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Oil price volatility to go up in 2011, says report
Reuters / Singapore January 06, 2011, 18:06 IST
This yeOil price volatility will increase in 2011 because of uncertainty about the pace of economic recovery in OECD economies, says HSH Nordbank, the most accurate forecaster among private institutions last year. US crude will average $90 a barrel this year, about $10 more than last year and the second-highest annual figure on record, driven by strong demand from Asia, said Sintje Diek, oil analyst at the German bank. A year ago, Diek forecast prices would average $80 in 2010, less than 40 cents off from an average of $79.61. That makes HSH Nordbank the second-most accurate forecaster out of almost 30 predictions ranging $65 to $94 in a Reuters survey conducted last January. The US government's Energy Information Administration (EIA), which a year ago said prices would average $79.80, had the most precise outlook. "I can expect this year will be quite more volatile than 2010, and I don't rule out we see more than $100, but then it will go back," Diek said in an interview. "Things are seen as too optimistic; the eurozone still has many problems." Employment in the US, the world's top oil consumer, is showing signs of steady recovery, while moves to control inflation in China, the second-largest user, are boosting prospects of sustainable growth. "The outlook for the US economy at the beginning of November last year was very pessimistic, so the Fed decided to go ahead with the treasury buying programme," Diek said. "Now we have some better data and everybody says: "Wow!"" "The economic development is not so bad this time and the recovery will continue, but it will not be so dynamic. At the moment, oil prices are too high for this kind of economic environment." HSH Nordbank expects prices to recede from current levels of about $90 in the next month. "Asian countries, especially China, will be the main drivers of oil demand. That is clear," Diek said. "But the focus of investors will also lie on the US" Volatility returns Oil prices were most volatile in 2008, when they traded in a range spanning almost $115, sliding from a record $147.27 in July to a low of $32.40 in December.
In 2009, the trading range shrank to span less than $52, while 2010 was the most stable year in absolute terms since 2006, with prices in a range spanning less than $28 between $64.24 and $92.06. HSH Nordbank expects global oil demand to grow by 1.4 million barrels per day (bpd) in 2011 to 88.8 million bpd. That compares with growth of 2.4 million bpd in 2010. Non-OPEC supply will expand by 600,000 bdp to 53.4 million bpd, the bank predicts, compared with growth of 1.1 million bpd last year. "The supply side is not so restricted at the moment," Diek said. "If we have a bigger demand increase, the impact is not as big because spare capacity from OPEC is very high. It's the same situation with refining because of very low demand during the crisis." The EIA forecasts US crude will average $86.08 a barrel in 2011, according to its latest short-term energy outlook, published last month. This month's issue will be published on Jan. 11. "While the EIA's average crude oil price forecast for 2010 proved to be close to the mark, both global real GDP and global oil consumption growth were stronger than we had projected at the start of 2010," said EIA analyst Tancred Lidderdale in response to e-mailed questions. "The rate of economic recovery, both domestically and globally, remains uncertain due to a variety of factors including fiscal issues facing national and sub-national governments and China's efforts to address concerns regarding its growth and inflation rates," the EIA's Lidderdale said. "On the oil supply side, the EIA expects OPEC members will maintain a key role in meeting the world demand growth by increasing production of both crude oil and non-crude liquids."
December 31, 2010
WTI oil prices in 2011, most bet $100 plus oil is ahead
WTI oil prices are set to finish the year around $90 a barrel and 2011 looks bullish for crude oil prices, according to many analysts and investors. Latest WTI Oil Price US Light crude oil futures for February 2011 delivery was trading at $89.50 a barrel, 08.00 GMT this morning on the NYMEX. Meanwhile, the ICE US Dollar Index, which measures the US dollar against a basket of six major world currencies, eased to 79.471 from its 79.515 level in late trading on Thursday. Oil Prices in the Spring of 2011 In a live poll by the WSJ, nearly 50 percent of voters believe that oil prices in the spring of 2011 will be above $100 per barrel. See chart below:
2011 – A Record Breaking Year for Oil Prices? US Light oil prices last hit the $100 mark in October 2008, after reaching an all time high of $147 in the summer of that year. That super spike in oil prices is thought to have been created thanks to oil price speculators. The million dollar question is will this happen again, and if so, is 2011 an oil bubble repeat of 2008? Going Long on Oil and Commodities Next Year With alot of uncertainty in currency markets, it’s looking like most traders will be going long on oil early in 2011 (betting that oil prices will rise) even though it seems that a new bubble maybe emerging in the market.
December 29, 2010
Oil price forecast for 2011, will oil hit $150 by summer?
With 2010 at a close, we take a look at oil prices over the last 12 months and attempt to make an oil price forecast for 2011, backed up by bank forecasts for 2011 and analysts and traders points of view on the coming year’s price of oil. 2010 – A Year of Rising Oil Prices WTI oil prices are around 15 percent higher today than they were on 1st January 2010, and Brent crude oil futures are more like 20 percent higher still ( see 1st January 2010 article here ).
with little effect on the downside in short term oil prices. this time last year than today? Here’s the full 2010 US Dollar Index chart: . But the BP spill was finally contained. what’s driving oil prices back near the $100 mark? Currency Markets in 2010 and the US Dollar The ICE US Dollar Index is a great way to track short term oil price movements as oil futures and other commodities are priced in dollars. it’s clear that the world economy continues to re-shape. Did you know that the US dollar Index was actually lower. if the dollar weakens. here ) however oil prices are now even higher than at any point in the year. Many analysts believed that the BP oil spill would have a long lasting effect as oil demand all over the world remains tight. hence. and in turn.Although 2010 has seen crude oil prices take on year highs and lows. global oil demand is now a main driver of oil prices. if not in reverse at this point (less oil available than oil demand itself). BP Oil Spill of 2010 The BP oil spill disaster that started in April of 2010 saw oil prices jump higher ( the first of many BP oil spill articles. oil prices tend to move higher. So.
In fact. There’s a big difference in 3 percent and 20 percent. driving oil prices higher. Here’s why: 1: Global Oil Demand is Higher than Oil Supply 2: There is another Bubble Emerging in the Oil Market Of course. many short to medium term situations over the world could change this view (Middle East or Asian Conflicts) but most of the potential situations would only make oil prices go even higher. Our forcasts for oil prices into 2011 are: January 2011 – $100 oil April 2011 – $110 oil July 2011 – $130 oil October 2011 – $150 oil Analysts are currently rushing out their forecasts for 2011. which tends to mean other factors are at work.As the chart shows. the US Dollar Index opened 2010 at 77. it’s hard to find any trader or analyst that expects oil prices to head lower anytime soon.81 a barrel. As for oil prices into the spring and summer of 2011. That’s an increase of around 20 percent higher than a year ago. Today. The only way oil prices would see a big fall in 2011 would be if the US dollar makes a massive recovery. Brent oil prices opened 2010 at $77.909. 13. (It is worth pointing out that these two are not mutually exclusive). However. which is around 3 percent lower than todays 80. Our point of view is that oil futures will remain bullish and may well see $100 a barrel in the first trading week of January 2011 (forecast for Brent oil. back to the 90 – 100 level. and one thing that almost everyone seems agreed on is this: oil prices will remain high. we forecast that oil prices will go higher than this. Last week. Oil Price Forecast for 2011 Goldman Sachs. Barclays predicted that oil would hit $100/barrel at points during the next year.93 and is today currently at $93. as traded on the ICE Futures Exchange). . JP Morgan and other large banks are forecasting higher oil prices in 2011.00 GMT on the ICE Futures Exchange. oil prices are much higher today than a year ago.201. Moody’s has made a slightly lower prediction. saying that it expected prices to average around $80/barrel over the year.
However. Since we also expect global economic growth to weaken somewhat in 2011. That is the kind of level that led the IEA last week to warn of the possibility of another crisis. The demand from China. Eliane Tanner. Commodity Strategist. a faster than expected decline in inventories and spare capacities might temporarily heighten fears of an oil shortage and thus encourage speculative investments. The crude oil price is likely to fluctuate between $80 and $100 a barrel and would be mainly driven by cyclical factors. “How high can it go and what will be the consequences?” What's moving oil prices in 2011? By: Contributor Print this article "We do not think that major oil price spikes are likely in 2011 because the oil market should continue to be well supplied in 2011 as well.2 per cent level paid in 2008. Bank Sarasin & Co. Pretty much the only thing that could knock the oil price off course is a second global recession. But if it stays above $90 for the rest of the year. growth in demand should be slightly more moderate than in 2010." says Bank Sarasin. and expect the price at the end of Q4 2011 to be around $98.” it said. This could drive prices even higher than $100 per barrel at times.. Opec says it is “comfortable” with oil in a range of $70-$80 a barrel. Structural weakening in demand from industrialised countries . growth in demand should be slightly more moderate than in 2010.As ever. thanks to continued strength in Asia (particularly China). as they can be tapped into the event of supply problems." “The emerging market demand for crude oil will continue their uptrend in 2011 whereby the robust growth of these economies should cause a gradual tightening in the crude oil market. The question now appears to be. according to the latest study published by Bank Sarasin's Thematic investments department entitled ‘Crude Oil : What's moving oil prices in 2011?’. But the difference between $80 and $100 a barrel is. not. Brazil and the Middle East would help to buoy oil demand in 2011. “Which way is the oil price heading?” but. The US dollar and the outlook for western economies are not very certain. Switzerland said. a weaker US dollar and an improving outlook for western economies… We expect these fundamental and technical dynamics to continue in 2011. Ltd. "We do not think that major oil price spikes are likely in 2011 because the oil market should continue to be well supplied in 2011 as well. Since we also expect global economic growth to weaken somewhat in 2011. keeping oil prices strong. but the strength of Chinese demand is difficult to dispute. The report highlights that sharp price spikes have been prevented in 2010 as inventory levels and spare production capacity have remained at a relatively high level in spite of steadily rising demand. the driving factor is Chiinese demand: Oil finally moved sharply higher late in the year. Sarasin analysts suggest that the sustained increase in oil prices to above $100 per barrel only in 2012. The market for crude oil will gradually tighten in 2011 due to the continuing robust growth in demand from the emerging markets. “Nonetheless.1 per cent of GDP for oil imports – close to the 2.” the Sarasin report said. of course. just before the crisis. The bank said these still high levels should continue to provide a cushion in 2011. the EU will be paying 2. crucial.
