Zoe Macintosh on
April 2, 2010 at
Cancun, Mexico, where the world's energy ministers agreed to create an open database of every nation's oil supply and demand figures. (image: bugbog.com)
Despite a dearth of media coverage, a historic event occurred on Wednesday: the International Energy Forum (IEF)’s biennial meeting produced a declaration approved by 66 nations in attendance that announced a new collaborative relationship that would lead to greater information sharing and transparency in the oil market.
The Cancun Ministerial Declaration (named after the convention’s location in Cancun, Mexico) stresses neither market regulation nor market intervention as recommended policies to combat oil price volatility, despite prior coverage that suggested these methods were under consideration. Instead, it favors a stepped-up version of what has been a project of the association since 2001: to create its own database of information on every nation’s oil demand, production, consumption, and stocks that would be constantly updated. Called the Joint Oil Data Initiative (JODI), the database was meant to parallel the International Energy Agency (IEA)’s authoritative Oil Market Report in its goals while rivaling it in quality and openness.
The successful production of this data resource would be no small achievement, and would likely lead to greater transparency in and wider understanding of oil markets. Speculation thrives on lack of information. The present lack of solid and widely-accepted information on factors like oil production figures is what allows analysts from firms like Goldman Sachs to sway the market with nebulous citations like “limits in the production and storage of commodities” in a market forecast. Because financial journalists believe that analysts have access to information they themselves do not, it’s impossible for them to analyze or verify these statements. If a publicly available and updated database of detailed supply and demand information were available, journalists, analysts, energy ministers, and traders would be able to thoroughly evaluate the validity of all statements and forecasts. Importantly, traders would also have the ability to choose what source of information to take seriously, lessening the influence that the prices of oil contracts several months into the future have on near-term investments. This could dampen the kind of excess speculation that leads to price volatility, because the artificial demand created by speculators buying up futures contracts would be more clearly visible. Instead, investors could choose to base their decisions more heavily on physical data.
As the only international energy organization that includes new consuming majors such as China, India, and Brazil as members (and therefore, as collaborators), the IEF is amidst a fast rise in its global relevance. In an interview with Financial Times Chief Energy Correspondent Carola Hoyos on the last day of the conference, IEA chief Nobuo Tanaka gave his blessings to the forum, which now will begin to rival his own organization’s as the authority on global energy data.
If the IEF succeeds in producing a high quality and openly accessible database of global oil data, oil prices would likely becomes less volatile. However, the effectiveness of this measure alone is skeptical. ”Data collection” appears to be the limit of IEF’s power. Despite wide acceptance within its ranks that excessive speculation in the New York and London commodities markets is the root of volatile oil prices over the past two years, the respective oil ministers and leaders don’t have any power to directly limit this activity. Even if sweeping numbers of traders began to adjust their investments to JODI-informed criteria, powerful speculators like Goldman Sachs, and JP Morgan would still wield significant influence on the market. Addressing this imbalance is the aim of commodities market regulation, which is the province solely of the Commodities Future Trade Commission in the US, and the Financial Services Authority in the UK, and it’s unclear whether the slow progress of the CFTC and the hands-off approach of the UK would be swayed even by a unified front of the majority of the world’s countries.
In addition to a re-energized commitment to JODI, the Cancun Declaration (pdf here) establishes the development of a more formal organization within the IEF. In its plan to expand the dialogue between producing and consuming nations, the IEF is careful to preserve the “informality” that has been critical for its past collaborative success. However, the document’s talk of a coming “IEF Charter” lends credence to the sense that privileges will be extended to those who elect to participate in the new framework. Because this is a very early stage of a new kind of agency, we will have to wait months for more details. That next soonest event will likely be the joint symposium the IEF plans to hold with OPEC and the IEA in January 2011.
This forecast comes from Glen Sweetnam, the director of the International Economic and Greenhouse Gas Division at the Energy Information Administration (EIA), the statistical branch of the DOE. Sweetnam oversees the publication of the EIA’s yearly International Energy Outlook, one of the most authoritative sources on forecasting global oil supply and demand.
While Sweetnam says that global oil production could fall as early as next year, he—like the DOE at large—does not fully subscribe to peak oil theory, which states that world oil production will at some point peak and irrevocably decline as oil, a finite resource, is exhausted. Instead, Sweetnam believes that oil production will reach an “undulating plateau” at which production will dip but then be restored through investment in new oil production capacity. In 2008 Sweetnam gave a presentation for the DOE that said oil production could remain at its undulating plateau until 2090, when production would begin to fall.
