A new report by Jeff Rubin and Peter Buchanan at CIBC World Markets predicts that oil will hit $100 per barrel by the end of 2008.It echoes a recent report published on The Oil Drum that found oil exporting countries past their production peaks are reducing their exports faster than their depletion rates so they can meet domestic demand.The authors also note that while rising oil prices have cooled demand in industrialized countries, most of the demand growth is coming from the oil producing countries themselves.The resilience of world crude demand to the doubling in prices in the last three years has economists scratching their heads about the apparent lack of price sensitivity in world crude demand.Pointing out that inside oil exporting countries, cheap domestic gasoline prices are "considered a political birthright," Rubin and Buchanan argue that without price signals, domestic consumption inside OPEC, Russia and Mexico will continue to go up even as national output peaks and goes into decline.With consumption growth in the Middle East quintuple the advanced economies' pace, OPEC's future export capacity must be increasingly called into question. Particularly now that the cartel no longer seems to be able to raise production. ...While OPEC production may be close to a peak, domestic demand for oil in OPEC member countries has nowhere to go but up. At current internal consumption rates, the cartel's exportable surplus will decline steadily over the balance of the decade - even if new production offsets the mounting toll taken from depletion. With domestic production more or less constant over the balance of the decade, internal demand growth will reduce exports by about 1 million barrels per day between now and the end of the decade.The report also notes that opportunities to offset export declines from OPEC are limited. Mexico is past past its production peak, while Russian production will grow only modestly, even as consumption continues to rise in those countries as well. Similarly, Iraq is too unstable to maintain reliably, let alone grow, its oil production.
Crude Oil Rises to Record $92.22 on Increased U.S.-Iran TensionBy Mark ShenkEnlarge Image/DetailsOct. 26 (Bloomberg) -- Oil rose above $92 a barrel for the first time in New York after the U.S. accused Iran's military of supporting terrorism and announced new sanctions on the country that holds the world's second-biggest oil reserves.``There's nothing out there to stop oil from going to $100,'' said Chip Hodge, a managing director at MFC Global Investment Management in Boston, who oversees a $4.5 billion oil and gas company bond portfolio. ``There are plenty of bullish factors such as the continued dispute between Turkey and Iraq, the new sanctions against Iran and falling inventories.''The U.S. wants Iran to halt uranium enrichment that it suspects is a cover for developing nuclear weapons. Prices also rallied on Turkish warnings of a wider military assault on northern Iraq. U.S. crude-oil supplies fell last week to the lowest since January, a government report showed on Oct. 24.Crude oil for December delivery rose $1.40, or 1.6 percent, to settle at $91.86 a barrel at 2:50 p.m. on the New York Mercantile Exchange. It was a record close. Futures climbed to $92.22, the highest intraday price since trading began in 1983. The December contract rose 5.6 percent this week. Oil is up 52 percent from a year ago.Brent crude oil for December settlement rose $1.21, or 1.4 percent, to close at a record $88.69 a barrel on the London-based ICE Futures Europe exchange. Brent reached $89.30, the highest since trading began in 1988.`Self-Fulfilling Prophecy'``I think we are going to $100, if for no other reason than because there are some traders who want to say they took oil there,'' said Sarah Emerson, managing director of Energy Security Analysis Inc., a consulting firm in Wakefield, Massachusetts. ``When you get close to a psychological number, reaching it becomes a self-fulfilling prophecy.''U.S. crude-oil supplies fell 5.29 million barrels to 316.6 million barrels last week, the Energy Department said this week. The drop left stockpiles the lowest since the week ended Jan. 5.``This rally was triggered by the big decline in crude oil we saw on Wednesday,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois. ``The crude-oil number has made us sensitive to any geopolitical news at all, regardless of the significance.''Inventories of gasoline and distillate fuel, a category that includes heating oil and diesel, also declined last week, the report showed. The drop sent heating-oil prices to a record and gasoline to the highest since July.Heating oil for November delivery rose 2.41 cents, or 1 percent, to close at a record $2.4325 a gallon in New York. Futures touched $2.4399, the highest since trading began in 1978. Gasoline for November delivery climbed 3.82 cents, or 1.7 percent, to settle at $2.274 a gallon, the highest since July 11.Falling StockpilesIndustry stockpiles of oil and petroleum products in the world's most developed economies declined by 33.3 million barrels during the third quarter, counter to the trend of the past five years, the International Energy Agency said on Oct. 11.