For the 2008 calendar year the price declined approximately 66 percent. has not changed quotas since late 2008.Sarasin pointed out that demand growth for crude oil from the member states of Organisation of Economic Cooperation and Development (OECD) is likely to expand only weakly. OPEC expects Qatar's NGL supply to continue to expand in 2011 and estimates that Qatar's NGL supply will increase to 1. Over the course of the calendar year the price has increased a relatively modest 13 percent. companies that still need to lock in supply contracts with transactions. OPEC. “The emerging market demand for crude oil will continue their uptrend in 2011 whereby the robust growth of these economies should cause a gradual tightening in the crude oil market.94 per barrel. however this volatility was easily eclipsed by the spot price fluctuation that was present during the market contraction of 2008. some analysts are concerned that prices have jumped almost 30 percent since September which could fuel inflation and impede further global economic growth. driven by quantitative easing in the United States and as data supporting robust growth in India and China drive demand. or even stagnate in 2011 amid a loss of momentum in economic growth. this growth in output should already be sufficient to offset the rising level of global demand that is expected for 2011. as trading has been especially light during the holiday week. Analysts believe OPEC's evident reluctance to increase output and the prospect of continued dollar weakness add to the case for costlier oil in 2011. Over the course of the year the spot price of oil increased by almost 72 percent. especially from Qatar. when it announced the biggest ever reduction in output as global demand . with the benchmark West Texas Intermediate ( WTI ) spot price of crude oil beginning the year at $81. slipping to a low of $64.17 and climbing to the $80 range during the later half of the time frame. The Organization of Petroleum Exporting Countries (OPEC) surprised in 2010 with a rapid rise in the supply of natural gas liquids (NGLs).16 per barrel in mid July before a precipitous decline to a low in December of $32. This has historically been the time of year when most traders have solidified investments. Recent Movement and Future Outlook Oil prices have risen steadily this quarter. Moreover. Oil industry Last year showed a greater fluctuation than the current annualized period with WTI spot prices. Benchmark crude hit a 26-month high on Monday near $92 per barrel and is forecast by some analysts to be headed to $100.6 mbd.” the report explained. Together with the rise in nonOPEC production of 0. the bank said that structural factors such as demand for smaller cars and eco-friendly fuels as well as rapid rise in global natural gas supply is limiting growth in crude oil demand in industrialised countries. which supplies about 40 percent of the world's oil. The WTI spot price of crude oil in 2008 began at $97.78 in May before climbing to the $92 range. The volume of trading is expected to spike in the first few weeks of 2011. however. however from crest to basin the oil price dropped closer to 78 percent. The demand from China. typically leaving only those who work for oil producers and commercial refineries.2 mbd in Q 4. 2011. stakeholders observed a relatively stable price environment compared with the previous two years. beginning the year at $46. Brazil and the Middle East would help to buoy oil demand in 2011.90 per barrel climbing as high as $145.74 per barrel.
exceeding the quotas by an average of 1.why that's a very bad sign SHOOT: I interviewed an energy economist in December 2010 who said you can start expecting a recession when oil prices reach 3 year highs. in trading on the New York Mercantile Exchange. Benchmark oil for February delivery rose as high as $92." the IEA said in its monthly Oil Market Report. Sandy Shore.88. although that level was not attained until this April. and Venezuela. 3. Goldman Sachs Group Inc suggested that crude will average $100 in 2011 and $110 in 2012. the killer of that growth responds. . For its part. JPMorgan Chase & Co. according to the IEA.66 a barrel. 2011. Options to buy oil at $100 per barrel next December are near a five-month high. OPEC is breaching its production limits by the most it has in six years. You can't have growth without energy resources to allow that growth to happen. which can not increase output as fast as other nations. The oil cartel pumped 26. OPEC may come under pressure to increase supplies to the market in the new year. replacing Iran as the biggest producer after Saudi Arabia.5 million barrels.28 above Friday's settlement price. Higher prices rather than increased production may help Iran. $1.75. Here's the full article from Yahoo below. AP Business Writer. Goldman had predicted oil would rally to $85 by the end of 2009.6 million for that period. forecasts that oil will average $93 in 2011. Yes. Oil prices at the start of 2011 are at 26 month highs .55 on Monday. The last time oil settled above $92 a barrel was on Oct.934 million a day.78 million barrels a day this year.collapsed. International Inventory Declines Inventories in the Organization for Economic Cooperation and Development ( OECD ) nations unexpectedly fell in the third quarter. "Against a backdrop of much stronger-than-expected global oil demand growth and oil prices above two-year highs. compared with the five-year average gain of 38. At the beginning of this month. whose heavy crude deposits make drilling more expensive. Iraq will account for 54 percent of the increase in OPEC's supply capacity in the six years ending 2015. as soon as economies rebound. What's also interesting is that as soon as there's a sign of macro-economic growth. 2008. according to the International Energy Agency ( IEA ). 5:11 pm Oil prices rose past $92 a barrel on Monday to a 26-month high. On Monday January 3. According to a Business Week article from earlier this month. an increase from its previous estimate of $89. In June last year. the highest level since 2004. energy prices. We're there. with a 24 month target of $120 before the end of 2012. It gave up most of those gains to settle 17 cents higher at $91. as the new year began with the prospect of still higher energy prices to come. when it reached $93. dropping 11.
other than a renewed recession. A $10-per-barrel increase in the price of oil will cost consumers an additional $200 million a day for all energy products. 2008.33 to $3. Chevron Corp.88) and Boston ($3. Drivers in Los Angeles. Some economists say rising energy prices will slow economic growth. Oil has been gaining ground on speculation that the global economy will continue to grow in 2011. the national average for regular gasoline was $3.54 Friday to end the year at $91. That's about 41 cents higher than a year ago. 2011 NEW YORK: The price of oil is poised for another run at $100 a barrel after a global economic rebound sent it surging 34 percent since May. Excluding BP PLC. ranging from $3. Many analysts expect the price for oil to reach at least $100 a barrel this year. a 49 percent increase from the year before. Analysts think there may not be much to keep oil prices from moving higher after a strong finish in 2010. Chicago and New York pay some of the highest prices in the country. Flying. according to the Energy Department's Energy Information Administration. which will mean higher prices not only for gasoline. but prices since spring have been on a roll primarily because of rising demand in developing countries." Cameron Hanover said in a research report. the highest since October 6. shipping a package and ordering a pizza all likely would get more expensive if that happens and companies pass along higher energy costs.07 a gallon on Monday. China’s oil consumption is expected to rise 5 percent next year.81). January 03. It reached $92. Benchmark oil for February delivery rose $1. but for diesel and heating oil as well. That means less money to spend on other things. . Positive economic data and surging stock markets pushed oil and gas prices higher on Monday Oil prices set to run at $100 a barrel in 2011 Monday.06 earlier in the day. Most economists don't think that's likely.. and Total SA are expected to have earned $81 billion for the full year. especially China. Exxon Mobil Corp. "The biggest problem with 2011 is that there are very few easily identifiable reasons why oil prices might move lower for any extended period -. like clothes and electronics.01). that compares with less than 1 percent growth forecast for the US Higher oil prices have fattened oil company profits. The US is the world’s largest oil consumer. Houston ($2. Royal Dutch Shell. Cameron Hanover energy analyst Peter Beutel said.16 a gallon. the four other major investor-owned oil companies posted combined profits of $59. The cheapest gas in major cities is found in Denver ($2.38 a barrel on the New York Mercantile Exchange.7 billion in the first nine months of 2010.At the pump.
a price not seen since the summertime speculative frenzy of 2008. by more than 5 million barrels per day. BP.or possibly even eclipse . As oil prices rose to their highest levels in two years. analysts say the company will still earn $20. The $600 billion program didn’t start until November. Morgan Stanley estimates that the rising energy needs of China and other emerging economies will consume about half of that amount over the next two years. If that happens. After starting the year at slightly more than $80 a barrel. A further oil price spurt came in late November as it became clear Congress was likely to extend for two more years tax cuts set to expire at the end of the year. That could create supply pressures similar to those that preceded the price spike of 2008. oil prices yesterday (Tuesday) rose to their highest level in two years. Kent Moors. but speculators had already starting bidding up the value of asset classes like oil.The fifth oil giant. and that oil prices may increase substantially next year.” Oppenheimer & Co.76 a barrel on the New York Mercantile Exchange (NYMEX). crude oil would approach . a frequent Money Morning contributor and editor of . analyst Fadel Gheit said." said Dr. See the following article from Money Morning for more on this. The price of energy and other commodities shifted into high gear in late August when Federal Reserve Chairman Ben Bernanke signaled that the central bank was prepared to stimulate the economy by buying government bonds. increased demand and limited supply are among the key factors that have analysts predicting higher oil prices in 2011. “There’s nothing this industry can’t survive. with West Texas Intermediate (WTI) crude surging as high as $90.the all-time high of $147 a barrel. "I believe we will reach triple digits early next year and could reach $150 by midsummer. Still. some industry experts are predicting oil prices will soon break the $100 per barrel price barrier. Crude oil prices are poised to again break the psychologically important $100 a barrel mark in a bid to move higher throughout 2011 and 2012. – AP Why Crude Oil Prices Could Reach A Record High In 2011 A weak US dollar. But that 13% advance is just the beginning.9 billion in charges related to the disaster. if it needs to. Excluding special expenses such as the Gulf of Mexico spill. was held responsible for the largest offshore oil spill in US history and booked $39. when oil soared to $147 a barrel.2 billion in 2010. OPEC is capable of raising output. and some forecasters are calling for prices to zoom by as much as 65% from here.
