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Posted on 04/09/2006 2:33:30 PM PDT by Flavius
CRUDE oil traded near a one-week low in New York amid speculation a report today will show US supplies last week rose to their highest in almost seven years.
Stockpiles probably gained for a sixth week, climbing 0.8 per cent in the period ended March 17, according to a survey. This would increase inventories to their highest since April 1999.
"People are talking about a glut now," said Mark Waggoner, president of Excel Futures in Huntington Beach, California.
Crude oil for April delivery was at $US60.05 a barrel, down US37c, in after-hours electronic trading.
The contract plunged $US2.35, or 3.7 per cent, to $US60.42 on Monday, the biggest one-day decline since August 17 and the lowest close since March 10.
Oil futures on January 23 rose to $US69.20, the highest since September 2, on fear that Iran, the world's No.4 producer, could cut exports if the UN imposes sanctions to stop the Islamic Republic's nuclear research.
Insurgent attacks in Nigeria have cut production in the No.5 oil supplier to the US.
Petrol stockpiles in the US have fallen in the past two weeks and demand is running 2.5 per cent higher than a year ago, the Energy Department said.
"When prices are at these heights you need fresh worrisome news to keep us moving higher," John Kilduff, vice-president of risk management at Fimat USA in New York, said on Monday. "We'll be paying attention to gasoline because there is a question about supplies as summer approaches."
The US, the world's biggest oil consumer, uses about 10 per cent of the global supply to make petrol. Demand for the motor fuel usually peaks between the Memorial Day holiday in late May and Labor Day in early September.
Petrol stockpiles fell in the US Energy Department's past two reports as refiners closed refineries for seasonal maintenance and demand rose to its highest this year.
Is the world now facing an oil glut?
by Dave Ebner
22-06-05 An oil glut is coming. That's right, a glut, way too much oil -- and the bold prediction is being made by one of the energy industry's top consultancies.
Even more bold is the prediction's timing, just as the benchmark price of oil is on the verge of cracking $ 60 a barrel and futures contracts suggest oil will remain higher than $ 55 for the rest of the decade.
Cambridge Energy Research Associates, based near Boston, is sceptical, and released highlights of a report that concludes the world's capacity to produce oil will likely easily exceed the world's voracious demand for the product that fuels cars, ships and planes.
Increasing oil production capacity "will comfortably meet volatile and expanding demand in the next five years and beyond," Peter Jackson and Robert Esser, the authors of the report, write in their introduction. Total capacity will surge by almost 20 % to 101.5 mm bpd by 2010, the widely respected and closely followed consultancy predicted, basing its assessment on field-by-field research. In 2010, capacity could be seven mm barrels or so higher than demand -- a huge surplus.
The surplus is tiny now. Current demand, by most estimates, is within a million barrels of current capacity of about 85 mm bpd. The significant capacity gain is expected to come on the back of a long slate of massive development projects, including Canadian Natural Resources' Horizon oil sands project, among the 10 biggest on the go anywhere.
The spare capacity could drive the price of oil far lower. The present panic surrounding oil is based largely on the world's lack of spare capacity and the seeming inability to handle a situation where a major source of supply was cut off.
But Cambridge Energy Research doesn't see the current price as ridiculous or irrational, noting that the price is a direct response to the strong surge in demand last year, coupled with numerous geopolitical worries. By 2007 and 2008, the consultancy says the price could drop as demand begins to fall short of supply, though it wasn't so bold as to make a precise prediction.
More than half of the additional oil will come in the form of light oil, the most valuable kind that is the easiest to turn into gasoline and jet fuel. The consultancy also said "unconventional" oil supplies -- such as those in the Alberta tar sands -- will be much more important than people think, as will output from ultra deepwater oil wells, more than 700 metres below the seabed. Other positive factors include getting more oil out of existing fields.
Still, the argument that there's plenty of oil around is somewhat academic as Canadians and people around the world face record prices for gasoline. The average price of gas in cities across the country is about 92 cents (Canadian), just a couple of pennies below the record of about 94 cents set in late April, according to M.J. Ervin & Associates in Calgary.
There is little relief in sight, say oil analysts, including Martin King of FirstEnergy Capital in Calgary.
"The world may be effectively tapped out in terms of spare capacity for 2005 and 2006," Mr King said in a report. He was among the first forecasters to predict oil would average $ 50 a barrel this year and has said oil will average $ 52 next year.
The authors of the Cambridge report looked at two scenarios, one positive and one negative, and found that, even in the negative outlook, the world will have more oil than needed.
The report also took aim at peak-oil theorists, who espouse the view that the world's oil production will hit a high, possibly as early as this year, and then decline rapidly. While no one argues that oil is anything but a finite resource, Cambridge Energy Research doesn't see a peak at all. Instead, it projected an "undulating plateau," extending for several decades.
Source: Globe and Mail
They always tell us about supply and demand. Now they have an oil glut and the price is still near record highs. So much for supply and demand.
There's the supply of crude and there's refining capacity. We're at or near our limits on the latter. Just one refinery going offline is all it takes for prices to shoot up.
Hopefully someday you can learn to come to your own conclusions and then you won't be tossed around so much by what "they" tell you.
Well, not and expect my car to run :)
The prices will go up again next week because of X refinery problem.
$1.07/L at the moment in my neck of the woods.
How has the law of supply and demand been violated?
Check out this posting and compare to yours:
http://www.freerepublic.com/focus/f-news/1612083/posts
This is the year of the Lord 1979.
A large part of the present price is also purely security related. It is a war fear premium over Iran. Which the world isn't going to do anything about, incidentally. They are going to get nuclear weapons and we are all going to watch, even though we could stop them easily. Leftists at home with heads firmly in the sand and boundless, utterly unprincipled political ambitions, have seen to that.
3.06 a gallon for regular where I live.........but I'm not gettin screwed........: )
Oh I have my own conclusions allright.
Wouldn't this be Bush's fault?
"There's the supply of crude and there's refining capacity. We're at or near our limits on the latter. Just one refinery going offline is all it takes for prices to shoot up."
Time for a Pre-Peak Driving Season Refinery Fire!
An American tradition!
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Closest months contract of unleaded regular:
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