Oil fundamentals ease as prices hurt demand: IEA ( That's World Wide Folks)

MarketWatch ^ | Aug. 12, 2008 2:28 p.m. EDT | Moming Zhou, MarketWatch

[Ernest_at_the_Beach]

NEW YORK (MarketWatch) - The International Energy Agency said Tuesday that tight global oil demand and supply balance, which had helped push up crude prices to record highs, is easing as higher prices and slower economic growth in developed countries curbs oil demand.

Global oil demand for this year is expected to stand at 86.9 million barrels a day, unchanged from the previous month's forecasts, the IEA said in an August monthly report. Oil supplies, on the other hand, are expected to remain strong. The world produced 87.8 million barrels of oil in July, up 890,000 barrels from the previous month, the IEA said.

"The slowdown in demand related to the general economic downturn and high oil prices is becoming increasingly evident," the IEA said in the report. "Consumers clearly are reacting by a change in [driving] behavior."

Easing fundamentals have pushed oil prices about $30 dollars a barrel, or 20%, lower than their record high above $147 hit in early July. Crude was trading around $114 a barrel on the New York Mercantile Exchange on Tuesday. See Futures Movers.

[Ernest_at_the_Beach]

fyi

[Ernest_at_the_Beach]

From :

Commentary: Speculators hit the exits, and we're all a-Twitter

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Speculators exit

What happened to the global demand that was fueling record oil prices?

You remember: The world, driven by the hothouse economies of Brazil, China, India and Russia, was consuming oil at such a rate that the price of light sweet crude was going to soar to $200 by July 4.

For a while, it looked like it might happen, if not on Independence Day then by the end of the summer. Oil hit $147.20 in the Nymex pits on July 11. It sputtered and has been in close to a free fall ever since, losing 21% over that span.

Now, the expectation is that oil will sink to $100 a barrel. See full story.

So what's changed? Not demand. It's still creeping along. The world will use 1.1% more oil next year, about the same growth rate as this year and the year before, according to the International Energy Agency. China's share is growing but at about the same 6% rate it has been for the last four years, IEA estimates.

Supply hasn't changed. Even if offshore drilling becomes a reality, it's unlikely to have a profound effect on supply, and it won't happen soon. Many experts say such drilling isn't even necessary. After all, there is no oil shortage, just higher prices.

Could it be the end of speculation? As we pointed out in May, between $100 billion and $120 billion in new speculative money entered the energy markets during a three-year span ending in 2006, according to a congressional report. Investment in commodity index funds surged more than 500% to $80 billion during the same period. Hedge funds do 55% of derivatives trading, according to a study last year by Greenwich Associates. See earlier column on speculation.

Fearing a top, a lot of that money has pulled out or gone short. But don't tell that to those who say big oil companies and global growth are to blame. They seem to think demand is coming from a very specific region: Fantasyland.

Twitter

[TheThinker]

Demand is declining. Look for Obama to claim it's because Americans are checking their tires and getting tune ups. In reality people are buying mopeds and fuel efficient sedans and ditching their trucks if they don't use them for work. The pragmatism and adaptiveness of the American people has won the day with no help from Obama and his Marxist zombie army.

[Ernest_at_the_Beach]

Working Link for text in post #3:

Talk of $200 oil by year's end quietly fades

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Myra Saefong's Commodities Corner

Talk of $200 oil by year's end quietly fades

New estimates point to a drop to $100, but that's not too shabby

By Myra P. Saefong, MarketWatch

SAN FRANCISCO (MarketWatch) -- Talk of $200-per-barrel oil prices by the end of the year has quietly faded away and been replaced by forecasts for $100.

It would be easy to say that crude oil has failed to meet market expectations, and a bear market may be in place. But the harder part is to figure out how long and to what point oil prices will fall.

Projections earlier this year for oil prices as high as $200 fell flat, with prices unable to even reach $150.

"Now analysts are lining up to say the top is in," said Sean Brodrick, a natural resources analyst at MoneyandMarkets.com. "I've been saying all along that volatility is the name of the game in oil this year."

He expects prices to move lower in the short term -- $120, $110 or even $100 "if we're really lucky."

[Ernest_at_the_Beach]

Some discussion on Mopeds on this thread:

Biggest drop in U.S. oil demand in 26 years

[Oldeconomybuyer]

Hmmm.

Supply and demand is an amazing macroeconomic concept. However, uneducated folks (democrats) get riled up when their congressmen blame “big oil” and evil “speculators” which would not be possible with an educated population. Thank you public educators and their union enablers.

[Adammon]

You’re thinking of micro-economics.

Macroeconomic supply and demand relates more to aggregate supply/demand, money supply and interest rates.

[conservatism_IS_compassion]

Supply hasn't changed. Even if offshore drilling becomes a reality, it's unlikely to have a profound effect on supply, and it won't happen soon. Many experts say such drilling isn't even necessary. After all, there is no oil shortage, just higher prices.

The only time there's a shortage of anything is when the government censors the expression of the relation between supply and demand by regulating price. No price controls, no "shortage."

But the relation between supply and demand - the price - will be affected by relaxation of the restrictions on supply.

[Marine_Uncle]

There was no supply and demand crisis. Those that produce their charts as what the price of oil should be set the stage for the drastic jump. Lots of insiders made a lot of money over the past few years on oil.

[SunkenCiv]

Global oil demand... 86.9 million barrels a day... world produced 87.8 million barrels of oil in July, up 890,000 barrels from [June]... pushed oil prices about $30 dollars a barrel, or 20%, lower than their record high above $147 hit in early July. Crude was trading around $114 a barrel.

Drill, drill, drill. Those who don't remember the past are condemned to Speaker Pelosi.