Tomas, the timing of your posting of the Matt Simmons article could not be more perfect if was sent by the Man Upstairs, himself:
First the Simmons article indicating the true CURRENT level of demand at 77 mbpd.
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worldoil.com
It is enlightening to look back on what really happened to supply and demand in 1999, based on the most recent numbers. Worldwide oil demand ended up exceeding 75 MMbpd for the first time ever. By the 4th quarter, oil demand was apparently close to 77 MMbpd. We should recall that, as the 1990s began, most long-term demand forecasts did not envision world oil demand exceeding 75 MMbpd until 2010 at the earliest. And at the beginning of 1990, the U.S. Department of Energy?s long-term forecast assumed worldwide oil demand in 2010 would reach only 70 MMbpd!
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Next this Bloomberg story outlining "The Deal". Richardson lists demand at 75. Even with Richardsons number the 1.5 increase still leaves the world in slight deficit for 6 months. If the true demand picture is closer to 77 (remember folks, it was WARM in the 4th qtr.) and climbing the world supply and demand balance will be in chronic deficit for yet another six months. So if this is "The Deal", then Richardson got his "bone" and little else. If this is "The Deal" can anybody in their right mind expect anything like $20 oil for even a year out? I'd be surprised if it goes down to $25. Oh Yes Slider, "The Ghost of Jakarta" is still very much alive. If March brings us any lower US aggregate stocks things will get real interesting. I hope this finaly puts the "sustainability" question to bed for a good long time, and we can all focus on our oil patch investments instead of OPEC. Thank Goodness. Unfortunately none of this is final. I wish it was, because frankly, I'm sick of discussing OPEC.
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quote.bloomberg.com
Bloomberg Energy
Mon, 28 Feb 2000, 9:25am EST
2/28 7:53 OPEC Preparing to Boost Oil Output Following U.S. Pressure, Analysts Say
By Sean Evers
OPEC Preparing to Boost Oil Production in April, Analysts Say
Vienna, Feb. 28 (Bloomberg) -- The Organization of Petroleum
Exporting Countries is preparing to boost oil production to keep
prices from getting too high and sparking inflation in the world's
biggest economies, analysts said.
Saudi Arabia and Kuwait, after meetings this weekend with
U.S. Energy Secretary Bill Richardson, indicated a willingness to
increase oil output on April 1. Kuwait dropped its insistence on
maintaining the group's current quotas, which helped oil prices
more than double in the past year.
Oil ministers from Venezuela, Saudi Arabia and Mexico are
expected to meet Thursday in London to begin the process of
determining by how much and when to increase output. While the
West will receive more oil, it's unlikely to see immediately the
as much as 2.5 million new barrels wanted daily by the U.S.,
analysts said.
``I expect 1.5 million barrel-per-day increase in April, and
then an additional 1 million barrels-per-day some time in the
third quarter, probably September,' said Mohammed Abduljabbar, an
oil analyst with Washington-based Petroleum Finance Co.
Oil prices have jumped and U.S. crude inventories have fallen
to their lowest levels in decades after OPEC last year agreed to
slash output to end a glut. As prices rose, U.S. concern increased
about shortages and higher inflation.
The world now produces about 73 million barrels of oil a day
while consuming 75 million, causing world inventories to shrink to
``dangerously low levels,' Richardson told the Saudis and
Kuwaitis during a four-day visit to the Persian Gulf.
Targets
While Richardson stopped short of saying how much more oil is
needed, the European Union Energy and Transport Commissioner
Loyola de Palacio last week said oil-producing nations need to
increase output by 2 million barrels a day from April because
current oil prices could stunt economic growth.
With the meetings past and new OPEC willingness to boost
output, crude oil for April settlement today fell as much as 28
cents, or 1 percent, to $27.20 a barrel on the International
Petroleum Exchange in London. So far this year, it's up 9 percent.
The world's largest crude oil producer, Saudi Arabia, for the
first time acknowledged on Saturday that an imbalance exists
between global oil supply and consumption and promised to take the
necessary steps to close the gap.
``Saudi Arabia will continue to review the oil supply and
demand levels to ensure market stability, prevent oil price
volatility and avoid harming the world economy,' Ali al-Naimi,
the kingdom's oil minister, said in a statement with Richardson.
For OPEC, the question centers on how much more crude to pump
and when to release it to the market.
If they boost output too much, prices could plunge and hurt
the economies of the Persian Gulf nations that rely on oil for as
much as 90 percent of income. If they don't boost output, they
risk incurring the wrath of allies such as the U.S. and
encouraging non-OPEC nations such as the U.K. to pump more oil,
cutting OPEC's market share.
Work Outstanding
Oil prices, which reached a nine-year high near $31 in New
York on Friday, fell to a 12-year low in December 1998, one year
after OPEC last boosted output. Since then, oil prices have surged
because 11-nation OPEC, along with other producers such as Mexico,
Oman and Norway, last March agreed to remove 7 percent of daily
crude supply from world markets.
In a U.S. presidential election year, oil prices have become
a topic of debate. The U.S. energy secretary, who visited Kuwait
and Saudi Arabia from Thursday to Sunday, is on a 10-day tour of
the world's largest oil-exporting states to convince producers to
pump more oil.
Saudi Arabia must still convince proponents of OPEC's current
quota system, such as Iran, Libya and Algeria, to answer the calls
of the U.S., Europe and Asia to help lower prices. Traders said
they expect Saudi Arabia will succeed in those talks.
``The meeting resulted in an encouraging response from Saudi
Arabia,' said Tim Noest, a trader with ADM Investor Services
International Ltd. in London. ``Saudi Arabia is a dominant player
that will influence others.'
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