Monday, April 28, 2008

Deutsche Bank Forecast

Oil May Rise Until Demand Collapses, Says Deutsche
By Ayesha Daya
April 28 (Bloomberg)

There is a ``huge risk'' that oil prices will continue to rise until demand collapses because additional supplies are limited and alternative fuels decades away from replacing crude, Deutsche Bank AG said.

``There is a huge risk that the oil price simply continues to escalate until it gets to some level ($200 a barrel?) when demand finally collapses because ordinary people can no longer afford to burn as much energy as they are burning now,'' Deutsche Bank's chief energy economist Adam Sieminski wrote in a report dated April 25.

Oil demand previously collapsed in the early 1980s, after nominal oil prices rose tenfold between 1970-73 and 1980-83, to $35 a barrel from around $3.50. Oil averaged about $25 a barrel from 2000-03, suggesting prices would have to increase to $250 a barrel in 2010-13 to have the same impact on oil users this time around, Sieminski said. Deutsche Bank's price forecast for Brent and West Texas Intermediate oil next year is $102.50 a barrel.

Oil prices have surged 82 percent in the past year as investors purchased contracts as a hedge against the dollar, which fell to a record low against the euro, and as an alternative to flagging equity markets. Crude oil rose to a record $119.93 a barrel today after BP Plc shut a North Sea pipeline and gunmen attacked police guarding Nigeria's largest oil and gas terminal.

Investment Needs

Additional oil supplies will come only from the Organization of Petroleum Exporting Countries, which produces 40 percent of the world's oil, because non-OPEC output will need ``enormous levels of investment'' just to maintain current levels of production.

``However, much of the remaining oil-in-the-ground in OPEC is run by National Oil Companies that have, by and large, been starved of investment capital by their own governments, for example Venezuela, Nigeria, Iran,'' Sieminski said.

The exception is Saudi Arabia, which holds the world's largest oil reserves. The country has no plans to raise output beyond its 2009 target of 12.5 million barrels a day, Oil Minister Ali al-Naimi said in an interview with Argus Media this month.

Any strengthening of the U.S. dollar would take time to stem the flow of investment into commodities, and alternative energies such as solar power or biofuels are at least a decade away from contributing to energy supply, Sieminski said.

Wednesday, April 23, 2008

Goldman Sachs Forecast

Goldman Sachs Says Window `Closing Fast' for Oil Drop
By Will Kennedy and Grant Smith
April 23 (Bloomberg)

Goldman Sachs Group Inc., the most profitable Wall Street bank, said the window for a decline in oil this spring is `closing fast,' as prices rise to records and the summer period of peak gasoline demand approaches.

U.S. crude imports are likely to rise because of lower inventories and the strength of local oil prices relative to the rest of the world, Goldman analysts led by Giovanni Serio said in their Energy Weekly report.

``Looking into the second half of this year, given the fundamental tightness, we believe the risks are substantially skewed to the upside,'' the report said.

The bank said on April 10 that oil may not fall as far as it expected previously, predicting that prices may slip to $98.80 in the spring, above a previous ``floor'' of $90 a barrel.

Crude oil futures rose to a record $119.90 a barrel on the New York Mercantile Exchange yesterday.

Goldman maintained its expectations for the price of the front-month crude contract in three, six and 12-months at $102, $107.50 and $115 a barrel respectively. The bank's forecast for the average price in 2008 of $105 is the second-highest among 31 estimates compiled by Bloomberg.

Thursday, April 17, 2008

Net Oil Exports - April 2008 Update

Net Oil Exports - April Update. Top 20 Exporters (93% of total exports).

For those of you that have already downloaded the spreadsheet - The correct value for Venezuelan March production is 2444 not 2244. Thanks to eastender for catching that.

Exports dropped by about 150,000 barrels per day in March.

check link to right for newer spreadsheet

Pickens Reversal

Boone Pickens Adopts Long Position on Oil Investments
By Daniel Whitten
April 17 (Bloomberg)

Boone Pickens, a billionaire energy investor, said he reversed course and adopted a long position on oil, meaning he is betting the price of crude will rise.

Pickens, 79, the founder and chairman of Dallas-based BP Capital LLC, said today in a speech at Georgetown University that the price of crude oil will only continue to climb and demand will eventually be dampened.

``The position is long, not short,'' Pickens told reporters after his speech. ``I covered the short position, it was a mistake on my part. We missed.''

Crude oil futures in New York touched $115.54 a barrel today, the highest intraday price since trading began in 1983.

Pickens said he thought oil was approaching $125 a barrel. Oil will eventually reach $150 per barrel, he said while cautioning ``I won't be investing in $150 oil.''

World oil supplies won't exceed 85 million barrels a day because of high depletion rates of existing wells, he said in his speech.