consumption in developed economies remains 8% below 2007 levels. U. Other factors include supply concerns.7%. "The underlying economic picture is still positive. recovery falters. even as other commodities have surged ahead. And the potential for another speculative frenzy . reserve replenishment. (NYSE: GS) has said that it expects "substantially higher" oil prices by 2012.S." But even if crude prices don't reach that admittedly lofty level. JPMorgan Chase & Co. And Goldman Sachs Group Inc. "In terms of oil markets. "Dollar weakness is a factor.the Energy Inner Circle advisory service." Divergent Demand The sluggish pace of economic growth has kept oil in check.S. but the general trend is we will see higher oil prices. which means oil prices will have the impetus to move higher. dollar.48 a barrel in 2008 will again conspire to push oil prices higher in 2011. quality of crude extracted. as is rising demand from non-OECD [Organization for Economic Cooperation and Development] countries. And most of that demand will come from emerging markets. Greater global demand.9 million bpd this year.2 million barrels per day (bpd) in 2011.a trend that is likely to continue through 2011 and beyond.S." said Fatih Birol. the rising demand for oil from emerging markets will be one of the main catalysts pushing oil prices higher. No doubt. chief economist for the International Energy Agency (IEA). which means emerging markets have picked up the slack. there is a strong consensus about the market for "black gold" in the New Year.like the one we saw in oil from 2007-2008. Those factors include: • • • • A weak U." The IEA forecasts global energy demand will rise to 88. Global oil consumption has rebounded from the lows in early 2009 and now exceeds pre-crisis levels. or the one we're currently seeing in gold. Oil demand in the third quarter of 2010 was up 3. supplies have been ample and production from the Organization of Petroleum Exporting Countries (OPEC) has been strong." Francisco Blanch. the same factors that drove oil prices to a record high $147. "There may be zigzags in the future according to the economy. head of commodities at Bank of America Merrill Lynch. level of stockpiles and the occasional saber rattling. Tighter supplies. "Global oil demand is set to hit a new record in 2011. told Bloomberg News. marking the fourth straight quarter of growth . But going forward. this and that. (NYSE: JPM) and Bank of America Merrill Lynch (NYSE: BAC) are among the major investment banks forecasting triple-digit oil prices for 2011. even if the U. However. We are still looking for economic growth because of quantitative easing and accelerating growth in emerging markets. up from 86. . I believe the age of cheap oil is over.
4% this year .Indeed.000 own cars.000 by 2035. Furthermore. when Japan hit $5.000 in Europe own cars today. ." Birol says that 700 out of every 1. "It comes as no surprise that the geographic distribution of oil demand growth follows that of economic growth: Emerging markets. "It is hard to overstate the growing importance of China in global energy markets. The same is true off South Korea. oil demand grew at a 15% annual rate for the next 10 years. In China.000 people in the United States and 500 out of every 1. drive the increase in global oil demand in 2010 and 2011. However.000 of gross domestic product (GDP) per capita. whose economy is expected to expand by 9. rather than the OECD. China reached the $5." BNP Paribas SA (PINK: BNPQY) said in its 2011 forecast.000 GDP per capita mark in 2007. according to oil-industry consultant firm PIRA. and oil demand has only grown at a 7% compounded annual growth rate. And Birol thinks that figure could jump to 240 out of every 1. Oil demand in China is expected to grow 10. the usage gap between developed markets and their "emerging" counterparts has shrunk from 12 million bpd three years ago to just 4 million bpd today. "The country's growing need to import fossil fuels to meet its rising domestic demand will have an increasingly large impact on international markets." the IEA's Birol said in that organization's annual report. only 30 out of 1.the fastest rate of any country in the world. The most dynamic emerging market growth has come from China.1% in 2010.
itself the excess in inventories has come off very. OPEC has indicated that it's comfortable with higher oil prices . according to the IEA.as any contingent of major crude suppliers would be . also has mentioned a range of $70 to $90 a barrel. the Energy Department will report today (Wednesday). making it the fourth-largest consumer of oil in the world. but noted that the global economy was capable of absorbing higher prices. inventories declined by 1. and Japan. "Oil prices increasing to $100 (per barrel) would not hurt the global economy. which is a deviation from his previous target of $75 a barrel. OPEC will do its part to influence higher oil prices . U." On the producer side of the equation. OPEC was comfortable with crude prices of $70-$80 a barrel. and it should continue to erode as we progress into the New Year. behind the United States.000 bpd of annual consumption growth through 2011. head of global commodity research at Bank of America Merrill Lynch Global Research. "Not only producers.5 million barrels. "Over the last five or six weeks. A Looming Supply Squeeze Of course.4%.7 million a week earlier.but the EIA expects that subcontinent to become the world's fourth-largest net importer of oil by 2025. which has yet to fully emerge from its economic malaise.Oil demand is also growing briskly in other economic hot spots around the globe.and would be reluctant to increase supplies barring a major spike in prices. or 0. It's tightening. "In the U. 3 from 359. in November said that the current price range of $70 to $90 was a "suitable" range.even in the United States. told Bloomberg." Saudi Arabia's oil minister. but consumers have reached this agreement that $70 to $90 is a suitable price for oil because it encourages investment and does not hurt the global economy. "The next threshold is $90 if Al-Naimi says he won't be putting any more oil in the market until we get to that level. in the seven days ended Dec. the cartel is showing an interest in making $100 a barrel the new standard.behind China ." Francisco Blanch. China.S. "Al-Naimi spoke of a $70-to-$90 range for the first time. an analyst at Barclays PLC (NYSE ADR: BCS) told the news agency. Iran's representative at OPEC.S. very quickly. Mohammad Ali Khatibi. The cartel controls 40% of global crude production and that share will grow to 50% by 2035. according to a Bloomberg survey. increased demand has led to tighter supplies of crude oil ." Khatibi told the oil ministry news agency SHANA.and it certainly has leverage. "We think OPEC is unlikely to raise output ahead of its June 2011 meeting unless oil . you've eroded about 40 million barrels of inventories. India has the second-largest proven oil reserve in Asia . Not wanting to hurt fragile demand in the depths of the financial crisis. India consumed nearly 3 million bpd in 2009. Ali Al-Naimi." Amrita Sen. But as demand rebounds." Indeed. The Energy Information Administration (EIA) expects approximately 100.
dollar which is a direct consequence of the ultra-expansive U." The bottom line: Both the short and long-term outlooks for oil prices are bullish. leaving inventories to draw over the first quarter.S. Oil will breach the $100-a-barrel level in the first half of 2011 and $120 before the end of 2012. dollar.S. "The additional liquidity pumped into the markets by the Fed's Treasury purchases should also reach commodity markets and is thus leading to increasing oil prices.prices push above $100 [per barrel]. That means its trading impact is much broader than the oil for delivery alone. it was largely because speculators had piled into crude . taking crude oil prices higher." says Money Morning's Dr. A stronger dollar makes oil more expensive for foreign countries that have to convert their domestic currencies into greenbacks to buy crude. Moors.S. . Currently. "As for speculation. it is the nature of the beast. a structure that is likely to remain in place for much of 2011 and 2012.S. the Fed has effectively flooded the system with cheap money. pushing Brent crude oil into backwardation. The price of oil has climbed 7% since the Fed on Nov. and OPEC will be slow to increase production. a weaker dollar makes it cheaper for countries that import oil." When oil reached its record high in 2008. Conversely. meaning there are more investment dollars available for commodities such as oil. will continue to accelerate as the global economy continues to mend and mature. Finally. the U. "What is more. "Oil is both a commodity and a financial asset in its own right. A Speculative Surge Finally.S. the higher price level reflects the weaker U. speculators looking to both capitalize on the Fed's expansive monetary policy and preserve their wealth in commodities will add fuel to fire. Furthermore. Treasuries through June. Federal Reserve's commitment to a loose monetary policy has undermined the value of the dollar. 3 announced it would buy an additional $600 billion of U. when the Fed first indicated it would consider a second round of quantitative easing. the key oil-price catalysts transcend the simple "Econ 101" arithmetic relating to supply and demand. and it's surged some 17% since mid-August. Supplies will tighten as a consequence. it is vulnerable to changes in the greenback's value relative to other currencies. JPMorgan said." said analysts at the Frankfurt-based Commerzbank AG (PINK: CRZBY). 2012 and Beyond Demand." analysts at JPMorgan said Friday.to hedge against the beleaguered greenback. already buoyed by strong emerging market growth. including investor sentiment and the value of the U. Because oil is priced in dollars.and a host of other commodities . Other factors are at play. Similar behavior could exacerbate oil's 2011 ascent. monetary policy.
its year-to-date cash performance in 2010 already exceeds that for all of last year. (NYSE: XOM) remains one of the safest and most consistent energy plays in the United States. 2014. The company has a market capitalization of $363 billion and its stock yields 2. where the most growth is currently occurring. Exxon has a distinctive ‘best-and-brightest' corporate culture. which is a big reason why 2009 was something of a disappointment. "Oil will just continue to get stronger as the fundamentals improve." Deutsche Bank AG (NYSE: DB) Chief Energy Economist Adam Sieminski said in an interview with Bloomberg Television. China National Offshore Oil Corp. called Exxon the Goldman Sachs Group Inc. One of the simplest ways to profit from surging oil prices . Domestically. China has 26 trillion cubic meters of shale-gas reserves that are largely unexplored due to a lack of drilling ability. If you're looking for specific companies.outside of investing in futures on the NYMEX exchange . Chesapeake is a pioneer in the shale gas industry." said Argus.45%. Although its earnings and cash flow declined year-over-year in 2009 for the first time since 2002. and the company's earnings are expected to increase further in 2011. Don't bet against it. The company set a world record with $45 billion in after-tax profit in 2008. A recent cover story in Barron's. CNOOC in October announced it would pay $1. natural gas producer. a deal that highlighted China's desire to develop its shale-gas extraction techniques.as could oil prices in general . "Exxon should remain in a strong position thanks to its fortress balance sheet. and relentlessly focuses on return on investment and efficiencies at the expense of egos. according to Argus Research.'s (NYSE:CHK) Eagle Ford shale acreage in Southern Texas. (CNOOC) (NYSE ADR: CEO) is one option. ExxonMobil Corp.if there's a reprise of the 2008 summer oil frenzy. Indeed. the largest U. But 2010 has already topped last year's take. 2013." "Like Goldman. which maintains a "Buy" rating on the energy giant.The result will be a surge in oil prices that tests the record highs set by "black gold" in 2008. except that "Exxon out-Goldmans Goldman. and 11% of the company's 2009 earnings came from its fast-growing chemicals segment." Barron's said. the popular financial journal. CNOOC is the vessel through which China is acquiring foreign expertise in the energy sector.08 billion for a 33% stake in Chesapeake Energy Corp.S. CNOOC is often referred to as the most "Western" of China's oil majors because it was founded with a mandate to form joint ventures with foreign companies. The iPath S&P GSCI Crude Oil Total Return ETF (NYSE: OIL) and the PowerShares DB Oil Fund (NYSE: DBO) are two options. Exxon could be in for another record-breaking year . To that end. Exxon's earnings in 2009 dropped for the first time since 2002. (NYSE: GS) of the energy business.. . Exxon's position has been strengthened by its takeover of XTO Energy Inc. We expect even stronger results in 2011. things really begin to look good in 2012.would be to invest in an exchange-traded fund (ETF) that tracks the commodity's movement. it may be best to look in China.
