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To: diana g who wrote (30631)	10/12/1998 11:07:00 AM
From: Tomas	Read Replies (2) \| Respond to of 95453

RE: Woodside's negative oil price outlook: Woodside is 34% owned by Shell. Shell plans to slash a lot of jobs from its workforce and close down offices world-wide "in order to help us deal with this low price environment for the foreseeable future". So, 3-4 weeks ago Shell issued a very pessimistic forecast saying "it sees no recovery in oil prices, and profit margins remain weak". However, Shell are not closing down offices and laying off staff due to the impact of low oil prices. It is a major review that the new Chairman instituted over a year ago, even before there were low oil prices, because Shell have undertaken to increase the return on their capital employed. Other major companies like ESSO make 15% while the Shell figure is 10%. Shell stated that about eighteen months ago that they were going to try and build up to a return of 12% and this is all part of that. This was going to happen irrespective of any low oil price or not. Why did Shell (and Woodside's) publish such negative oil price outlooks? They say they fear reduced Asian demand, we haven't seen the worst in Asia yet, the crisis will spread to other parts of the world next year, and so on. BUT - They aren't really trying to predict oil prices, they have a much more self-serving intention... Look at this: NEW YORK (Reuters) - October 11. Shell Oil Co., the U.S. unit of Royal Dutch/Shell Group, said Friday it will cut 20 percent from its U.S. exploration and production workforce in the next few months, making it the latest company put on the defensive in the face of severely low oil prices... They are playing a dirty game, and there's more to come. Shell and Woodside predicting crude prices several years out, believe it if you want. Woodside predicted a "flood of new production" on the world market in the next decade. Read "Crude Awakening" in Barrons (it was published in January, but as to long term predictions it's just as valid today): Message 3193164 Tomas

To: diana g who wrote (30631)	10/12/1998 11:52:00 AM
From: Gameboy	Respond to of 95453

Diana, Tomas gave an excellent and thorough response to your request for comments. I would only add that the current outlook is very much in question. Crude inventories are generally forecast to build in 1998 to a level over 500 million barrels but if you examine the supporting data there are holes in the data a mile wide. Senator Pete Domenici has already requested the GAO (General Accounting Office) to investigate the anomalies and the potential errors are enormous. This is the latest worldwide supply/demand table published by the EIA: eia.doe.gov In the second quarter, the table shows a build of 2.8 million barrels per day but only 1.8 million shows up in increased inventories. The third and fourth quarter supply figures seem to ignore the OPEC cutbacks of 3 million barrels (98% compliance) per day and also seem to ignore the reduction by non-OPEC countries due to lower prices (US oil production in September was at the lowest level since 1954). Are we drawing inventories at a rate of 1.5 million barrels per day in the fourth quarter as shown in the table, or is the rate really more like 4 million barrels per day by making adjustments? Asking what the supply/demand will be like in 5 or 10 years is a good question but it appears to me that no one knows what the supply/demand is right now. What the heck is going on? Steve