Here is why we rallied...
But, I think the smart play is to buy balanced, or oil leveraged E&P's. This news is bullish for crude prices and the E&P's get the bottom line result today,... BJS up 12% vs. E&P's flat on this news ? - short covering and the OSX is still the first proxy for bullish energy news. I'll still overweight to E&P's & the oilier names.
Oil Inventories to Drop This Month as `Stresses' Build in Market, IEA Says
OPEC Cuts Place `Stresses' on Oil Market, IEA Says (Update1)
(Rewrites from 1st paragraph and adds background, table.)
Paris, Dec. 8 (Bloomberg) -- OPEC, which has restricted oil
supplies since April 1998 to end a glut, must boost output soon to
ease ``evident stresses' that are building in the world oil
market, the International Energy Agency said.
Lean supplies from the Organization of Petroleum Exporting
Countries means consumers need to draw as much as 6.2 million
barrels a day this month from inventories to meet rising demand,
the Paris-based agency said in its monthly report.
``Inventories are being drawn down rapidly,' the IEA said.
``This is a thirsty oil market, waiting for more oil, which will
have to come principally from OPEC countries.'
As OPEC restrains output, demand is increasing with oil use
next year forecast to rise 2.4 percent to 77.1 million barrels a
day from 75.3 million in 1999, the report said. The group left its
outlook unchanged for the third straight month.
This month, supplies will plunge as oil demand reaches 78.3
million barrels a day, up from 76.6 million in November, buoyed by
rising heating oil consumption and strong economies in North
America and Asia, the IEA said.
About half the drop in inventories of oil and oil products is
likely to come in Organization for Economic Cooperation and
Development countries, the IEA said. Stockpiles of oil and oil
products in OECD countries dropped 1.8 million barrels a day in
November and could fall by 3 million barrels a day this month, the
IEA said.
While demand is strengthening, OPEC last month stepped up its
effort to curtail supplies. OPEC oil output fell to 25.8 million
barrels a day in November from 26.5 million barrels a day in
October, led by declines in Iran and Iraq, the IEA said.
Such output means OPEC members made 89 percent of pledged
cuts last month, the IEA said, in line with compliance estimates
provided by other agencies.
Crude oil prices have more than doubled this year and reached
a nine-year high after OPEC and several other nations agreed to
slash supplies by 5 million barrels a day.
As oil gained, marginal oil fields outside of OPEC resumed
pumping. Supplies from non-OPEC nations rose 450,000 barrels a day
to 45.2 million barrels a day, driven by higher production in
North America and from the North Sea, the IEA said.
Exports from the former Soviet Union fell by 130,000 barrels
a day because of weather-related problems at the Black Sea port of
Novorossiysk, it said.
1Q99 2Q99 3Q99 4Q99 1999 2000
Total world demand 76.5 73.1 74.7 76.9 75.3 77.1
OPEC crude oil supply 27.7 26.1 26.1 N/A N/A N/A
Total Supply* 75.2 72.9 73.4 N/A N/A N/A
* includes natural gas liquids
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