Sweetnam believes that any drop-offs in oil production will be met with renewed investment, but acknowledges that the recession has interrupted such investment. Without that investment, 2011 could be the year that global oil production begins to decline.
Yet Sweetnam’s statements highlight other causes—“above ground factors,” rather than the dwindling amount of oil in the ground—of a potential decline in global oil production:
If the investment is not there, a chance exists that we may experience a decline. If we do, I would expect investment in new capacity to increase if there is still demand for oil.
As Sweetnam sees it, if people want oil they will be able to get it. As long as there is demand for oil there will be investment to produce it, even if it comes from unconventional sources that are harder to refine into the oil products that we use, such as heating oil and gasoline. Yet as alternative sources of energy are developed, people may not want oil, or at least not as much of it. The possibility of peak oil demand—not peak oil supply—will shape our energy future.
This transition toward lower oil demand can be seen in the heating oil industry itself, which—through a combination of industry leadership and legislative mandate—is adopting blends of biodiesel and heating oil. Biodiesel blends will lower overall oil demand while supplying consumers with a more efficient and cleaner-burning heating fuel. As with Sweetnam’s forecast that declining oil production could happen next year, many heating oil users will see changes by next heating season—in Massachusetts all heating oil will have to contain 2 percent biodiesel by July 1, 2010, and pending legislation in Connecticut and Pennsylvania would have a similar effect on heating oil users in those states in the next three to four years.
Zoe Macintosh on
March 29, 2010 at
Steady oil prices for the next decade is what OPEC's newest study predicts. (image: travelblog.org)
A yet-to-be released study expects oil prices to remain in the $70-80 range for the next ten years, says CNBC.
Conducted by OPEC, the report and its fuller details will become public on Tuesday and Wednesday during a presentation at the 12th International Energy Forum (IEF) conference in Cancun, Mexico. United Arab Emirates 24/7 reports that excessive speculation and the global financial crisis are factors in the report’s result.
The IEF is the world’s largest assembly of energy ministers. It holds a unique position in the energy industry because it’s committed to informal dialogue, not policy recommendations or preparation, and because it invites nations that are often excluded from global assessments of energy due to their non-OECD status. Countries such as China, Brazil and India are of an equal or superior importance to the current global energy picture than the advanced western economies, as they are poised to consume the lion’s share of the world’s energy in coming decades. Because they are not OECD members (and therefore, not International Energy Agency members), they operate outside of the kind of monitoring and international data-collection upon which the rest of the world relies.
The meeting on March 30 and 31st will include an assessment of future global oil demand. Energy ministers from over 60 countries will be in attendance, including Brazil and Russia, as well as the CEOs of oil industry heavyweights Exxon Mobil, ConocoPhillips, Royal Dutch Shell, and Total.
Zoe Macintosh on
March 26, 2010 at
Oil production rose domestically for the first time since 1990, thanks to previously untapped reserves like that in the Bakken formation (pictured). However, this uptick means little for both prices and energy trends. (image: cbr.ca)
American oil production reached its peak in 1971, as was predicted by the Hubbert model applied to US oil fields. Since then, production has dropped by nearly 50 percent. Yet 2009 was a record-breaking year for US production, with levels increasing for the first time since 1991, according to the U.S. Energy Information Administration and reported by the AP.
However, missing in the above comparison is the fact that production dropped to its lowest point in 25 years in 1990, rendering the 1991 increase less significant in terms of overall production trends. In 1990, average domestic production of oil was 7.35 mbd, and in 2009, it was 5.32 mbd. 2009’s improvement over 2008’s 4.95 mbd is worth noting, but not a game-changer for the US energy outlook. The level is still 2 million barrels per day below the 1990 average.
As the AP article explains, the spike in 2009 domestic production was due to oil discoveries and the fruit of drilling projects that were financed during the period of high oil prices that ran between 2004 and autumn 2008. Deepwater reserves in the Gulf of Mexico and the Bakken Shale deposit that spans Montana and North Dakota were the biggest new sources.
“As the price of oil went up, you were able to access resources that were more difficult and expensive to get to,” said Rayola Dougher, Senior Economic Adviser for the American Petroleum Institute.
