Demand for oil will fall by largest margin in 25 years
* Tim Webb, industrial editor
* The Observer, Sunday 28 December 2008
* Article history
Gloibal demand for oil in 2009 will fall by the largest amount for 25 years, according to the chief energy economist of Deutsche Bank.
Adam Sieminski said oil prices could hit a low of $30 a barrel next year, a fall of a quarter from today's price, because of the sickly global economy. He forecast an average price of $47.5 for the whole year for oil traded in New York. Deutsche Bank predicts global demand will contract by 1 per cent, or 1 million barrels a day, three times the fall seen this year and the biggest since 1983.
Sieminski is predicting much lower prices than most other analysts and even Opec or the International Energy Agency (IEA). He said that other forecasts underestimate how much the global downturn would reduce demand for oil. The IEA forecasts that global demand for oil will rise by 400,000 barrels per day next year, but is expected to slash its numbers next month after the IMF revises down its economic growth projections for 2009.
Citigroup is forecasting an average of $65 per barrel next year. Barclays Capital is predicting $76, although it said there was a greater risk that prices would undershoot rather than exceed this figure. Dresdner Kleinwort forecasts $84.50. Oil prices averaged just under $100 in 2008 as soaring prices in the first half - they hit a record $147 in July - countered the recent slump.
If Sieminski is right about lower prices next year, it is good news for motorists in particular. Households should also see lower utility bills as gas prices are index-linked to the cost of oil. A continued slump in oil and gas prices, however, could make the cost of using alternatives to fossil fuels to generate electricity, such as wind farms or nuclear power, uneconomic. This will make meeting Britain's climate change targets even harder.
Monday, December 29, 2008
Wednesday, December 17, 2008
NPR Report on OIl Prices
OPEC Announces Record Production Cut
OPEC agreed Wednesday to slash production by 2.2 million barrels per day -- one of its biggest production cuts ever -- in an effort to offset the falling price of oil.
The cut, which goes into effect Jan. 1, comes on top of existing reductions of 2 million barrels per day (bpd) agreed to by the 12-member Organization of the Petroleum Exporting Countries at its last two meetings. It lowers the group's supply target to 24.845 million bpd.
News of the cuts in crude production failed to boost oil prices Wednesday. Light, sweet crude for January delivery fell nearly 5 percent, or $2.07, $41.53 on the New York Mercantile Exchange.
Crude oil prices have plummeted more than 70 percent from summer highs of nearly $147 per barrel.
OPEC agreed Wednesday to slash production by 2.2 million barrels per day -- one of its biggest production cuts ever -- in an effort to offset the falling price of oil.
The cut, which goes into effect Jan. 1, comes on top of existing reductions of 2 million barrels per day (bpd) agreed to by the 12-member Organization of the Petroleum Exporting Countries at its last two meetings. It lowers the group's supply target to 24.845 million bpd.
News of the cuts in crude production failed to boost oil prices Wednesday. Light, sweet crude for January delivery fell nearly 5 percent, or $2.07, $41.53 on the New York Mercantile Exchange.
Crude oil prices have plummeted more than 70 percent from summer highs of nearly $147 per barrel.
Wednesday, December 3, 2008
Watch for inflation
Those of you who missed the Jimmy Carter years of inflation should prepare yourselves for the reality of inflation. There is no way the government (us, as taxpayers) can repay the money borrowed for the bailouts. The only way is for the treasury department to print more money. That will lead to a lower value for our money. We will have more money in our bank accounts, items will cost more, but we will not have as much worth or value.
Watch for this key indicator: The price you pay for a Coke from a machine. Right now a 20 ounce Coke is about $1.25. Watch for prices to rise as the value of your money decreases.
Encourage our lawmakers to stop preventing business failures. It does not work.
NPR reported this morning that the Democrats will ignore budget deficits in order to pump up the economy. A pumped up economy is one with high inflation. Watch out.
Watch for this key indicator: The price you pay for a Coke from a machine. Right now a 20 ounce Coke is about $1.25. Watch for prices to rise as the value of your money decreases.
Encourage our lawmakers to stop preventing business failures. It does not work.
NPR reported this morning that the Democrats will ignore budget deficits in order to pump up the economy. A pumped up economy is one with high inflation. Watch out.
Fall in oil will last 18 months
Oil Will Fall Further Without OPEC Action, Says BP
By Eduard Gismatullin
Dec. 2 (Bloomberg) -- Oil prices will continue to fall during the next 12 to 18 months if OPEC fails to implement “sufficient cuts” and supply stays at current levels, according to Christof Ruehl, the chief economist of BP Plc.