``We did not build global inventories during the second and third quarters because demand outpaced supply,'' Emerson said. ``That reality is sinking in and is partially responsible for the rise from $70 to $80 and then $90 a barrel.''The Bush administration yesterday announced new sanctions against Iran that designate the Iranian Revolutionary Guard Corps as a proliferator of weapons of mass destruction and its Quds force as a supporter of terrorism.The strategy is aimed at showing governments and overseas banks they would be tainted by doing business with Iranians linked to terrorism or arms proliferation, making it more difficult for the regime to gain access to international capital.Turkish ThreatsTurkey is threatening to send troops into northern Iraq unless Iraq and the U.S. take measures to stop about 3,500 Kurdish militants from attacking targets in Turkey, including closing the group's camps and cutting off supply routes. The U.S. has urged restraint from the Turkish government.``I don't think I've ever seen such an explosive market without a major correction,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``There is a combination of factors that continue to send prices higher and we've run out of bearish news.''Oil also rose because the U.S. dollar declined against the euro on speculation the Federal Reserve will cut interest rates next week. Lower rates will reduce demand for U.S. assets as investors look for better returns in other countries. The dollar touched an all-time low of $1.4393 in New York.Members of the Organization of Petroleum Exporting Countries have said a falling dollar justifies higher prices because oil- producing countries sell oil in dollars and often buy goods in euros. The group agreed in September to produce an extra 500,000 barrels a day starting Nov. 1 to lower prices and meet fourth- quarter demand.``The OPEC countries have gotten used to these prices,'' said Claudia Kemfert, head of the energy department at the Berlin-based DIW economic institute. ``I think that in the future they will seek to keep the prices high.''To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net .Last Updated: October 26, 2007 15:41 EDT
Crude oil prices appear increasingly likely to hit the real terms record, reached during the second oil crisis in 1979, as nominal prices soar above $90 a barrel.West Texas Intermediate crude oil has risen to a nominal all-time high of $92.22 a barrel on a combination of renewed geopolitical tension over Iran’s nuclear programme, weakness of the US dollar and low inventories ahead of the winter.In real terms, adjusted for inflation, oil is at its highest price since the early 1980s but still below its modern historical peak – equivalent to about $100-$110 a barrel in today’s money – reached in late 1979 after the Iranian revolution.Oil traders said that strong speculative flows, Middle East tensions and supportive fundamentals could push crude oil prices towards, if not above, their real term record.Even so, some analysts remain dismissive about the potential impact of reaching such a level, as the factors behind the price increase are different.Adam Sieminski, chief energy economist at Deutsche Bank in Washington, said that the current price increase, driven by demand, was different from the 1979 crisis. “That crisis was driven by a supply shortage and turmoil in the Middle East. That has wider implications on business and consumers’ psychology.” Royal Dutch Shell’s chief financial officer, Peter Voser, also last week said that record oil prices were being driven by speculation and political tension, not a lack of supply.There are also discrepancies among energy economists on which level represents the true adjusted record as West Texas Intermediate futures did not exist in the early stages of the second oil crisis, in 1979. That obliges to use for the calculation other crude oils streams that are not exactly comparable.There is also disagreement about which inflation measure should be used to adjust the price – world inflation or US inflation. But most agree that $100-$110 a barrel will represent roughly the real terms record.A measure taking account of the evolution over time of the rich countries’ per capita income has crude oil prices well below the adjusted record. G7 per capita income is now sufficient to buy 456 barrels of crude oil, well above the 320 to 350 barrels between 1980 and 1982.To bring G7 purchasing power down to this level would require oil prices rising to between $120-$130 a barrel, according to Deutsche Bank.Copyright The Financial Times Limited 2007
Oil price exceeds US$96 a barrel, nearing all-time peak Cannot PostNov 1, 2007Oil price exceeds US$96 a barrel, nearing all-time peakSYDNEY - OIL leaped nearly 2 per cent to top US$96 (S$139) on Thursday, nearing its all-time peak after an unexpected sharp fall in United States crude stocks and data showing strong economic growth.The rise was also supported by a drop in the US dollar, which fell to record lows against the euro after the US Federal Reserve cut rates by a quarter percentage point. The rate cut also boosted the attraction of commodities as an investment.US oil for December delivery rose as high as US$96.21 a barrel in electronic trade. By 10.49am it was up US$1.50 at US$96.03.December Brent crude also hit its record high of US$91.63, up US$1 on the day.Oil soared US$4.64 or over 5 per cent on Wednesday, its biggest one-day gain in 10 months, after US data showed an unexpected 3.9 million barrel drop in crude stocks last week, most of it at the Cushing, Oklahoma, delivery point.'The US inventory report has reaffirmed the belief that market conditions are tightening and oil prices are ratcheting up higher on that basis,' said Mr David Moore, a resource analyst at the Commonwealth Bank of Australia (CBA).Two rate cuts by the Fed to stave off fears of recession also have added liquidity to financial markets by making it cheaper to borrow, and some analysts say the extra cash has been drawn to energy markets.Oil prices have surged more than 50 per cent since the start of the year, and have risen about 18 per cent in the past month alone on winter supply worries, speculative buying and a succession of record lows in the US dollar.Prices are now nearing the inflation-adjusted high of US$101.70 seen over the course of April 1980, but the economy of the world's biggest energy consumer has shown surprising resilience to high oil prices, growing at a brisk clip in the third quarter. -- REUTERS