Dougher is referring to the steep costs of developing deepwater reserves and oil shale. The US Department of the Interior estimates that the US contains over a trillion barrels of oil in the form of oil shale, and 12-19 billions of barrels of oil in the form of tar sands. Both of these forms fall under the category of “unconventional oil,” because they require extraction techniques outside of traditional oil wells, and/or refinement techniques outside of those used for lighter grades of oil. As we’ve previously discussed, the methods of producing unconventional oil are economically feasible only when prices are very high.
But even under high-price conditions that could stimulate increased domestic production (some analysts are predicting higher oil prices in 2010 and onwards), it’s unlikely that Americans would experience relief from either high consumer prices or energy dependence.
In a period of very high oil prices, we would likely see more of these projects or efforts to make those federal lands, much of which are situated inside pristine national parks, open to drilling. However, setting aside the uncalculated costs to America’s bastions of untouched wildlife, it’s unlikely that these projects would have any impact on the price of oil, which is a globally traded commodity influenced by worldwide supply fluctuations that dwarf any US contribution. In terms of lessening our dependence on foreign oil, increased oil production domestically, even on the order of 1 mbd, would only offset the export losses that we are already experiencing from major suppliers Mexico and Venezuela. As analyst Chris Nelder wrote in February, the combined export loss from these two countries, which together comprise two of our three largest sources of oil, was 0.89 mbd from 2005 through 2008. Roger Blanchard, oil analyst and author of “The Future of Global Oil Production”, finds it “likely” that Mexican oil exports will reach zero within the next ten years.
The optimistic-sounding AP headline “Govt. says US oil production increased in 2009” implies a needed rejuvenation of our nation’s future energy supplies, but in reality only reinforces the unpredictability of our future.
The Oxford researchers said that estimates of global oil reserves are “exaggerated by one-third,” and that conventional oil reserves amount to only 850–900 billion barrels—not the 1.2–1.4 trillion barrels that are currently estimated. The researchers wrote that the errors in statistics of oil reserves are “broadly acknowledged but not taken into account due to political sensitivities.” David King put the matter more bluntly, saying the IEA couldn’t afford to give unpleasant information to Western governments that pay its bills: “The IEA…has to keep its clients happy.”
Michael Hoven on
March 22, 2010 at
Cushing, OK is an important oil storage facility in the US. Now sources inside and outside the EIA question whether the agency can reliably say how much oil is being stored there. (image: guardian.co.uk)
Every week, the Energy Information Administration (EIA), the statistical branch of the Department of Energy, releases data on oil inventories in the US that is considered the most authoritative information on the supply of oil in the country. The EIA inventory report comes out every Wednesday at 10:30 am (eastern time) and has the power to send oil prices soaring or skidding. So when internal documents from the EIA and a report by an outside consulting firm question the accuracy and reliability of EIA data, as the Wall Street Journal reported today, it becomes even more difficult to make sense of oil data and oil prices—and raises questions about how much reporting errors have cost oil consumers through unnecessarily inflated prices for heating oil and gasoline.
Internal documents obtained by Dow Jones Newswires through a Freedom of Information Act request show a number of errors in the EIA’s weekly data over the last three years, sometimes accounting for reports that were millions of barrels off, which would be enough to affect oil prices. According to the consulting firm SAIC, whose report the EIA commissioned, outdated technology, unproven methods, and reliance on firms to self-report inventory data were responsible for the errors.
The EIA collects data every week from thousands of oil storage facilities, which are responsible for reporting the number of barrels of crude oil and refined oil products that they have in storage. Some of the data has to be entered manually, which allows human error to skew data, and some statistical methods used by the EIA haven’t been evaluated since they were devised in 1983, the first year that oil futures were traded.
Stephen Harvey, the director of the EIA’s office of oil and gas, was not surprised by SAIC’s findings, but said the EIA data remains a better source for determining supply and demand than exists in many countries:
Should you be concerned? Yes. Is it as good as we’d like it to be? No. Is it better or worse than some other countries where we’d like to know this information? It’s probably a whole lot better.
Oil traders consider the EIA’s inventory report good enough that it can shape oil prices every day of the week. Before the report is released, oil prices often move up or down according to analysts’ forecasts for what the EIA data will hold; if the numbers are surprising, Wednesday’s oil prices can sharply increase or decrease, and the EIA inventory data can be the focus of oil traders’ actions until the next report is released.