The world economy will stage a recovery from recession in 18 to 24 months, followed by “possible spikes” in oil prices, Ruehl told a conference in London today.
“Demand is now plunging like a rock,” he said. OPEC, the supplier of about 40 percent of the world’s oil, may cut output once or twice more in an attempt to reverse crude’s 66 percent retreat from July’s record, he said.
The Organization of Petroleum Exporting Countries will reduce crude production when it meets later this month in Algeria, the group’s Secretary General Abdalla el-Badri said yesterday. Concerns that a slowing world economy will hurt demand for fuel has pushed oil prices down to a three-year low.
Crude oil for January delivery fell $1.12, or 2.3 percent, to $48.16 a barrel at 11:43 a.m. on the New York Mercantile Exchange. Futures touched $47.36, the lowest since May 20, 2005.
BP, Europe’s second-largest oil company, has so far stuck to its planned capital expenditure program, Ruehl said. The oil producer may scale back investment in future to maintain its dividend, which “is a priority,” he said.
On Oct. 28, BP reiterated capital spending at around $21 billion to $22 billion for the year.
‘Fair’ Price
Saudi Arabia’s King Abdullah and oil ministers from OPEC members Venezuela, Algeria, Nigeria and Iraq said last week an oil price of $75 a barrel would be a “fair” level that supports investment in new capacity.
BP’s Ruehl disagreed with their views, saying: “There is no fair price. There is a price, which balances demand and supply.”
Most OPEC nations’ economies can sustain current oil prices, apart from three or four nations, Ruehl said. Countries that restricting access to their reserves should allow international oil companies to invest in production projects to meet demand for energy, Ruehl said.
“Most investment could take place in areas, which currently locked for private companies,” Ruehl said. “If the purpose of the fair oil price is to allow investment there are easier ways of doing it, you just open up.”
Oil and gas industry costs are falling because of the drop in commodity prices, Ruehl said. Service and equipment costs are bucking the trend because of contractual obligations.
“We will see costs diminishing as the commodity price cycle is turning,” Ruehl said.
By Eduard Gismatullin
Dec. 2 (Bloomberg) -- Oil prices will continue to fall during the next 12 to 18 months if OPEC fails to implement “sufficient cuts” and supply stays at current levels, according to Christof Ruehl, the chief economist of BP Plc.
The world economy will stage a recovery from recession in 18 to 24 months, followed by “possible spikes” in oil prices, Ruehl told a conference in London today.
“Demand is now plunging like a rock,” he said. OPEC, the supplier of about 40 percent of the world’s oil, may cut output once or twice more in an attempt to reverse crude’s 66 percent retreat from July’s record, he said.
The Organization of Petroleum Exporting Countries will reduce crude production when it meets later this month in Algeria, the group’s Secretary General Abdalla el-Badri said yesterday. Concerns that a slowing world economy will hurt demand for fuel has pushed oil prices down to a three-year low.
Crude oil for January delivery fell $1.12, or 2.3 percent, to $48.16 a barrel at 11:43 a.m. on the New York Mercantile Exchange. Futures touched $47.36, the lowest since May 20, 2005.
BP, Europe’s second-largest oil company, has so far stuck to its planned capital expenditure program, Ruehl said. The oil producer may scale back investment in future to maintain its dividend, which “is a priority,” he said.
On Oct. 28, BP reiterated capital spending at around $21 billion to $22 billion for the year.
‘Fair’ Price
Saudi Arabia’s King Abdullah and oil ministers from OPEC members Venezuela, Algeria, Nigeria and Iraq said last week an oil price of $75 a barrel would be a “fair” level that supports investment in new capacity.
BP’s Ruehl disagreed with their views, saying: “There is no fair price. There is a price, which balances demand and supply.”
Most OPEC nations’ economies can sustain current oil prices, apart from three or four nations, Ruehl said. Countries that restricting access to their reserves should allow international oil companies to invest in production projects to meet demand for energy, Ruehl said.
“Most investment could take place in areas, which currently locked for private companies,” Ruehl said. “If the purpose of the fair oil price is to allow investment there are easier ways of doing it, you just open up.”
Oil and gas industry costs are falling because of the drop in commodity prices, Ruehl said. Service and equipment costs are bucking the trend because of contractual obligations.
“We will see costs diminishing as the commodity price cycle is turning,” Ruehl said.
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