ANALYSTS SEE OIL GLUT OVER BY END OF SEPTEMBER
1.53 p.m. ET (1753 GMT) July 6, 1999 By Richard Mably
Fox Market Wire Forums:
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LONDON — OPEC oil exporters are on course to wipe out surplus inventories of crude oil and petroleum products by the end of September, even before the start of peak winter demand, industry analysts said on Tuesday.
Cartel shock treatment, in the form of supply cuts administered since April, has already prevented the normal seasonal second quarter stockbuild, they said.
"By avoiding a significant second quarter build this year, OPEC has done a great deal to meet its objective of eliminating excess inventories on world markets," said Washington consultancy Petroleum Finance.
"If the third quarter draw is as large as expected, the inventory surplus will be eliminated before demand peaks in the fourth quarter."
"By the end of the third quarter inventories will be at the bottom end of the five year average in terms of forward stock cover," said a London-based oil analyst.
Faster than expected growth in demand from the United States and Asia also has helped accelerate projections for an end to the glut which last year took oil to a 22-year low.
"The latest indicators point towards continued oil demand recovery in the Asia-Pacific region," said Kleinwort Benson. Demand in Japan in April jumped 6.8 percent on the year, while consumption in South Korea from January to May rose 8.8 percent.
Underestimates from the United States government for demand data have meant a series of upward revisions in recent weeks.
"With the U.S. economy still exhibiting brisk demand growth, oil demand must follow suit, leading us to increase demand growth for the third and fourth quarters as well," said Petroleum Finance.
"The inventory overhang could be whittled away in a much shorter period of time than thought possible previously," said Dresdner Kleinwort Benson.
If the forecasts prove correct they are likely to mean renewed pressure within OPEC to consider easing supply restrictions to avoid the risk of allowing the market to overheat.
OPEC has set itself an $18-$20 a barrel target range for Brent crude which on Monday broke above $18 for the first time since December 1997. The cartel has set output limits until end-March 2000 but has a scheduled meeting in late September.
Only substantial OPEC leakage can spoil the party.
"From now on the real test for OPEC is how long they can keep up their strong discipline," said Mike Barry at Energy Market Consultants in London. "Under past agreements they've never managed to go more than three months."
Analysts are using the inventory levels of 1997 as a benchmark for measuring the return to normal stocks, rather than those of 1998, already at bloated levels.
International Energy Agency data shows year-on-year commercial stocks held in OECD countries increased every month from January 1997 until March 1999.
April saw the first decrease in the year-on-year OECD surplus which peaked at 194 million barrels in May 1998. Absolute OECD stock levels that month rose above 2.7 billion barrels and stayed there until February this year.
Petroleum Finance said it was forecasting a global stockdraw during the third quarter of 800,000 bpd, followed by an enormous 2.3 million fourth quarter draw. During the second half of last year stocks were almost unchanged.
Second quarter stocks this year were built by just 300,000 bpd compared to 2.9 million in 1998, the consultancy estimated.
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The United States recently admitted fears that its reliance on oil imports from outside the industrialized world makes it vulnerable to a supply crunch if, as predicted, computers around the globe fail to recognize the dawn of year 2000. ''Nearly 50 percent of the oil used in the U.S. comes from foreign sources, yet many of the countries have a high risk of failure,'' a Senate special committee report said this month.
Message 8555968
Oil shortages "will potentially be the major source of economic disruption in this country," said Sen. Robert F. Bennett, Utah Republican and chairman of a Senate Special Committee on the Year-2000 Problem. Computer failures are expected at oil refineries and ports in Venezuela, Mexico and Saudi Arabia, which provide 43.5 percent of all U.S. petroleum imports, petroleum industry experts say.
Message 8361966
How the CIA sees Y2K
Click on a country for the CIA's assessment. Interesting little map ... what stands out loud and clear is interrupted international trade and oil shortages.
msnbc.com
International Energy Agency Posts Update Report Warning Of Some
"Inevitable" Y2K Problems In Global Oil Industry
Message 10372042
APR '99 Senate Hearings: Domestic, Foreign Oil Production & Shipping - Y2K
greenspun.com
The Oil Industry and the Y2K Problem
iea.org
Table of Contents
Executive Summary
Introduction
Overview
The Supply Chain
Oil Production
Pipelines
Shipping and Ports
Refining
Regional and Industry Factors
Power Generation
Preliminary Findings
Guidance for Contingency Plan Development
Annex A: Examples of Y2K Problems in the Oil Industry
Annex B: Evidence of Oil Industry Preparedness
Annex C: Examples of Oil Company Preparation
Annex D: Oil Demand and Supply Analysis
Line at the pumps?
year2000.dci.com
TESTIMONY: Lawrence Gershwin, National Intelligence Officer
Global Implications of Y2K January 20, 1999 Excerpt
Regarding world trade and oil: some of our most important trading partners have been documented by, among others, the Gartner Group, as behind the US in fixing their Y2K problems (China and Japan, for example). Significant oil exporters to the United States and the global market include a number of countries—Venezuela, Saudi Arabia, Mexico, Nigeria, Angola, and Gabon—that are lagging in their Y2K remediation efforts. Oil production is largely in the hands of multi-national corporations in the oil-producing countries, but this sector is highly intensive in the use of information technology
and complex systems using embedded processors, and is highly dependent on ports, ocean shipping, and domestic infrastructures. The industry is fraught with potential Y2K problems ...
house.gov
We joked when building it [largest pipeline in US - 30" heavy crude line, from CA to TX over Rockies] that if it shut down, we would have the longest liqorish stick in the world, because the oil had to be heated to 180 degrees to flow and if it shut down and cooled, it would solidify and never be usable again.
Message 9376450
Y2K PETROCHEMICAL WARNINGS SOUNDED
Houston-area plants race computer-driven clock to prevent disaster
chron.com
Cheryl
177 days until 2000
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