to $US97. Oil output from the platforms is only 20. The pipeline was expected to boost throughput to 500. The IEA revised higher its 2011 world oil demand growth forecast in its monthly report. In London. The euro rose against the dollar on Tuesday on buying by sovereign funds and strong German data. Before expiring on Friday.000 barrels per day within 24 hours. Royal Dutch Shell said on Tuesday it was unclear when four Brent North Sea oil and gas platforms shut on Saturday would restart.US oil prices slipped on Tuesday in choppy trading on pressure from Alaska's pipeline restart and the International Energy Agency saying OPEC has been quietly raising output. analyst at PFGBest Research in Chicago.20 intraday. No one was surprised by the IEA and OPEC reports or that OPEC might be producing above quota. . 19 Jan 2011 Last update 4:48 AM." said Phil Flynn. as the euro's strength. "The Alaska pipeline is running and that resumption is being priced in and is the major factor pulling prices lower.79 a barrel. Last week's major supply disruption in the United States was drawing to a close after Alaska's crude oil pipeline resumed operations on Monday. a weaker dollar and a higher IEA demand growth forecast helped offset the bearish supply factors.000 bpd. The dollar index weakened. 19 Jan 2011 QUICK SUMMARY | FULL STORY Reuters NEW YORK . 2008. also in choppy trading. US crude oil for February delivery fell 13 cents. But the agency also said some OPEC members appeared to have boosted production and that the group's output may quietly increase.m.41 a barrel at 12:23 p. Germany's ZEW headline economic sentiment indicator surged to its highest reading in six months. While Alaska's pipeline was restarted. Along with the dollar's weakness. the Brent February contract reached $US99. A weaker dollar can lift dollar-denominated oil prices because it lowers the value of currency paid to producers and the price of oil for consumers using other currencies. Brent crude futures were higher. Investors will be eyeing weekly oil inventory reports to see the effect of the Alaska pipeline outage. though the closely watched S&P 500 index seesawed near flat at midday in New York. oil received some support from Wall Street equities hovering near unchanged after a weaker open.14 per cent.31 intraday on October 1. or 0. which was the highest front-month price since Brent hit $US100.Oil slips on reports of higher OPEC output Published 2:32 AM. EST (1723 GMT). The February contract expires on Thursday. to $US91. ICE Brent crude for March rose 36 cents.
" This boils down to a story about supply. and economic growth figures for the fourth quarter. but that output would rise by only 0. EST (2130 GMT) on Wednesday. which is enough to absorb this year’s projected consumption increase.09. including the 12 members of OPEC. It is therefore disturbing that the consensus among 34 analysts surveyed by Bloomberg earlier this month is for substantial rises in the price of a barrel of crude through the current year. opened a roundup of analysts’ predictions with the words: "Oil demand increasing at almost twice the pace of supply is spurring the most-accurate forecasters to predict the second-highest price on record in 2011. demand and speculation.m.9%. Oswald Clint. especially if the price per barrel breaks back through the $147 peak seen in July 2008. Bernstein’s lead oil analyst in London told Bloomberg: “We expect OPEC to have to increase their production. while the US Energy Information Administration's oil inventory report will arrive on Thursday at 11 a. China is due to release inflation. Bloomberg’s survey concluded. which to us is increasingly becoming a more important determinant of oil prices. EST (1600 GMT).7% to a record level of 88 million barrels a day during 2011. the sparecapacity factor has become more important. The report from the industry group the American Petroleum Institute will arrive at 4:30 p. That would represent the highest oil price since the record $99. thorough as usual. Anything above the $100-barrel mark can be expected to have harmful side-effects. excess production capacity will fall at its sharpest rate since 2003 as exporters. industrial output and retail sales reports for December.75 reached in 2008 and 40% above 2009’s average of $62.The weekly reports will be delayed a day following the Martin Luther King public holiday in the United States on Monday.Getting used to $100 oil (or $200 oil?) A resurgent oil price is likely to be one of the biggest threats to global economic recovery in 2011. including squeezing industry margins across most sectors and driving up inflation.7 million barrels a day. 26% higher than in 2010. claimed Bernstein’s Clint. boost supply. The Bloomberg report added that the global use of oil will rise by 1. Also on Thursday. Analysts at Sanford C. Sanford C Bernstein says crude will average $90 this year. Bernstein predict that as oil prices rise.m.” Crude futures on the New York Mercantile Exchange can be expected to average $87 in 2011. Since China became a more important part of the demand pie. Spare production capacity in the OPEC nations is about 5. 2011: The Year Ahead . Natixis Bleichroeder sees $100 a barrel. . causing a reduction in spare capacity. Bloomberg. which would become especially toxic if accompanied by the inflationary effects of surging food prices.
it is pouring investment into long lead time big ticket capital projects once there are capacity issues.” said Schallenberger. arguing that 2011 should not be mistaken for a rerun of 2008. Expect more volatility. There just wasn’t much spare capacity out there back then. which I expect will go to $200 a barrel or more in the next two or three years. Reuters has issued a warning to oil bulls. head of commodities at Landesbank BadenWuerttember in Stuttgart. Supply will matter more than demand. driven largely by China.” But not everyone shares these views. Both countries are now much keener to boost output in order to protect . but we are not seeing much increase in production. however. Oil demand will remain strong in 2011. after it “rolled over existing quotas at the latest meeting on 11 December” and failed to make any clear statements of intent about actions it would take to limit uncontrolled price rises. Frank Schallenberger. The ongoing devaluation of the dollar will only support nominal prices of oil and other commodities. one of the big price accelerators in 2008 was the shortage of refining capacity. 2. but there is a great deal of refining capacity set to come on stream during 2011. which overbuilt rather massively and had new ships swinging at anchor once the global downturn hit. The global refining industry is not in that position. Barclays Capital predictions are as follows: 1. principal and chief investment officer at Geneva-based alternatives asset manager Dighton Capital Management believes that the oil price will go even higher than the analysts surveyed by Bloomberg. If there is one thing that markets are really good at. 3. with growth in supply from non-Opec countries slowing. with shipyards around the world churning out more surplus ships almost daily. Another big difference over 2008 is that there is nothing like the same penchant for nationalizing resources among oil producing nations. The only problem is that all that capacity tends to come on stream just as demand slackens off – just ask the shipping industry. Governments had a merry time in 2008 choking back supply to bump up prices. Opec will become more proactive in increasing supply but will not stop $100/barrel oil. The second half of 2010 was a wonderful time if you had cash and wanted to buy new ships for pennies in the pound. For a start. has made five predictions for the oil price for 2011. 4. with Venezuela and Russia leading the pack. He said: “There are major lifestyle changes in emerging markets that are putting massive upside pressure on commodities. Geopolitics will matter (supply constraints will mean that events such as the Nigerian elections could have a major impact on the oil price). so there will be no premium there for the oil price from capacity issues – rather the reverse. even compared with just a few years ago. It said Opec effectively “paved the way” for further price rises. 5. “There isn’t much for the bulls. the investment banking arm of Barclays. Barclays Capital. is much more bearish about the oil price.Alex Moiseev. predicting it will average $87 in 2011. none of which is good news for consumers. There’s still too much oil. This is particularly true of oil.
falling U. at least as far as the US market is concerned. house prices. there is also more capacity coming on stream from countries like Canada and Brazil. Using current econometric techniques it is not possible to disentangle the effect of rising oil prices from the impact of a slowing housing market. Prices were driven by macroeconomic factors. a record level in both nominal and real terms. . an escalating credit crisis. Even the more moderate Saudi Arabia seems unwilling to try to restrain prices by upping production despite reaffirming its commitment to a notional price target of $70-80 per barrel. Finally. Total's bullish Chief Executive Christophe De Margerie has admitted "it would have been better for the prices not to go too high too quickly". Oil at $100 could tip world into slowdown: John Kemp By John Kemp Jan 17 (Reuters) . but oil will be just one of a number of attractive commodity plays in 2011. Price hawks Iran. The International Energy Agency (IEA) has warned prices are approaching the "danger zone". with the US oil shale saga also set to generate a significant contribution. With different factors tugging it up and tugging it down oil looks set for a volatile ride in the months ahead.a time when rising oil prices were hitting consumer spending and raising business costs. reducing the risk of sharp price rises causing a macro shock. But OPEC members are resisting calls for an emergency meeting or output increase. Venezuela and Libya have indicated they are comfortable with $100. Oil bulls dispute the claim high oil prices played any significant role triggering the last downturn.Past experience suggests oil prices are at a level that poses a serious threat to the advanced economies and increases the risk of a double-dip recession. or pose a serious risk to growth in 2011. But it is clear industrial production had peaked in most of the advanced economies well before Lehman imploded in September 2008 -.their economies. In particular. The seizing up of global credit markets following the collapse of Lehman Brothers followed by the sudden collapse of trade flows and industrial production triggered the sharp fall in crude oil prices in late 2008.S. For the bulls. cotton and precious metals all looking very attractive – and possibly more so than oil. interest rate rises and mounting financial problems in the banking system. 2007-2008 TIMELINE What level of oil prices actually damages growth is an empirical question. Speculative flows have a bearing on driving the oil price higher. with wheat. and the lagged effect of interest rate increases by the Federal Reserve and other central banks between 2004 and 2007 are sufficient to explain the start of the Great Recession in 2007-2008. not the other way around. they note economic output in the OECD is now far less oilintensive than in the 1970s and early 1980s. Surging oil prices played little or no role despite doubling to $140 in the twelve months to July 2008. Oil bulls argue prices would have been sustainable above $100 if the recession had not intervened.