BEIJING: China, the world's No. 2 oil consumer, warned Wednesday that crude prices were too high, as the country's energy officials sat down with OPEC officials for their first formal meeting in two years.Record-breaking oil prices, China's strategic stockpiling, its companies' forays overseas and exporting nations' designs on the Chinese refining and retail sector were all on the agenda for a daylong OPEC energy roundtable with China."The discussion here is mainly to look at the future, to see where these prices are taking us, to forecast demand and supply," Abdullah al-Shameri, head of the OPEC secretary general's office, said at a press conference.The last meeting was in 2005, when the Organization of Petroleum Exporting Countries said that China had changed the culture of oil markets and asked for a road map to help them better understand the country's volatile demand growth.Since then oil prices have risen by more than $25 a barrel, but China's state-set pump prices have not been increased since May 2006, meaning the increase has had little impact on Chinese consumption.A senior policy maker from China's energy bureau said that China had no problem finding crude, but objected to prices that last week hit a record of more than $90 a barrel. By Wednesday, the benchmark price had retreated below $85 a barrel."The oil price is too high, but we don't see any shortages," the official, who declined to be named, said.Beijing last December held a meeting of top oil consumers, a rare move to take leadership on global energy issues, urging the consumers to join in the face of resurgent producer power.The country's booming economy, paired with solid demand growth of 4.3 percent in the year through August, offers oil exporters a reassuring counterweight to the U.S. economy, and may give them more leverage in coming months.OPEC's secretary general, Abdullah al-Badri, said Wednesday that the producer group was implementing a decision to increase production by 500,000 barrels per day starting in November, which could help cool markets.But Javad Yarjani, head of OPEC affairs at Iran's Oil Ministry, said fear rather than fundamentals were driving markets."The real reason for prices being so high is not the shortage of crude oil. Fundamentally there is no problem," Yarjani said."There is a fear factor - discussions of a political nature which are pushing up prices. We have to go back to the basics of the oil market, which is demand-supply, investments, flow of technology," he said.Oil has risen about 40 percent from the start of the year, propelled by concerns about tighter supplies before the Northern Hemisphere's winter, plus political tensions in the Middle East.Fears that Turkey might push into northern Iraq helped drive prices to fresh peaks last week. But such fears have eased this week, as Baghdad promised Turkey it would close the offices of Kurdish rebels and work to prevent them launching attacks in Turkey.
International Journal of Global Energy Issues2007 - Vol. 27, No.4 pp. 404 - 424Many studies, as well as historical events, indicate that oil price shocks affect the macro economy of a country.In this paper we build a Chinese Computable General Equilibrium (CGE) model, with which we simulate the impact on the Chinese economy of international crude oil price when it rises by 5%, 10%, 20%, 40%, 50% and 100%.Simulation also identifies the effects of low/medium/high technological advances in the crude oil mining, petroleum and chemical and transportation sectors on fighting the risk of oil price shocks.The results indicate that international crude oil price has negative effects on Chinese real GDP, investment, consumption, import and export, amongst a range of economic indices.Technological advances have positive effects on fighting back the risk of oil price shocks, especially the technological advances in petroleum and chemicals, whilst the transportation sector has a greater effect on resisting oil price risk. An international oil price hike holds more disadvantages for rural residents' welfare.These results would be valuable reference information for policy makers.
Actaually, the answer the OPEC community gives China will be very interesting....if OPEC listens to them, then China has a great deal of sway in the international resources market....but i seriously think China cant do anything aside from some under table deals or backdoor deals, because petroleum is a necessity, plain and simple, and if the prices are high, well guess wat, too bad....i think this is the answer OPEC will give....Again, like i said very intersting to watch for the response
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Topic: [Focus] Crude Oil Market n News (Read 16176 times)