The Wall Street Journal provides a telling example of the danger of relying on inventory numbers that may be inaccurate and misleading. On September 16, 2009, the EIA reported that crude oil inventories dropped by 4.7 million barrels. That figure was almost 2 million more than what analysts had expected, and traders considered it a sign that oil demand in the US was growing. Crude oil futures rose by 2.2 percent that day. To put that in perspective, last Tuesday crude oil futures increased by 2.4 percent and heating oil futures gained 2.8 percent, which led the average retail price of heating oil to increase by 6 cents per gallon the following day.
But of the 4.7 million barrels that the EIA found had been taken out of inventory, 1.7 million barrels came from a correction the EIA made after it discovered an earlier error. That correction inflated the drawdown in crude supplies that the EIA reported on September 16, which in turn inflated the impact that the EIA inventory report had on oil prices. If the EIA had reported a reduction in crude supplies of only 3 million barrels, oil prices would not have risen as much, and consumers would have paid less for heating oil, diesel, and gasoline in the days that followed.
What is being done to correct errors in a report that has such a powerful influence on oil prices that affect all of us? Not much. The EIA blames budget shortfalls for much of its difficulties, although Harvey has pledged to undertake what the Journal called “a number of measures” to improve the accuracy of the report. No details were offered regarding what these measures might be. The Federal Trade Commission established regulations last year that would punish companies who intentionally reported misleading inventory data, but no company that reported incorrect data has been accused of doing so intentionally.
The wild card is how traders will respond to reports that the EIA data is flawed. Perhaps, like Harvey of the EIA, they will not be terribly surprised and business will continue as usual. As the Financial Times’ Energy Source blog points out, the fact that some traders subscribe to services that take infrared photos of oil storage tanks to determine oil inventories shows that there were already some concerns about the accuracy of the EIA’s inventory data.
But if the EIA’s flaws persist—or, indeed, worsen—then the weekly inventory report could lose its influence on oil prices. Because the EIA report provides insight into the fundamentals of supply and demand, it serves as a weekly jolt of reality in oil markets that can otherwise be concerned with global currency markets and economic sentiment. If the EIA inventory reports cease to provide a touchstone for oil markets, oil prices may become even less comprehensible to the average oil consumer than they already are.
Josh Garrett on
March 15, 2010 at
According the recent report “World oil demand’s shift toward faster growing and less price-responsive products and regions,” current demand trends will continue into 2030 and grow global demand by some 40 million barrels per day. (image: econ.nyu.edu)
The key element in the study’s picture of oil demand is its presumption that world per capita oil demand will continue to grow at a steady rate, while estimates from the IEA and others rely on an overall slowing in the growth of per capita demand. The study’s authors argue that previous declines in per capita oil demand that occurred in 1973-1984 and 1998-2008 were precipitated by declines in consumption that cannot and will not be replicated in the next three decades. The study attributes both decline periods primarily to developed nations’ (the Western nations of the OECD and former Soviet countries) switching away from oil as a fuel for electrical plants and residential heating fuel.
Josh Garrett on
February 21, 2010 at
Richard Heinberg’s Goldilocks thinks that crude oil prices between $60 and $80 per barrel are just right. (image: twentydollars.files.wordpress.com)
We report regularly at HeatingOil.com on crude oil, crude oil prices, natural gas, peak oil, and alternative energy sources. Together, these broad categories of news provide us clues about our world’s energy future. As a global society, we are at a major crossroads: we can rest assured that the energy that the energy sources that power our cars, trucks, airplanes, end electrical plants 20 years from now will be very different than the fuels we rely on today.
Author Richard Heinberg has cleverly combined all of those factors into a concise anecdote that tells the tale of the world’s energy makeup over the last decade, providing clear signposts that show where to look for clues to what the next decade or two will look like.
Reuters’ Environment Forum blog posted Heinberg’s anecdote on Thursday, under the title, “Goldilocks and the Three Fuels.” His updated version of the classic tale is below:
Once upon a time (about a dozen years past), oil sold for $12 a barrel and a lot of people thought it would get even cheaper because the market was glutted.
But instead the price rose: many big oilfields were aging and yielding less, and it was getting harder to find new ones—especially in places easy and cheap to drill.
Oil demand has been on the decline in some industrialized nations since before 2008, when a sharp downturn first gripped the global economy. Since then, the downturn has continued and the trend of falling oil demand has expanded to the US, the world’s top oil consumer. Currently, the economic crisis is seen as the foremost driver of declining oil demand. But some expect longer-lasting influences, such as a new emphasis on conserving fuel and energy in the US, to carry the downward trend decades into the future.