according to official estimates published by the OECD. and the last time oil prices were at this level the OECD economies had already started to slide into recession. Bullish observers dismiss these concerns by pointing to continued strong growth in emerging markets. We also know the full impact of price rises only becomes apparent over time as higher costs sap household and corporate budgets and begin to filter through to other price increases. National Bureau of Economic Research (NBER) which date the onset of the recession to December 2007. without becoming a drag on growth in 2011 and increasing the risk of a renewed downturn. Investors started to become much more cautious and risk premiums rose. the Czech Republic. equities peaked in late 2007 and had slid substantially by the time oil peaked in July 2008. emerging markets still rely to a significant extent on exporting to the OECD and are exposed to any renewed slowdown. or continue rising. In fact.including the Netherlands and Sweden (Dec 2007). let alone the seizure of credit markets in September 2008. emerging market growth is very oil intensive. We do know increasing expenditure on oil and other forms of energy began to drag on other forms of consumer spending in this period. Germany. U. COMPLACENCY RISK Of course problems with subprime loans had started to become more visible from summer 2007 onward. and Belgium. Crude oil in 2010 and forecast for 2011 . It is dangerously complacent to assume prices can remain at present very high levels. With current techniques it will never be possible to determine the precise role of rising oil prices compared with other factors in tipping the U. The global recession was well underway six months before Lehman went bankrupt (though of course it intensified afterwards). Hungary. Spain and the United States as early as June-August 2007. But it should be clear these economies were already starting to look very unhealthy as oil prices begin their final ascent from $50 at the start of 2007 to $147 in July 2008. unlike the advanced economies. This is consistent with the findings of the U.Industrial output peaked in Italy. Twelve other OECD members saw production peak between December 2007 and June 2008 -. and other economies into recession in H2 2007 and H1 2008.S. financial conditions and confidence. But emerging markets are not immune to price rises either. It is therefore highly likely rising prices were exerting a negative influence on the economy well before they peaked at $147 in July. Even the Fed thought mortgage problems would be largely "contained". which they expect to continue supporting rapid increases in oil consumption. No one can quantify the effects of rising oil prices on global growth precisely or separate them from the impact of monetary policy. The first disturbing tremors of the credit crisis were felt in August 2007. Japan and Slovakia (Feb 2008). But sharp oil price increases have been associated with downturn in the past. (Editing by Anthony Barker).S. leaving them far more exposed to the damaging effects of price increases. But few at that time foresaw the extent of the crisis that would eventually unfold. Moreover.S. France and Greece (Apr 2008). Finland and Mexico (Jan 2008).
S.1%. It could be. respectively.S. Ending Stocks of Crude Oil and Petroleum Products (Thousand Barrels. In the following table are the Monthly U. there are many reasons why the price of crude oil is expected to increase this year. energy prices played a lead role in the rising inflation rate during 2010.. Crude oil . mainly in the last few months of the year. 2010 was still a strong year with prices outperforming the price of Natural gas (Henry Hub).S. the green columns) & Monthly U. . A key feature is the upward trend. or in short. by 3.9% (according to BLS).In spite of the expected softening in China. The chart below shows the average monthly price of crude oil in 2010. Could this rise be related to rising demand in the U. the supply and demand in the U.8% from January to December of 2010. in the U. or was the increase driven by lack of supply? After all..S. and energy prices increased in the U. but I think that this isn't the real story.S.. I want to focus on the major factors that influenced the price of oil (WTI spot price) last year.Nov 2010) is 1.2010 The price of crude oil rose by almost 13. Product Supplied of Petroleum Products (Thousand Barrels per Day.S. the crimson columns). Even though this is far below the yearly price hike of over 78% in 2009. As we continue to review the performance of energy commodities in 2010. as the current level of inflation (Dec 2009. and how that might change in 2011.
. When we take a look at the U. it seems that currently crude oil stocks are at a high level. could be partly explained by the fact that during September. there was a decrease in supply of gasoline. The reason for the decline in stock on the one hand and rise in oil prices on the other. however. It does show.The table shows no apparent trend for either series during 2010. it's still a high level in an historic perspective. there was a workers strike that also slowed down its main refineries.October major refineries in the US and Canada were undergoing maintenance repairs. Ending Stocks of Crude Oil and Petroleum Products (Thousand Barrels) on a yearly scale. which drove up the price of crude. As a result.S. Despite the decrease in stock during the year. nor is there any strong correlation between the two. that the decline in supply in the last several months of the year happen as oil prices rose. while in France.
and one of the biggest importers of crude.845 million which was set back in 2008. announced. the Y-2-Y inflation rate was 5.1%). U. Crude oil .S.8 million barrels per day. 2.6% increase in demand for oil in 2011 compared to 2010.3% in 2011.2011 When analyzing the prospects of crude oil prices in 2011. OPEC. there are several aspects worth considering: 1. This slowdown could be driven by China's fight to cool inflation pressure in its economy (as of Nov 2010. in which China was responsible for 40% of it. dollar: the U. Also. it is expected that demand in China will fall below levels seen in 2010. On the other hand. and will rise by a further 6.4 MB/d. is responsible for the rise oil prices during 2010. which is responsible for about 40 per cent of the world crude oil supply. when daily consumption was estimated at 87. China's demand in 2011: On the one hand. Asia’s demand for energy is responsible for 70% of the world energy growth in the past couple of decades. has taken several steps in the past couple of years that reduced the value of the dollar against major commodity markets. 4.S. in a recent OPEC meeting. China’s energy demand has nearly tripled since 1990. Bloomberg estimates that demand in China rose by 20% during 2010. driving up the . which is roughly a 1. World demand growth: The expected increase in world demand for Oil in 2011: IEA (International Energy Agency) expects petroleum demand worldwide in 2011 to be 88. as shown above. (the second largest consumer of crude oil). 3. it will sustain its current quota of 24.This could mean that other counties such as China.
The spend on new wells. As the U.S. banks in an attempt to stimulate the U. I refer to the very low interest rate which has remained at 0. making up for a large part of 2009’s mammoth slump in oil consumption. Additional pressure will be exerted due to the rising costs of oil production in remote offshore locations and uncertainties over offshore drilling in the wake of the Deepwater Horizon disaster in the US Gulf last Spring. Oil use in 2011 is forecast to swell to nearly 88. Demand for oil surged by 2. highlighting several reasons why. and as the year will progress. production platforms and other energy infrastructure is likely to . Supporters of the bearish view on oil prices report that US and European consumption will continue to decline as a result of the introduction of both more fuel-efficient cars and a new generation of hybrid vehicles as well as the availability of plentiful supplies of natural gas as an alternative fuel. and proffered itself as a harbinger of the impending global financial meltdown which struck a few months later. a new record. to reach an average of 87. In reply.25% in 2009-2010. By July 2008 it had reached USD 147. in which the Federal Reserve gave loans to U. the global economy is not currently overheating like it was three years ago. Today. it will not do so by much and the rise will not be sustained. Also. If oil does push past the USD 100 per barrel barrier. Feeding this growing requirement for oil will require continued investment in equipment capable of developing more remote and more marginal oil reserves. economy. In their view the resurgent demand for oil worldwide in tandem with cold weather reduced inventories and a reluctance on the part of OPEC to open the taps much further will maintain the upward pressure on oil prices. First of all. In early January 2008 the price of a barrel of oil breached the USD 100 mark for the first time and didn’t stop. and the quantitative easing phase 1 and 2. oil consumption in the industrialised nations is declining while the members of the Organisation of Oil Exporting Countries (OPEC) have a total of over 5 million barrels per day (bpd) of excess production capacity of their sleeves at the moment. dollar continues to lose its value. the market bulls state that it is not so simple. in 2010. more accessible oil fields have been exploited. Furthermore. Most energy analysts are reassuringly pointing out that the events of 2008 will not be repeated in 2011. Europe's recovery from the recent slump could affect demand and prices.S. to cut a long story short.S. the current relatively high price of oil is spurring increased drilling activity with the result that new sources of oil in places like offshore Ghana and Brazil are being brought on stream. uncertainties about price movements appear about as great as they were exactly three years ago.3 million bpd.price of key commodities.6 million bpd as the world economy continues on the path to recovery. 5. including gold.4 million bpd. with the price of oil inching up through the USD 90 per barrel range towards the psychological barrier of USD 100. much more than was the case in 2008. there are many reasons why the price of crude oil should continue to rise this year. now that the larger. investors will continue to rely on the commodity market and consequentially will drive up the price of oil and other commodities. So. Europe's recovery: the Euro zone is also a key player in crude oil equation. say the pundits. Feature: Whither oil prices and tanker shipping in 2011? By Mike Corkhill At the start of a new year the thoughts of oil producers and marketers worldwide turn to what price their loaded barrels might fetch over the coming 12 months while consumers are primarily concerned with how much they’ll have to pay for their litre or gallon of fuel at the petrol pump.
