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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: Richard Saunders who wrote (73350)	9/13/2000 7:57:07 PM
From: Tomas	Read Replies (2) \| Respond to of 95453

Goldman Sachs sees rolling mini-crises for oil consumers Financial Times, September 13 By Toby Shelley Oil product supply shortages will result in a rolling series of short-term, mini-crises in developed economies over the coming months as regional and product specific price spikes suppress demand, Steve Strongin, managing director of commodities research at Goldman Sachs said on Tuesday. As demand is priced out of the market in a given industry or region, it will free up product for others until a squeeze is precipitated elsewhere, he said. Goldman Sachs forecasts benchmark US crude WTI to average $32 a barrel over the next 12 months, excluding major supply disruptions in politically volatile producer countries. But over the next six months there is a 50 per cent chance of a $40 a barrel spike. The impact of price spikes and localised supply squeezes in Europe and the US will be different to previous periods of high crude prices, said Mr Strongin. Transport accounts for a higher proportion of oil use while heavy industry's share has dropped. Transport takes about 40 per cent of oil use in developed economies, while industry's share in western Europe has fallen to the high teens, although it remains at a high 30 per cent in Japan. This means there will be less concentrated industrial dislocation but more widespread, diverse impact on transportation. While individual industries can cut back on production, transport is more difficult to pare. Also, the greater efficiency of oil use in countries with higher oil product taxes tends to mean the economic pain of the loss of each barrel is greater. By contrast, industrialising countries like India have more demand flexibility. India's oil demand growth turned negative in the second quarter of this year, having run at about 10 per cent in the third quarter of last year. Mr Strongin said Opec members have the immediate capacity to be able to boost supply to the market by around 1m barrels a day (b/d). But much of what will return to the market as earlier cuts are reversed will be heavy, sour crude. Even if Saudi Arabia ramps its production up to previous peaks of about 9m b/d, half of that crude will likely be Arab Heavy grade with the other half Arab Medium, he said. Environmental legislation in the US and Europe means that there is little spare capacity in the refinery units required to process this crude into the higher specification products now required.