07 May 2008

Yikes - superspikes

Analyst sees oil surging to US$200

Oil could shoot to US$200 within the next two years as part of a "super-spike," investment bank Goldman Sachs said Tuesday, as crude cruised to a record price north of $122 per barrel and at least one Calgary station briefly advertised regular gasoline at a record CAD$1.29 per litre. It's an oil forecast that's gaining in popularity - and one prospect analysts and economists agreed would lead to a global slowdown, a deep US recession and higher prices for consumers in Canada on everything from gas to food. "We believe the current energy crisis may be coming to a head, as a lack of adequate supply growth is becoming apparent," Goldman analyst Arjun Murti said in a research note. "The possibility of US$150 to $200 per barrel seems increasingly likely over the next six to 24 months, though predicting the ultimate peak in oil prices . . . remains a major uncertainty." Despite high prices, Alberta Premier Ed Stelmach said in Calgary he wasn't keen on the idea of reducing fuel taxes. "All the money that comes from fuel tax goes directly to infrastructure, to highways. We don't use that money for any other operational cost of government," he said. "It is by far the smallest fuel tax in the country."

Doug Porter, deputy chief economist for BMO Capital Markets, said Tuesday $200 oil would probably cause a global economic slowdown that would push the weak US economy into a deep recession and sideswipe Canada as well. "Up to this point, the global economy has held up remarkably well in the face of oil prices going from $20 to over $120 but I think that added increase (to $200) over such a short period of time would prove to be a tipping point for global growth, especially in North America." Consumers would see higher energy prices and higher inflation, Porter said, but some prices would fall simply because energy costs would deplete family budgets to the point that there would be less demand for discretionary items such as clothing, electronics and appliances. Alberta, thanks to oil and natural gas royalties, would be insulated from the slowdown, but the Canadian dollar would likely follow the oil price higher, leading to increased pressure on Canadian firms that sell goods in US dollars, as well as the farming, lumber and travel industries.
(Calgary Herald, Globe and Mail, National Post 080507)

Things are looking worse and worse everyday. What will be the trigger to set everyone panicking for the financial exits?

Gas prices to cut US oil demand

Higher gasoline prices and a slowing economy will cut into US oil demand through the summer driving season much more than previously thought, the US government's top energy forecasting agency said Tuesday. "Based on projections of weak economic growth and record high crude oil and product prices, (petroleum) consumption is projected to decline," the Energy Information Administration said in its latest monthly forecast. Thanks to rising crude oil costs, US drivers will pay an average US$3.66 a gallon for gasoline this summer, up 12 cents from earlier estimates, the US Energy Department's analytical arm said. Pump prices are expected to peak at $3.73 a gallon in June, 11 cents more than previously projected, the agency said. Gasoline prices will be higher due to expensive crude oil, which the EIA said it now expected will average $110 a barrel this year, about $9 more than the agency forecast last month. High fuel costs, along with a sputtering economy, will take an even bigger bite out of gasoline consumption, which was already forecast to decline from last summer's levels. "The gasoline (situation) we're facing here in the US is not something we've seen in 20 years, where we have these high prices on top of a weak economy," said EIA analyst Tancred Lidderdale. "Both are unquestionably taking their toll." The EIA said it expected total petroleum demand, which includes gasoline, diesel fuel and jet fuel, in the current quarter to be 90,000 barrels a day less than last month's forecast and down 170,000 barrels a day compared with the second quarter of last year. For all of 2008, demand will decline by 190,000 barrels a day, 90,000 barrels per day more than the agency said in last month's forecast.
(Calgary Herald 080507)

Everything on this bloody continent is going to be affected by this.

Indonesia may quit OPEC as nation's output dwindles

Indonesia said on Tuesday it may quit the Organization of the Petroleum Exporting Countries as its declining crude oil output prevents the country from meeting its OPEC quota and has reduced its influence in the cartel. Indonesia is Asia-Pacific's only member of OPEC, but its crude oil output has fallen in recent years due to aging wells, a lack of investment, and the absence of any major oil finds. "We are studying whether we have to stay in OPEC or leave. We are now a crude oil importer and our production has declined to below one million barrels," Indonesia's President Susilo Bambang Yudhoyono said, referring to the country's daily output. Indonesia produced 977,000 barrels per day of oil and condensate in April, an official at the country's energy watchdog said last week. Of this, 859,000 bpd were crude and 118,000 bpd were condensate. Indonesia's status as a net oil importer has prompted many analysts to question its continued membership of OPEC, especially at a time when the cartel has been expanding. Indonesia has aired the possibility of leaving OPEC before. In 2005 a group of advisers to the government had recommended the country leave the group partly because of the financial costs of membership. Kurtubi, an energy analyst at the Centre for Petroleum and Energy Economics Studies in Jakarta, said Indonesia should have left the group because of its status as a net oil importer, which is different from OPEC's interests. "Our interests now are different. As an importer, we want oil prices to come down as high oil prices put pressure on our budget. But exporters want a reasonable or even high price since it is their main source of revenue," Kurtubi said. Indonesia is likely to remain a net importer of oil, and the decline in production has forced it to turn to other energy sources. It has huge natural gas and coal reserves, but has been unable to fully exploit those due to a lack of investment and poor infrastructure.

In other news, OPEC countries cut oil production 1% in April. Nigerian output dropped to the lowest level this decade, a Bloomberg News survey showed. OPEC pumped an average 32.105 million bpd last month, which is down 320,000 barrels from March, according to the survey of oil companies, producers and analysts. Production by the 12 members with quotas - all except Iraq - fell by 305,000 barrels to 29.74 million barrels a day. Nigerian production dropped 160,000 barrels to an average 1.88 million barrels a day last month. This is the biggest decline of any member, the survey showed. It was the lowest output for the African country since August 1999.
(Calgary Herald 080507)

Why are all the fringe suppliers suddenly out of the game? Who's been monitoring activity? Better yet, who's been asleep at the wheel?

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