to the extent that the average world price for 2011 will be around the USD 100 per barrel level. Pragmatists point out that this is not such a frightening prospect because dollar-denominated oil is cheaper than it seems due to the decline in the value of the dollar in recent years. could climb by 700. OPEC members are able to increase the output of these liquids freely since they do not count as part of their production quotas. for example. Output of these light natural gas liquids (NGLs). Petrobras of Brazil. However. The inexorable slide in that country’s domestic production. Oil producers and marketers will post attractive turnovers. including tanker shipping and chemical logistics. The lion's share of the investment is committed to exploiting the rich resources of the recently discovered deepwater oil fields southeast of Rio de Janeiro. Motorists will have to content themselves with the fact that there are currently few signs of the bottlenecks that pushed oil prices through the roof in the summer of 2008. Feature articles written by outside contributors do not necessarily reflect the views or policy of BIMCO. although oil supplies are readily available. The oil exploration and production sector’s equipment requirement is benefiting from investments made three years ago when the price of oil reached an apex. A good example of how advancing oil recovery techniques are helping to prolong the life of ageing oil fields can be found in the US. which make good gasoline blending stock amongst other useful products.01. the largest such commitment by an oil producer this year. A qualified Naval Architect. such activity is continuing largely unabated in many other parts of the world. increasing natural gas output and a potential rebound in Iraqi oil production. demand is high and fuel will not be cheap in 2011. Shipyards delivered 25 specialist deepwater rigs in 2010 and another 35 such units are due to be handed over in 2011.approach USD 500 billion in 2011 and a substantial percentage of the total reflects the higher costs associated with finding and extracting oil in harder-to-access areas. if any. chemical and product tankers and is currently the Editor of both LNG World Shipping and LPG World Shipping. not to mention changes in technology.000 barrels a day worldwide in 2011. Date: 05. which began back in the 1970s. It involves accurately predicting global growth and output in dozens of countries. is budgeting upwards of USD 30 billion for offshore oil development projects in 2011. Asian economies are forecast to grow strongly again this year. Other plus signs for the oil supply/demand balance are improving oil field recovery technologies.11 Oil’s Most Accurate See Second-Highest Price in 2011 . he has written books on LNG. analysts. In any case at the end of the day predicting the price of oil for the next 12 months requires the kind of omniscience possessed by few. Editor's Note: Mike Corkhill is a technical journalist and consultant specialising in oil. tax and regulatory policy as well as fickle market sentiment and geopolitics. Despite questions surrounding the strength of the market recoveries in several key trading areas. While an earlier moratorium and current uncertainties as a result of Deepwater Horizon have effectively brought deepwater drilling in the US Gulf to a standstill. LPG. Robust economic performances by China and India are expected to bolster world trade and push crude oil prices upwards by more than 10% this year. gas and chemical transport. drillers will be active in particularly challenging environments and the world tanker fleet will be busier than ever before. Gas field developments have proceeded apace in recent years and the processing of the contents of these fields is producing rising volumes of not only dry natural gas but also associated liquids. appears to have been arrested through the use of techniques such as hydraulic fracturing and horizontal drilling to rejuvenate geriatric oil wells.
8 million barrels a day this year. the world’s biggest energy consumer. which tied with Bernstein.January 04.S. says crude will average $90 this year. As oil prices rise.Oil demand increasing at almost twice the pace of supply is spurring the most-accurate forecasters to predict the second-highest price on record in 2011. and six times Europe’s.. according to the U. While economic growth in China.. according to the median estimate in Bloomberg surveys of economists. “We expect OPEC to have to increase their production. 26 percent higher than in 2010.S. according to Bernstein. Energy Department.9 percent.” said Oswald Clint. “Since China became a more important part of the demand pie. 9:20 AM EST More From Businessweek • • • • • Oil Rise to $100 May Stall as Refiners Curb Tax: Energy Markets Slovak November Industrial Output Rises First Time in 14 Months European Manufacturing Expands More Than Estimated India’s Sensex Drops Most in Three Weeks. will slow to 9 percent this year from 10 percent. that would still be three times the rate in the U. who replaced Neil McMahon in August as Bernstein’s head oil analyst in London. 2011. the spare-capacity factor has become more important. whose estimate last January was within 1 percent of 2010’s mean price of $79. and output will rise 0.7 percent to a record 87. Bernstein & Co. sees $100 a barrel. Sanford C. State Bank Declines Norway’s $186 Billion Gas Loss to Cement Russian Grip on Supply Story Tools • • • • • e-mail this story print this story 1diggdigg add to Business Exchange By Grant Smith and Mark Shenk (Updates today’s price in 14th paragraph. 3 (Bloomberg) -. Natixis Bleichroeder Inc.60 a barrel. spare production capacity may drop the most since 2003 as exporters including the 12 members of OPEC boost supply. causing a reduction in spare capacity. Global oil use will increase 1. which to us is increasingly becoming a more important determinant of oil prices.” Highest Since 2008 .) Jan.
24. Germany. inventories were 339. Prices have almost tripled since reaching a low of $32.6 percent above their five-year seasonal norm.S. Energy Department said. according to Bernstein’s Clint. Higher-than-average U. Spare production capacity in the Organization of Petroleum Exporting Countries is about 5.7 million barrels a day and sufficient to absorb this year’s projected consumption increase. stockpiles will limit price increases this year.75 reached in 2008 and 40 percent more than 2009’s average of $62. while bonds as measured by Bank of America Merrill Lynch’s Global Broad Market Plus Index returned 4. who since giving his forecast for an average of $100 has left New York-based Natixis Bleichroeder to join Morgan Keegan & Co.” Exxon Mobil Corp. said today in an interview with Deirdre Bolton on Bloomberg Television’s “InsideTrack. said Roger Read. That would be the highest since the record $99. U. The Standard & Poor’s 500 index of stocks jumped 13 percent. The group acted after crude tumbled from an all-time high of $147.9 percent. in Houston. the U. Oil is likely to trade at $75 to $120 this year. when OPEC agreed to record production cuts.S. less than the 20 percent advance of the Standard & Poor’s GSCI gauge of 24 commodities. said Frank Schallenberger. based on the median of 34 analyst estimates compiled by Bloomberg.” said Schallenberger.. according to analysts’ estimates compiled by Bloomberg. 7.4 million barrels as of Dec. . head of commodities at Landesbank Baden-Wuerttember in Stuttgart. whose 2010 estimate of $78 was about 2 percent below last year’s average.09. one of the five mostaccurate forecasters in 2010.40 in December 2008.S.27 in July 2008. “There’s still too much oil. Oil prices will average $93 a barrel this year and are “very likely” to climb above $100. Airline earnings may drop 40 percent partly because of increased fuel costs.8 percent lower than the closing price of $91.” This year’s projected average of $87 is 4. the International Air Transport Association said Dec. 2010 Gain Crude gained 15 percent last year. 31. 14. Too Much Oil “There isn’t much for the bulls. president of Prestige Economics in Austin. Texas. who predicts $87 oil this year.38 on Dec.Crude futures on the New York Mercantile Exchange will average $87 in 2011. BP Plc and Royal Dutch Shell Plc are forecast to report increased profit this year. Jason Schenker.
Oil Earnings Shell.S. according to Eagles.1 billion as fuel costs rise and passenger demand wanes. the largest non-OPEC producer. which provides about 13 percent of U. . imports.55 from $5.92. Airline profits will drop a total of $6 billion to $9. according to the Montreal-based International Air Transport Association.” OPEC’S daily production capacity will shrink by about 1 million barrels to 4. OPEC could bring on extra supply and push the market down. will drop 2 percent this year.” he said.71 this year from $3.03 in 2010. according to 18 estimates. the biggest publicly traded crude producer. 11 at the group’s last meeting in Quito. in New York. will fall 9 percent. oil minister for Saudi Arabia. while output from Mexico. prefers $70 to $80. based on 10 estimates. Secretary-General Abdalla El-Badri said on Dec. Ecuador.6 percent in New York.based Exxon.S. Irving. “If global growth continues to rise. compared with a loss of 23. 3. rose 7. Ali Al-Naimi. 11 it will skip a regularly scheduled first. the group’s biggest producer. Texas.7 million as countries outside the group struggle to make up the shortfall. according to Clint. OPEC.quarter meeting. the highest settlement price since Oct. Supply from Russia. Shell’s earnings per share will rise to $3. jumped 15 percent last year in Amsterdam trading.” Schenker said. “We subscribe to the notion that OPEC is the central bank of oil. fell 22 percent in London. based in The Hague and Europe’s biggest oil company. “At any point. there may very well be a need for OPEC to raise production quotas.12. he said. even at a decelerated pace. head of oil research at JPMorgan Chase & Co. 2008. according to the mean of as many as 22 analysts’ forecasts compiled by Bloomberg. may raise supply if needed. a sign that it’s ready to let prices climb. BP will post earnings per share of $1.Futures for February delivery climbed 17 cents to $91. “We don’t think they’ll do that. Crude will average $93 this year. he said at the meeting. which accounts for 40 percent of world production. whose 2010 forecast was $78.3 cents a year earlier. history. which agreed last year to a payment of $20 billion for its role in the biggest offshore oil spill in U.25. Exxon’s will climb to $6.” OPEC Meeting OPEC said Dec. BP. said Lawrence Eagles.55 a barrel in New York today.