``There is only 85 million barrels of oil globally in the market coming a day and I don't think you can increase that 85 million,'' Pickens said.

World oil demand during the four years ending 2008 is rising at an average annualized pace of about 1.4 percent, according to International Energy Agency forecasts.

OPEC Reluctance

Over the same period, non-OPEC oil supply is seen climbing at a slower pace of 0.9 percent. The Organization of Petroleum Exporting Countries has this year been reluctant to commit to pumping more, saying supply and demand are in balance.

Pickens endorsed Republican presidential candidate John McCain, while criticizing his energy policies. Recent McCain proposals to stop putting oil into the federal Strategic Petroleum Reserve and to suspend a gasoline tax for the summer wouldn't be good for the country, Pickens said.

``I'm hoping he will become better informed and come up with better ideas about energy than he has up to now,'' he said.

He plans to invest $10 billion in 4,000 megawatts of wind projects within the next several years.

``We are going to put a lot of money into wind next month,'' Pickens said, adding he expects at least a 25 percent return on his investment.


Angola Crude Oil Exports, Including Palanca, Fall 1.7% in June
By Alexander Kwiatkowski and Nesa Subrahmaniyan
April 17 (Bloomberg)

Angola's daily crude oil shipments, including the Palanca grade, will drop 1.7 percent in June.

BP Plc, Total SA, Chevron Corp., Exxon Mobil Corp. and other companies will ship an average of 1.92 million barrels a day in June, compared with 1.95 million barrels a day scheduled for May, according to the loading program. The schedule for Palanca cargoes had previously been unavailable.

Angola, which became a member of the Organization of Petroleum Exporting Countries in 2007, was given a daily production target of 1.9 million barrels at the group's meeting in Abu Dhabi last year. The country's oil output increased 18 percent last year to 1.61 million barrels a day, according to the International Energy Agency.

Sixty cargoes totaling about 57.6 million barrels will load in June, compared with 63 cargoes totaling 60.6 million barrels in May.

Angola's June loadings will include seven cargoes apiece for BP and Total, and six for Exxon Mobil. StatoilHydro ASA, Eni SpA and Chevron are scheduled to lift five cargoes. Galp Energia SGPS SA will load one cargo of Nemba crude.

State-run Sonangol SA has 22 cargoes, while Sonangol Sinopec International, a venture between the national oil company and China's biggest refiner, will load two Plutonio shipments.

Angolan oil comprised 5 percent of total U.S. crude imports in 2006, or 513,000 barrels a day, according to the Energy Information Administration.

Angola's cargoes typically range in size from 875,000 barrels to 1 million barrels apiece. Following is a table showing the number of Angolan crude cargoes scheduled to load in June and May.

Grade Cargoes Total Bbls/Day Previous %Change

Cabinda 6 5,700,000 190,000 183,871 +3.3
Dalia 9 8,550,000 285,000 245,161 +16.3
Girassol 8 8,000,000 266,667 290,323 -8.1
Hungo 8 7,600,000 253,333 275,806 -8.1
Kissanje 8 7,600,000 253,333 245,161 +3.3
Kuito 2 1,750,000 58,333 56,452 +3.3
Mondo 3 2,850,000 95,000 91,935 +3.3
Nemba 8 7,600,000 253,333 275,806 -8.1
Palanca 2 1,970,000 65,667 95,323 -31.1
Plutonio 6 6,000,000 200,000 193,548 +3.3

Total 60 57,620,000 1,920,667 1,953,387 -1.7

Friday, April 11, 2008

New Production Record - January 2008

The EIA has just released its numbers for January 2008. They show a new production record for Crude and Condensate production (C+C).

You saw it here first. I had prepared a piece for this in the last week as I was sure it was going to happen, but I will hold off and wait to see what those who have been adamant about 2005 being the peak have to say. Hopefully they are starting to learn that we just can't predict.

74,466 is 168,000 barrels per day above the previous monthly record of May 2005.

Here is a link to graphs on EIA Revisions and what they tend to do.

IEA April update (for March)

April 11th IEA Oil Market Report - Highlights

Crude futures set new records above $110/bbl in early April, driven by tight distillate markets, strong non-OECD imports and a weaker dollar. Refining margins remain extremely volatile, reverting into positive territory in recent weeks following a large US gasoline stock draw, which has tightened regional supplies.

Global oil product demand has been revised down by 310 kb/d in 2008 to 87.2 mb/d following the downgrading of global GDP prospects by the IMF, coupled with a change in FSU methodology and baseline data revisions. By the same token, 2007 demand is up by 140 kb/d over last month’s report to 86.0 mb/d. As a result of these divergent shifts, demand growth in 2008 is now expected at almost 1.3 mb/d or 1.5% over 2007.

