Simmons, a US investment banker, he said new technologies could even shorten the life of producing fields instead of extending it due to its effect of lowering existing reservoir pressure.
“Concurrently, the demand for oil and gas continues to grow, largely from the emerging economies in the last decade, and is expected to do so in the decades to come… world demand remains young and presents a huge requirement for new oil sources worldwide by new generations,” Xu said.
“Faced with the crucial fact of soaring new demand and ageing supply, new pathways have to be found. Traditional energy policies employed by many countries are merely one-way solutions, ie using the finite fuel as much as possible. Some other solutions deal with emerging energy problems within the current framework, ie enhancing recovery using new technology.
“The first plan, which I call plan A, is a dead-end approach while the second plan, which I call plan B, will escalate the deadlines for many oilfields. The world needs a brave new solution for energy-sustainable development… in other words, it is becoming increasingly important to explore new ways to use conventional energy resources more cost-effectively and efficiently.
“This will lead toward plan C – using oil less. It is time for the US, China and India to plan a new lifestyle for future generation. In this regard, the three countries can play their part.”
For the US, Xu added, the issue is profound given its high energy consumption, which exceeds the combined consumption of China, India, Japan and Germany although its population accounts for only five per cent of the world’s.
“The issue is the exact opposite for China, the most populous country in the world. China now consumes more oil than any country other than the US. However, on per capita basis, China still uses just under two barrels of oil per year, compared to the US whose per capita oil use is almost 15 times as much. Again there is no way for China or India to copy the energy consumption of the US, Europe or even Japan since the global oil supply is now too limited and far less required to satisfy the virtual growing demand in China.
“The US should lead by example and guide the shift from the traditional consumption model to a brave new one that includes renewables, conservation and efficiency – one which China and India have to accept as a core ingredient of action for Plan C. The key content of the future lifestyle is nothing more complicated than less use of finite energy sources.”
The numbers
14: Giant fields produce 20% of world total
4,000: small fields produce 53% of world total
Originally from : http://www.business24-7.ae/cs/article_show_mainh1_story.aspx?HeadlineID=5343
By Nadim Kawach on Wednesday, April 9 , 2008
The United States, China and India – which account for nearly a third of the global oil demand – must cut their crude consumption to avert a supply crisis triggered by dwindling reserves, according to a Chinese scholar.
Xiaojie Xu, chief professor at the Institute for Geopolitics and Energy Economists at East China Normal University in Shanghai, said efforts by the three countries to ensure their crude oil needs and meet the rapid growth in domestic demand were only temporary solutions on the grounds supply security is weak.
In a study published in a new book obtained by Emirates Business from the Abu Dhabi-based Emirates Centre for Strategic Studies and Research, Xu said the world was heavily reliant on what he described as ageing oilfields at a time when demand was growing fast, especially in China and India.
“In short, supply is too old and demand is too young,” he said in the research, published along with other oil studies in the 600-page book. The Clash of Age reflects the global dilemma and creates a huge challenge for the US as the largest energy consumer on the one hand and China and India as emerging energy consumers on the other. These three countries have to examine seriously these challenges and work out a common solution.
Xu’s figures showed about 14 giant world oilfields, each with a capacity of more than 500,000 barrels per day, produce nearly 13.9 million bpd, contributing about 20 per cent of the world’s oil output.
About 12 large fields with a capacity of more than 300,000 bpd and combined production of 4.1 million bpd contribute six per cent while 29 big fields with capacity of more than 200,000 bpd and output of 6.4 million bpd account for nine per cent. And 61 fields with a daily capacity of 100,000 barrels produce 7.9 million bpd, contributing 12 per cent of the global oil production while 4,000 small fields with a daily output of less than 100,000 bpd produce 36.2 million bpd, contributing 53 per cent of the world’s total oil output.
“The oil pyramid provides clear and convincing evidence that the world relies heavily on ageing giant fields. Saudi Arabia is a typical case and may be singled out as an example. The country depends on around six giant and super giant fields within the Kingdom. Iran, Kuwait and other producers in the region and beyond are following a similar extraction model,” Xu said.
“Both the US and China as major oil producers are no exception. These giant fields are over 40 or 50 years old already and are witnessing declining output.”
According to Xu, most of the giant fields in many major producers have passed their peak plateau and that peak may occur earlier even if advanced technologies of enhanced oil recovery are applied. Citing an oil theory by Mathew Simmons, a US investment banker, he said new technologies could even shorten the life of producing fields instead of extending it due to its effect of lowering existing reservoir pressure.
“Concurrently, the demand for oil and gas continues to grow, largely from the emerging economies in the last decade, and is expected to do so in the decades to come… world demand remains young and presents a huge requirement for new oil sources worldwide by new generations,” Xu said.
“Faced with the crucial fact of soaring new demand and ageing supply, new pathways have to be found. Traditional energy policies employed by many countries are merely one-way solutions, ie using the finite fuel as much as possible. Some other solutions deal with emerging energy problems within the current framework, ie enhancing recovery using new technology.
“The first plan, which I call plan A, is a dead-end approach while the second plan, which I call plan B, will escalate the deadlines for many oilfields. The world needs a brave new solution for energy-sustainable development… in other words, it is becoming increasingly important to explore new ways to use conventional energy resources more cost-effectively and efficiently.
“This will lead toward plan C – using oil less. It is time for the US, China and India to plan a new lifestyle for future generation. In this regard, the three countries can play their part.”
For the US, Xu added, the issue is profound given its high energy consumption, which exceeds the combined consumption of China, India, Japan and Germany although its population accounts for only five per cent of the world’s.
“The issue is the exact opposite for China, the most populous country in the world. China now consumes more oil than any country other than the US. However, on per capita basis, China still uses just under two barrels of oil per year, compared to the US whose per capita oil use is almost 15 times as much. Again there is no way for China or India to copy the energy consumption of the US, Europe or even Japan since the global oil supply is now too limited and far less required to satisfy the virtual growing demand in China.
“The US should lead by example and guide the shift from the traditional consumption model to a brave new one that includes renewables, conservation and efficiency – one which China and India have to accept as a core ingredient of action for Plan C. The key content of the future lifestyle is nothing more complicated than less use of finite energy sources.”
The numbers
14: Giant fields produce 20% of world total
4,000: small fields produce 53% of world total
Originally from : http://www.business24-7.ae/cs/article_show_mainh1_story.aspx?HeadlineID=5343
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