.5 percent. it may be difficult for OPEC quota changes to significantly impact prices.7 percent in Europe and be little changed in the U. December 23.1 MMBD annually to reach 93.” --With assistance from Rachel Graham in London and Ayesha Daya in Dubai.Oil fundamentals. 10. Assuming a 4. will consume 9. The deficit (2. U. 2010 Sentiment has been the primary driver behind the increase in oil prices the last 2 months.S. Editors: Mike Anderson. higher cost Canadian oil sands (up 1. “The growth story is the primary focus.” said Prestige’s Schenker.7 million barrels a day this year. China. a Vienna-based consultant. OPEC’s current effective spare capacity is 5. Thursday.4 MMBD in 2015. OECD oil inventories remain near the all time high. world oil demand is expected to grow about 1.0 MMBD). While the IEA expects non-OPEC conventional oil production to plateau to 2015 (up only 0. sluggish growth and high unemployment in the US. according to the Paris-based International Energy Agency. Joe Link To contact the reporters on this story: Grant Smith in London at gsmith52@bloomberg. and OPEC NGLs (up 1.net.8 MMBD) will add incremental supply. Current surplus global oil inventories should decline from 2H11 with sustained growth in oil demand. which accounts for 11 percent of the global total. growth in biofuels (up 0. whose 2010 forecast of $78 was about 2 percent below the annual average.3 MMBD after adjusting for production constraints on Nigeria and Venezuela. “If speculative forces push crude markedly higher. or 1.8 percent more than last year.3 million barrels a day. OPEC indicated $100/B would be a trigger for action.. Demand will fall 0.5% rate in global economic growth to 2015. Risks to the demand outlook include the continuing risk of sovereign debt defaults in Europe. Mark Shenk in New York at mshenk1@bloomberg. up 6.net Commentary: Oil Price Indicators . At its recent meeting.S.Oil consumption will increase by 1.1 MMBD) will be made up by increased dependence on OPEC crude oil production. 4.0 MMBD from 2010E demand. the IEA said Dec. and overheating of the Chinese economy followed by a hard landing. While its crude capacity is . to a record 88. demand may also rise this year as the Federal Reserve purchases $600 billion of Treasuries through the first half of this year to sustain the recovery. according to JBC Energy.8 million in 2011. OPEC has more than ample spare capacity. putting upward pressure on prices.3 MMBD from 2010E).8 MMBD).
the industry believes it is in the early stage of a multi year up-cycle.4 MMBD (up 2. Iran’s current oil production of 3.8% of world oil demand without any geopolitical disturbances. Social upheaval could put Iran in turmoil. from 59.1 MMBD in 2015 regardless as reinforced sanctions delay new projects and accelerate field decline for lack of needed technology and equipment. In its latest report. whereas something near 54 days is normal.6 MMBD.8% Y/Y or +2. and it once again postponed removal of consumer subsidies on oil products. up 28% from $61. oil prices have been driven higher by bullish sentiment supporting commodities in general and stronger than expected global oil demand in 3Q10. Since October. (The . While the US oil service market is expected to move sideways in 2011. The prevailing futures strip remains within a $75-$85/B range to 2015.9 MMBD is expected to decline to 3.5 MMBD) largely on stronger growth in product demand in the US and China. The lagging XNG natural gas index is up 5%.1 days forward demand cover. October oil inventories increased to 60. the call on OPEC crude is expected to increase more to 36.9 day peak in August. the XLE energy SPDR and the OIH oil service index are both up 12%. Its estimated gasoline consumption in September declined 18%. Oil prices for the year will average over $79/B.4 MMBD by 2015. Oil price strength could be sustained seasonally in coming weeks based on forecasts of continued cold temperatures in the US and Europe. have moved into backwardation from mid 2011 where crude prices are below current spot prices as producers appear to be taking advantage of oil prices above $90/B to hedge future production.83/B in 2009. with growth shifting to markets outside North America. probably the result of curtailed gasoline imports. the IEA increased its estimate of world oil demand for 2010 again to 87. At its recently concluded meeting.9 MMBD in 2015. The outlook for the oil service industry is positive. or 3. OPEC’s Secretary General expressed satisfaction that oil prices are at a comfortable level for both producers and consumers. near the early May high. Year to date. OilEdge Crude oil prices currently approximate $88/B. He indicated if oil prices went to $100/B. reducing its effective spare capacity to 3. The Saudis also indicated they are comfortable with oil prices in the $7090/B range. while the S&P 500 is up 10%. Futures contracts however. OPEC would have to act. By Paul Kuklinski. The current outlook in Nigeria is worrisome as well. International sanctions on Iran appear to be having a meaningful effect which could further tighten oil markets.expected to increase 1. and remain near the 60.7 in September. Superior performance from energy stocks is linked to the oil price outlook.
0 MMBD in 2015. 20 mil new cars were sold in China.4 MMBD in 2011.) In the US.1 MMBD Y/Y on higher output in Canada. Two recent interest rate increases. sluggish growth and high unemployment in the US. adding 350 MBD to oil demand.8 MMBD.5 MMBD higher than its June forecast but generally in line with other forecasts. social unrest could weaken the government. Japan also had an unprecedented summer heat wave. (+600 MBD Y/Y). the first in nearly 3 years. It is now expected to be relatively flat in 2011. are aimed at cooling red hot real estate prices and inflationary expectations.strongest prior annual increase in world oil demand was 3. Risks to the demand outlook include the continuing risk of sovereign debt defaults in Europe. Estimated non-OPEC oil supply in 2010 is increased to 52. Nevertheless.4 MMBD in 2007. assuming it is successful at engineering a soft rather than a hard economic slowdown. 2011E 45. and Brazil. and overheating of the Chinese economy followed by a hard landing. The IEA’s estimate of world oil demand in 2011 is also increased.7 MMBD). with inflation probably surging. estimated gasoline demand in September fell 18%. For the period . and broadly in line with historic trends relative to expected global GDP growth. All of the growth in oil demand will remain in developing economies. This represents its best performance since 2004. and biofuels.1 MMBD annually to reach 93.9 MMBD. (Diesel demand growth appears to have slowed significantly in recent weeks however.3 MMBD Y/Y to 88.2% Y/Y. Assuming global GDP growth about 4. and is now up 1. Kazakhstan. Iran has a population of 73 million and. Apparent oil demand in China rose 12.6% Y/Y in October and concerns have increased that the Chinese economy is in danger of overheating. Mexico (reflecting Pemex success in stabilizing production from mature oil fields). with added supply from the US (liquids rich shale plays). oil product demand in the OECD is expected to resume its structural decline in 2011 (2010E 45. China is the key driving force. GDP growth about 10% is expected this year and inflation is creeping up toward 5%. with demand during the summer driving season up 1. which is 1.) US gasoline demand has also been remarkably resilient this year.4 MMBD in 2015.5% Y/Y.8 MMBD. Its government once again postponed the removal of oil product subsidies previously legislated. possibly due to supply problems related to international sanctions on gasoline imports. non-OPEC supply for 2011 remains unchanged at 53.0 MMBD in 2004 and the prior peak in world oil demand was 86. Last year. growth has been remarkably strong the last 2 quarters. up 1. In Iran. Non-OPEC supply is forecast to continue to grow minimally thereafter to 54. Nevertheless. which raised oil demand. This will be the strongest 3 year run in increased non-OPEC production since 2002-2004 when recovery in Russia was the driving force.5% per year. the IEA then expects world oil demand growth to increase about 1. with diesel demand growing 10.
The IEA’s medium term outlook then anticipates OPEC NGL production will grow to 7. with the bulk of the increase coming from biofuels (+800 MBD to reach 2.8 MMBD is expected in 2011. and NGLs. Kazakhstan currently produces 1. Phase 1 production of only 375 MBD is scheduled to ramp up to 1. Incremental growth to 5. or 20% on total non-OPEC supply.1 MMBD.86 MMBD). Deepwater supply rises from 6% of total supply to 8%.9 MMBD without changes to its tax regime. compared with an estimated call . up from 4. Sequentially. Total US crude and liquids supply is expected to be flat 2009-2015 around 7.6 MMBD.9 MMBD). With tighter regulations and protracted delays. have been very slow in coming. overall non-OPEC supply is expected to grow by 2.9 MMBD). the Caspian (Kashagan Field).3 MMBD. The IEA anticipates a plateau in Russian oil production from 4Q10 as the impact of new green-field startups is spent and declines in base production become more prominent.36 MMBD). then representing 21% of total US production. A brighter outlook for US unconventional onshore production more than offsets the impact of drilling delays in the Gulf of Mexico. Colombia (+210 MBD). Kashagan has proven reserves of 7-9 bn B and is the largest oil discovery in over 30 years. 0. not covered by the moratorium. with downside risk to 7. China’s oil production (4. Conventional crude declines are strongest in the UK. decline rates at post-peak Gulf of Mexico oil fields will steepen. Conventional crude production is expected to increase by only 255 MBD. OPEC NGL production has been trimmed to 5.45 MMBD. Its original start date was in 2005. The impact is expected to reduce Gulf of Mexico production in 2015 by 300 MBD to 1585 MBD. No permits for deepwater drilling in the Gulf of Mexico have been granted since the moratorium was lifted and permits for shallow water drilling.2 MMBD. with strongest increases largely from Brazil (+480 MBD). oil sands (+1. as additional LNG trains in Qatar are brought on stream.1 MMBD). 8% of non-OPEC) is also expected to peak in 1Q11 and decline thereafter as new offshore fields reach peak capacity.5 MMBD in 2009. OPEC crude oil production in November was unchanged at 29.3 MMBD in 2010.1 MMBD in 2015 with new supplies from Qatar (2015E capacity 1.2009-2015. OPEC NGL supplies are adding meaningfully to supply. and from 22% of offshore production to 28%.4 MMBD in 2015 from 1. UAE (2015E capacity 0. and Russia. Russia itself expects plateau production for the next decade. and Saudi Arabia (2015E capacity 1. and Mexico. Iran (2015E capacity 0. Russian oil production is 10.5 MMBD about 2018-2019.4 MMBD of 2011 incremental capacity will be added in 1Q11.5 MMBD. The Kashagan oil field in the Caspian Sea offshore Kazakhstan is scheduled to begin production by the end of 2013.6 MMBD in 2009). Norway. largely reflecting a weaker trend from Iran.