Josh Garrett on
February 15, 2010 at
Punxsutawney Phil is cute, but his yearly predictions do little to help heating oil users plan their fuel budget. (image: coreybrinn.com)
Groundhog Day is one of those weird and wacky American (and Canadian) “holidays” that carry a tradition hundreds of years old into the modern era. Although its official purpose is to make a general weather prediction about the subsequent six weeks in February and March, the groundhog-shadow event basically amounts to an excuse for the nation to focus on a pudgy fuzzball from Pennsylvania every February 2 (and let’s not forget that it was the inspiration for one of Bill Murray’s funniest movies).
Friday’s This Week in Petroleum newsletter from the US Energy Information Administration (EIA) takes a look at Groundhog Day from the point of view of heating oil users, and the result is not too surprising: even if the groundhog’s prediction is accurate, it does very little to help heating oil users plan their fuel purchasing.
The IEA’s report is more bullish on oil demand than other major oil forecasters, the EIA and OPEC. The IEA revised its forecast upward by 170,000 barrels a day, and now expects oil demand in 2010 to average 86.5 million barrels a day—an increase of 1.6 million barrels a day from 2009 levels. In contrast, the EIA predicts that oil demand will grow by 1.2 million barrels a day in 2010, and OPEC expects an even more modest 800,000-barrel-a-day increase from last year’s level.
While the IEA and OPEC agree that oil consumption in the OECD—primarily countries in North America and Western Europe—will remain flat, they part ways in their assessment of Chinese demand. OPEC is concerned that the Chinese government’s efforts to curb energy demand could prove successful, cutting into China’s oil consumption. Slow recovery in the global economy could also reduce demand for Chinese goods and shrink the industrial sector’s appetite for oil.
The IEA, on the other hand, assumes that China’s efforts to reduce energy consumption and prevent inflation will not impede the country’s robust economic growth. Following the IMF’s prediction of 10 percent growth in China’s economy, the IEA predicts that China’s demand for oil will grow by 4.7 percent to reach 8.9 million barrels a day. As the Wall Street Journal reports, that would be an increase of 400,000 barrels a day from China’s 2009 demand, a number that accounts for nearly a third of the IEA’s global demand growth forecast.
Kristin Miller on
February 2, 2010 at
This chart from JBC Energy shows that distillate supplies in floating storage remain ample, even if crude supplies are falling. (image: blogs.ft.com)
For oil traders, it seems that contango—a market situation in which futures prices are higher than spot prices—is no longer such an exciting dance. The Wall Street Journal reported yesterday that floating supplies of crude, kept at sea during times of low demand in the hope of future profits, are finally dropping after more than a year. The volume of crude oil currently stored on supertankers has more than halved, down to 43 million barrels from its record high of 90 million in April of last year, and the Wall Street Journal notes that land-based surpluses are falling as well. Analysts estimate that the quantity of crude at sea could drop to 27 million barrels by March, which would be the lowest level since the current contango began at the end of 2008.
Some analysts are trumpeting this development as a sign that the oil market is rebounding, and that the contracting of floating crude reserves may even herald a price spike. But the Journal takes a more cautious view, noting that “Appetite for oil in industrialized countries, which plummeted during the recession, remains depressed. Demand in the U.S. shrank 2% in the last four weeks from a year earlier and supply is still plentiful. Moreover, spare capacity in oil-producing countries remains high.”
In addition to plentiful supplies and ample spare capacity, most of the oil in floating storage is currently in the form of distillates, such as heating oil, so even if the contango for crude is coming to an end, the world’s oceans are still the largest oil storage facility around. A JBC Energy estimate cited yesterday in the Financial Times puts floating storage of distillates at 75–85 million barrels. Their figures also show that as floating storage of crude has dropped, there’s been a corollary rise in the shipboard volume of distillates. Last March, there were only 8–10 million barrels of distillates stored offshore, a number that has increased tenfold since then.
Jared Killeen on
January 18, 2010 at
Goldman Sachs logo. (image: businessweek.com)
Financial titan Goldman Sachs predicted today that shortages in crude supply will bring about higher oil prices in 2010 and 2011. Speaking in London, Goldman analyst Jeffrey Currie said that by the end of this year global oil consumption will return to levels seen before the financial crisis, while crude production will continue to lag because of the recent credit crunch. Such expectations mark the apex of optimism among investors, some of which—like OPEC and JP Morgan—forecast lighter demand over the next several years.
