OPEC took the middle road, cutting their oil production a hefty 1.5 million barrels per day (almost 5%). The cut was enough to have an impact in slowing oil’s price decline, but not so much it would considerably damage already flailing economies worldwide. In the short-term, their production cut was drowned by a dramatic fall in global stocks that has sent the Dow to the low 8,000s again.
The UK reported larger than expected economic contraction of (more…)
Tomorrow in Vienna, OPEC will decide how much to cut their oil production in order to stop the rapid price fall since early July. OPEC produces almost 40% of the world’s oil and, more importantly, exports more than half of global trade in petroleum. Saudi Arabia largely holds the reins, since they produce and export more than twice the second largest OPEC player, Iran. Iran, Venezuela and Nigeria are estimated to need oil above $80 per barrel to provide enough revenue for their current natural budgets. While other members such as Saudi Arabia and Kuwait are thought to make ample revenue with prices as low as $55. OPEC remembers the collapse in oil’s price to below $10 after the 1998 Asian Financial Crisis and is determined to prevent a repeat performance during our current financial crisis. So, they are probably debating a cut between (more…)
The Good News for recession consumers:
The average price of gasoline nationwide fell below $3 per gallon last weekend and looks poised to fall a bit further from the current level ~$2.92 at the pump.
The Bad News for recession consumers:
OPEC is in control of (more…)
OPEC just released its monthly oil report for October which included lower estimates for oil supply and demand for 2008 and 2009. Each year, global growth is projected to be positive: at almost 600,000 barrels per day (b/d) this year and 800,000 b/d in 2009. But there was one piece of information on page 25 of the report that raised my eyebrows and my hopes that we can keep oil prices and global greenhouse gas emissions in check: global oil demand in the third quarter of 2008 is reported to (more…)
The continued fall in the price of oil due to stock market crashes worldwide leads most analysts to wonder how far down it can go? To understand the depths of oil’s potential price we have to first understand the potential imbalance of demand and supply that can send prices lower than $80 per barrel. This blog will focus on the demand side and probe US demand specifically.
At ~20 million barrels per day (Mbd), the United States consumes more than double the amount of the world’s #2 consumer, China (~8.3 Mbd). US consumption equals almost 24% of world consumption. Thus, fluctuations in US demand have (more…)
The bullish weekly oil report that I predicted arrived on schedule. But the oil markets largely ignored it. Crude supplies fell 5.9 million barrels (Mb) but remain in the average range while gasoline supplies fell a huge 6.5 Mb to an extremely low level for this time of year. Hurricane Ike has strengthened and will keep Gulf production low for at least (more…)
The US Energy Information (EIA) Short Term Energy Outlook (STEO) for the month of September came out this afternoon with more startling updates on non-OPEC oil production. They cut their prediction of non-OPEC oil production again, bringing it to 20,000 barrels per day higher than in 2007 (revised from a guess of a 900,000 barrel per day increase made just seven months ago in February’s STEO). If the estimate falls next month by a similar amount to the last seven months’ cuts, we will be looking at a repeat of the oil production decrease that (more…)
Right when oil and natural gas production would be ramping up production back to normal levels after Hurricane Gustav’s disruptions, another hurricane turns its way along Cuba toward the Gulf of Mexico. Ike hit the Bahamas with Category 4 strength before its current weaker state as a Category 2 (100 mph) storm over Cuba. But the ingredients that could make Ike a serious threat to US energy markets emerge once it has passed Cuba late Tuesday. If Ike goes over warm water with less wind shear and dry air than Gustav then (more…)
After spending the day moving in a big rented Penske truck I found myself appreciating the fact that gas prices took a break from their daily records climb. And the weekly EIA report on natural gas stockpiles showed an above average gain in inventories, further sending natural gas prices and oil prices down (even though inventories are still (more…)