Nigeria’s remaining fields to develop are ¼ to 1/3 the size of its already developed giants but will involve the same costs. It recently increased its estimate of proven reserves to 143 . assuming the fragile cease fire with former militants endures and its proposed new Petroleum Industry Bill does not discourage investment. It has indicated its trigger for adding new capacity would be if global crude demand began eating into the 1. and Angola (+0. Iraqi oil production of 2.5 MMBD).9 MMBD in 2015.9 MMBD to 3.1 MMBD and would produce more but for militant activity.8 MMBD in 2015. Saudi Arabia stated it would initiate capacity expansion by 2012.6 MMBD in 2015 reflecting normal field decline. the call on OPEC crude is expected to peak at 30.6 MMBD by 2015. In Nigeria. with the new law resulting in a disincentive to invest. Its goal is to raise production capacity to 3.5 MMBD) are expected to account for the bulk of capacity growth. Nigeria currently produces 2. The estimated call on OPEC crude oil for all of 2011 is revised up to 29. Production capacity in Iran is expected to decline over the period from 3. The IEA estimates combined OPEC and non OPEC normal field decline approximates 3 MMBD. and expects its capacity will remain relatively flat to 2015 and possibly to 2020.on OPEC crude of 29. It does have substantial resources to sustain much higher production if it is able to overcome its above ground challenges.6 MMBD).4 MMBD to 36. putting upward pressure on oil prices. Iraq (+1. currently 12.2 MMBD in 3Q11.1 MMBD to reach 3. decline rates in OPEC production are in the 3. according to a former Aramco official. If demand growth looks likely to erode this comfort level by 2015. capacity is expected to increase slightly from 2. is expected to decline to 11. the UAE (+0. Seasonally.0 of strategic spare capacity it likes to have available for unexpected supply shocks.5 MMBD.1 MMBD. OPEC export schedules indicate OPEC supply should remain fairly constant into 2011.3 MMBD in November.0 MMBD by the end of next year. Saudi capacity.5-2.4 MMBD in 2009. the proposed PIB is described by industry sources as `very flawed’ and equivalent to `resource nationalization’. The IEA does not expect Iraqi capacity to exceed 3. The outlook for OPEC’s production capacity over the next 5 years remains largely unchanged.5 MMBD and is expected to grow by 1.48 MMBD in November reflects a minimal increase from 2. OPEC’s sustainable crude oil capacity currently stands at 35. Without new investment.7 MMBD currently to 2. A surge of militant activity reduced production in Nigeria by 80 MBD in the month. which was offset by increased production from Saudi Arabia. Assuming stable OPEC production. As it currently stands. It produced 8.5-5% range.1 MMBD in 4Q10 and 1Q11. excess global oil inventories will decline.1 MMBD as reinforced sanctions delay new projects and accelerate field decline for lack of needed technology and equipment.
2010 01:24 IS another round of crude price spiral just round the corner? Is the run to the $100 a barrel mark now inevitable? With 2010 coming to a close and crude prices hovering around the highest level in two years. which represents an ample 6.4 MMBD in 2015 after adjusting for growth in biofuels. Global distillation capacity is expected to increase by 9.1 MMBD. Oil markets could tighten from 2H11 as spare capacity is reduced.2 MMBD by 2015. Some 70% of the growth in Middle East OPEC capacity stands to be absorbed by regional demand growth fueled by ongoing subsidies. The complexity of building a pipeline through Syria and maritime border issues with Iran will be a barrier to oil export expansion.6 MMBD. or 3. the question making rounds is what next: Are we again heading into the triple digit era? . even though significant surplus capacity persists.bn B based on a 34% recovery factor. with growth in onshore liquids rich plays offsetting a decline in natural gas directed Non-fundamentals driving oil toward $100 a barrel By SYED RASHID HUSAIN | ARAB NEWS Published: Dec 26. Canadian oil sands.5 MMBD in 2011 to about 32.9% of 2011E world oil demand. Recent Oil Service industry reports anticipate the US market will move sideways in 2011.4 MMBD). Iraq’s official production target is 12. the call on OPEC crude will increase from 29. and relatively flat nonOPEC conventional oil production from 2011.8% of world oil demand (2015E 93. with 40% of the expansion in China and 70% in the broader Asia and Middle East regions. OPEC’s spare capacity currently stands at 6. which compares with 259 bn B for Saudi Arabia. Iraq stated its goal is to boost revenue. Faster global economic growth implies faster world oil demand growth and even tighter spare capacity.0 MMBD. Identified global capacity closures since 1Q09 amount to 2. 2010 01:24 Updated: Dec 26. with a plateau of sustainable capacity of 6. Assuming world oil demand growth about 1. About 63% of OPEC’s current spare capacity is in the hands of Saudi Arabia. The global refining environment is expected to remain difficult in 2011.0 MMBD by 2017.3 MMBD maintained for 12-14 years. China has a strategic goal to be self sufficient in light product demand. 211 bn B for Venezuela. and 137 bn B for Iran. reducing effective spare capacity (ex Nigeria and Venezuela) to about 3. but a panel of experts in the Middle East recently stated production of 4-5 MMBD at that time was a more reasonable goal. More rationalization is anticipated but will be slowed by stringent exit regulations and the high cost of closures. offering little investment opportunity until growth in world oil demand absorbs surplus capacity. and OPEC NGL production. not production.1 MMBD annually 2012-2015.
the biggest mover for energy markets appeared financial investors.4 percent this year. is to crimp growth as well as oil demand in China. Japan and the US emerging from a deep recession.9% year-over-year in November. the major growth engine of the world. “What is more. the Fed has effectively flooded the system with cheap money. This massive Quantitative Easing (QE) liquidity is a major factor in the current strong correlation between WTI crude and S&P 500 — another reversal of historical pattern. 3 announced it would buy an additional $600 billion of US Treasuries through June. The broader equity and commodity markets. The perspective is not that bright. here we are. have understandably driven investors to plow money into the commodities and stocks at a record pace. This is happening despite indications that the Chinese dragon is slowing. 22. The Chinese economy is expected to expand by 9. oil markets were trading at around the $80 mark — rising almost eighty percent from a year ago. Beijing has just slapped a 4 percent hike on domestic gasoline and diesel prices effective Dec. the world was different. In sharp contrast. considerable spare capacity and a lack luster macroeconomic indicators? Indeed severe winter and snowstorms have hit parts of Europe buoying the expectations that fuel demand will increase. barely out of the Great Recession. More positive sentiment was around. A stronger dollar makes oil more expensive. “The additional liquidity pumped into the markets by the Fed’s Treasury purchases should also reach commodity markets and is thus leading to increasing oil prices. in end 2010. Furthermore. chief investment officer at fund manager Swiss Asia Capital Ltd. and increasing risk appetite because of the US Federal Reserve’s QE pumping up the economy. are artificially supported by the US Federal Reserve. Oil producers too realize that high oil prices could trigger a global recessionary cycle. So there are anticipations of a increasing consumption momentum. in Singapore. the higher price level reflects the weaker US dollar which is a direct consequence of the ultra-expansive US monetary policy. Energy demand in China continued growing despite projections of a slowing dragon. improving global growth. and largely detached from the market demand and supply factors.” said Juerg Kiener. With evidence mounting that the global economy was on the mend. with its oil demand expected to grow 10. it was largely because speculators had piled into crude — and a host of other commodities — to hedge against the beleaguered greenback. Because oil is priced in dollars. given ample supplies. Other factors. with the jobless rate hovering around 10 percent — twice the levels in 2007 — 08 and the housing sector in the US continuing to languish in the intensive care with existing home sales down 27. with the euro zone. This and other tightening measures to fight inflation. Bank of America Merrill Lynch estimates that a $15 rise in the price of oil could shave about half a percentage point from US .” analysts at the Frankfurt-based Commerzbank AG said. meaning there are more investment dollars available for commodities such as oil. including crude oil. Yet in the immediate sense. Oil markets are peculiar — they transcend the simple supply and demand equation. it is vulnerable to changes in the greenback’s value relative to other currencies. and it’s surged some 17% since mid-August. adding to the global demand picture. the US Federal Reserve’s commitment to a loose monetary policy has undermined the value of the dollar. when the Fed first indicated it would consider a second round of quantitative easing.When 2010 began. The price of oil has climbed up by more than seven percent since the Fed on Nov. Currently.1% in 2010. And this brings us to the question — how could crude be at this price level. Crude markets have definitely responded to the galloping winter demand and temperature factors. Similar behavior appears in play once again. are always at play. Expectation of inflation.” When oil reached its record high in 2008. including investor sentiment and the value of the US dollar.
890 contracts in the week to Dec. chairman of Libya’s National Oil Corp. ‘remember. Right now.. ‘Oil prices will climb to $100 a barrel. enough to wipe out the Fed’s QE2 effect. and Bank of America Merrill Lynch also underpin that prices will return to $100 for the first time in two years during 2011. said in Cairo as Arab oil ministers and officials gathered for a meeting on Saturday.. estimates crude will average $100 a barrel in 2011 and $105 a barrel in 2012. Goldman Sachs sees oil at more than $100 a barrel in 2011.’ And the oil markets continue to do so. Korea.94 14. the market is designed to fool most of the people. Non-fundamentals are driving the market. speculative longs are dominating the crude market with hedge-funds and other large speculators long positions outnumbered short positions by 205. JPMorgan Chase & Co. Financial markets are playing a lead role in this transformation.68 Change Nov/Dec 1. could also impact the global demand scenario.74 All Areas OPEC .37 20.66 1. sees oil averaging $88 a barrel next year. $95 in 2012 and topping $100 by the end of 2013. 14.93 18.61 12. baffling even the pundits. most of the time. once said. Global Insight. in conjunction with affiliate IHS Cambridge Energy Research Associates. The issue of US sovereign debt and/or municipal debt crisis is also looming large on the horizon and the escalating geopolitical tensions in N. Hussein Allidina. head of commodity research at Morgan Stanley.economic growth in 2011. Trading legend Jesse Livermoore. Morgan Stanley. OIL TANKER MARKETS(OPEC FIGURES) Monthly Comparison(Average Figures in Million Barrels/Day) OctNovDec10 10 10 Spot Chartering 17.’ Strategists at Goldman Sachs Group Inc. the Middle East. according to the Commodity Futures Trading Commission (CFTC).03 12. The deepening European debt crisis may also have lasting impact on the state of the global economy. Others peg oil even higher. And it was perhaps in that perspective that Shukri Ghanem.
58 8.26 0.06 4.77 5.99 17.27 0.33 5.82 1.6 17.5 8.17 0.9 1.15 4.71 Sailings 23.32 8 8.45 12.92 0.09 -0.93 1.66 11.51 6.57 8.21 -0.33 16.5 6.24 Arrivals 8.65 0.7 0.07 .38 12.36 23.17 5.Middle East/East Middle East/West Outside Middle East OPEC Middle East North America Europe Far East West Asia 5.74 -0.79 4.07 23.
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