“By 2011, the market is back to capacity constraints,” Currie said during his presentation. “The financial crisis created a collapse in company returns which has significantly interrupted the investment phase.” Investment in new oil production is being held up because “political impediments on the flow of capital are still very large.” Here Currie referred to recent difficulties in Saudi Arabia, where the state controls production, and Iran, which has been hurt by economic sanctions.
Currie’s presentation echoed predictions made by Goldman last month. In December the bank projected that global demand would increase to 86.4 million barrels a day (mb/d) from 2009’s 84.9 mb/d, citing growing consumption in China, India, and Brazil. Moreover, Goldman said that dwindling production levels in the world’s largest oilfields will help bring about a price hike to $90 per barrel this year and $110 in 2011.
As Steven Zweig explains in this helpful article, Goldman Sachs subscribes to a “supercycle” school of thought when it comes to the oil market. This means that Goldman analysts look to market fundamentals such as supply and demand to account for increasing crude prices; the record-high prices of 2008, and the projected prices of 2010 and 2011, are attributable to increasing demand from the developing world coupled with a shrinking supply caused by years of underinvestment in exploration and production. According to this model, growing demand and dwindling supply will lead to perpetually higher prices—a sure bet for investors. Perhaps this explains why Goldman is going long on oil.
Kristin Miller on
January 15, 2010 at
IEA logo. (image: h2euro.org)
The Wall Street Journal reported on Friday that the International Energy Agency has updated its forecast for 2010: the IEA now expects global oil consumption to grow by 1.44 million barrels a day this year, down from the 1.47-million-barrel growth rate predicted last month. While slightly less optimistic, the IEA’s figure still exceeds the more moderate number forecast by the EIA of 1.1 million barrels a day.
Despite cold weather dipping into last year’s record crude inventory, stockpiles still remain high, with a forward demand cover (how much oil is in reserve, expressed in days of supply) in the US of 59.1 days. This level of inventory is expected to continue to act as a “buffer against higher prices.” Oil prices fell back below $80 a barrel this week, after the recent cold snap subsided.
The IEA’s revision appears to represent a slight tempering of optimism regarding global economic recovery. The first real signal of what oil demand and consumption will be comes in early February, when the IEA and other agencies release consumption data for the first month of the year.
Michael Hoven on
January 15, 2010 at
Whether in floating storage or on land, oil supplies grew near record levels this week. (image: made-in-china.com)
Inventories of oil—whether crude oil, distillates (which include heating oil and diesel), or gasoline—have been high throughout the heating season. Just before Thanksgiving we reported that “heating oil inventories…[were] at staggering levels,” their highest point since Christmas 1998, and in early January we looked at EIA data and extended that record to 26 years. And heating oil inventories have stayed high, despite refining cutbacks.
Yet this Wednesday the EIA reported that oil inventories had gotten bigger still during the previous week—even with the cold weather. Izabella Kaminska of Alphaville found it “unbelievable” that inventories could rise so much during a week of cold weather, especially when inventories were high to begin with. Between crude oil and all categories of refined products, oil inventories climbed by 8.9 million barrels last week. As oil analyst Dennis Gartman pointed out, that amounts to one of the largest weekly increases ever. Additionally, the US Strategic Petroleum Reserve is now full.
Will all this supply bring down heating oil prices? Crude and heating oil prices have declined this week, but those prices are determined by many factors besides supply and demand; fresh economic data or geopolitical tension could reverse oil’s downward trend. Any upcoming price increase would be hard to attribute to growing demand, though. This week’s inventory numbers show that there is enough oil supply to cover another cold snap or an uptick in the pace of economic recovery.
Zoe Macintosh on
January 7, 2010 at
Right now the price of crude is $83 on NYMEX. Global daily demand for oil, assuming no change from the 2009 average, is 84.9 million barrels a day (mb/d) according to the IEA’s December Oil Market Report.
The global economy is in flux and it’s anyone’s guess which factors will exert the most influence over demand for crude oil in 2010. The question for many has been whether growth in China and other non-OECD countries like India and Brazil will be enough to offset declining demand from North America and the United Kingdom. An added factor that has received little attention is the historic levels of global crude and distillate supplies currently in storage—a massive overhang of 159 million barrels—the likes of which have not been seen for 26 years. Read More »