Global oil supply fell by 100 kb/d in March to 87.3 mb/d, led by lower supplies last month from OPEC, the North Sea and non-OPEC Africa. Non-OPEC supply growth in 2008 is trimmed to 815 kb/d on a broad swathe of adjustments in the Americas, Africa and Europe.

OPEC crude supply fell by 265 kb/d in March to 32.1 mb/d, on field maintenance in UAE, Nigeria and Venezuela. Pipeline/power outages highlighted ongoing risks to production in Iraq and Nigeria amid effective spare capacity of just 2.3 mb/d. Weaker economic growth cuts the 2008 call on OPEC by 0.3 mb/d to 31.6 mb/d.

OECD total industry stocks fell by 48.9 mb in February, to 2,579 mb, offsetting a similar rise in January. The February draw leaves inventories At 53.3 days of forward demand. With preliminary data indicating a build of just 6.3 mb in March, OECD end-1Q08 stocks remain close to end-December levels.

Global refinery throughput weakened in March, as poor margins curbed crude runs in all OECD regions. Estimated 1Q08 global throughput is unchanged at 74.0 mb/d. However, 2Q08 estimates have been cut by 0.2 mb/d to 73.7 mb/d, in line with weaker demand.

Monday, April 7, 2008

OPEC exports down 100,000 bpd

OPEC exports down 100,000 bpd 4 wks to Mar 23
Mon 7 Apr 2008

LONDON, April 7 (Reuters) - OPEC seaborne oil exports, excluding Angola and Ecuador, fell 100,000 barrels per day (bpd) in the four weeks to March 23, mostly on slippage from Gulf producers, data released by Lloyd's Marine Intelligence Unit showed on Monday.

LMIU said shipments from 11 OPEC producers, including Iraq, fell to an average of 22.104 million bpd in the peroid, versus 22.201 in the previous four weeks to Feb. 25.

"Exports are trending downwards, with Gulf shipments clearly falling in the period. Volumes are cyclically lower," an LMIU analyst said.

He said that refinery maintenance in the first and early into the second quarter was likely affecting flows as demand slows.

The analyst said lower output in Nigeria and Venzuela in March, could also be responsible for the turndown, a trend confirmed by other industry sources and analysts.

Last week a Reuters survey of 12 OPEC members showed production fell slightly in March because of lower Nigerian and Venezuelan output as maintenance at oil installations curbed supply.

Tuesday, April 1, 2008

Why Oil Requires a Sense of Humor

I won't be printing any jokes today (April Fool's Day). I promise. But this is pretty funny.

I was cleaning up the website when I stumbled upon this old draft. I'm glad I didn't throw it away. I think it goes well with the material I've been posting lately on forecasting. I haven't found out what Lehman's "revised" forecast is, if somebody knows where to find it by all means post it here. Most likely it has been buried in the recent turmoil surrounding these brokers and banks. Keep in mind that February 20th was more than halfway through the first quarter. Can you forecast history? The comment that follows the piece was written in February.

From Bloomberg last month:

Lehman Will Revise First-Quarter Oil Price Forecast
By Jeremy Naylor and Grant Smith
Feb. 20 (Bloomberg)

Lehman Brothers Holdings Inc. will revise its first-quarter New York crude oil price forecast of $86 a barrel, chief energy economist Edward Morse said.

``We will be revising it up,'' Morse said in an interview with Bloomberg television. Oil prices, which rose to a record $100.10 a barrel on the New York Mercantile Exchange yesterday, are being driven by financial markets rather than supply-demand fundamentals, he said.

The Organization of Petroleum Exporting Countries is unlikely to reduce output at its March 5 meeting with prices at current levels, Morse said. The 13-member group, which produces more than 40 percent of the world's oil, left production targets unchanged at its previous Feb. 1 conference.

``It's unlikely that at $100 a barrel anybody's going to be in the mood for a cut,'' said Morse. ``The Saudis are uncomfortable at $100 oil.''

Consumption in export-driven emerging markets won't be immune to a slowdown in the U.S., the world's biggest energy user, Morse said. Some analysts have said that Asian markets are ``decoupled'' from the U.S. and so demand there can weather a U.S. recession.

``We will be seeing an impact on Chinese demand, probably after the Olympics, and that's because of what's happening in the U.S. economy,'' he said.

Yesterday's price record was part of a broader flow of investment into commodities rather than the result of any genuine threat to crude supplies, Morse said.

``It's certainly not oil market fundamentals and nothing to do with geopolitics,'' he said. ``This is a commodities issue rather than an oil market issue.''

I don't mean to single this story out. Ninety-five percent of business stories and ninety-nine percent of those on oil are filled with this meaningless nonsense. I haven't figured out the percentage of garbage that comes from the analysts, but I suspect it is even higher.