Lawdy, Lawdy Momma - GLUT GONE - Never, EVER, thought I'd live to see the day when DOOMBerg printed those words. Guess I'll have to throw in the towel and call 'em BOOMBerg!
Energy News
Fri, 9 Apr 1999, 4:37pm EDT
N.Y. Crude Rises as '99 Demand Seen Exceeding Supply, Ending Global Glut
Crude Rises After IEA Says Demand to Exceed Supply (Update3)
(Adds quotes in 3rd, 7th paragraphs, details about IEA
report in 8th to 11th paragraphs.)
New York, April 9 (Bloomberg) -- Crude oil rose 6 percent,
its biggest gain in seven months, after the International Energy
Agency said production fell short of demand for the first time in
more than two years, signaling the end of a worldwide glut.
World oil output is trailing demand this quarter by about
450,000 barrels a day, the Paris-based IEA said. By the end of
the year, a supply surplus that sent prices to 12-year lows in
December should be gone. Oil producers' efforts to cut output, if
successful, will accelerate the decline, the IEA said.
''The numbers I've been running show inventories going down
for the rest of the year,'' said Ken Haley, manager of energy
forecasting at Chevron Corp., the fourth-largest U.S.-based oil
company. ''The cuts are accumulating and we should be back into a
better supply-demand balance.''
Crude oil for May delivery rose as much as 97 cents, or
6.1 to $16.80 a barrel on the New York Mercantile Exchange. If
crude ends at that level, it would be the biggest one-day gain
since Sept. 3. Prices are up about 6 percent from a year ago.
In London, May Brent rose as much as 81 cents, or 5.7
percent, to $15.02 a barrel on the International Petroleum
Exchange.
The Organization of Petroleum Exporting Countries and other
nations pledged to start cutting output this month in a plan to
reduce world supply by 2.7 percent. If they follow through on
their promises, and demand rises as forecast, it would be the
first time since the fourth quarter of 1996 that demand will
exceed supply, the IEA said.
Glut Gone
Crude oil inventories are being drained at the rate of
450,000 barrels a day during the second quarter, said Dave Knapp,
the economist in charge of the IEA's monthly oil outlook, in an
interview. That should culminate in world inventories dropping by
a total of 41 million barrels by the end of June. The IEA
estimates that world inventories are about 500 million barrels
higher than normal, which would mean a decrease of 8.2 percent in
the second quarter.
In the third quarter, if exporters adhere to their pledges,
world stockpiles would drop by 1.35 million barrels a day,
resulting in a decrease of 124 million by the end of September.
In the fourth quarter, 2.75 million barrels per day would be
drained from inventories for a total of 253 million barrels
during the quarter, Knapp said.
''That will be eating up a substantial amount of the
surplus,'' Knapp said.
In all, crude inventories would be down 425 million barrels
by the end of the year, almost eliminating even the 500 million
barrel surplus that the IEA says exists. At 85 percent of
compliance by producers to their output cutting plan, 350 million
barrels should be out of inventory, Knapp said, adding that many
analysts say the surplus is between 300 million and 400 million
barrels.
U.S. inventories of petroleum products ''are coming down
precipitously,'' Knapp said.
Retail Gasoline
Falling gasoline inventories -- and a 39 percent rise in
prices since mid-February -- sent U.S. retail gasoline prices to
$1.118 a gallon this week, the U.S. Energy Department said, up
23 percent over the past six weeks.
The consensus among analysts is that the IEA is correct in
its forecast, said Bill O'Grady, vice president, director of
fundamental futures research, at A.G. Edwards & Sons in St.
Louis, Missouri.
''If the production cuts are made and the economies of some
of these countries improve, inventories will drop,'' O'Grady
said. ''We're going to need that oil. You just can't keep this
market down.''
Gasoline for May delivery rose as much as 1.83 cents, or 3.7
percent, to 51.35 cents a gallon on the Nymex. Heating oil for
May delivery rose as much as 2.21 cent, or 5.4 percent, to 43.05
cents a gallon.
Yeltsin Jitters
Oil prices also were boosted by heightened concern that the
North Atlantic Treaty Organization's bombing campaign over
Yugoslavia might, in some way, disrupt oil supplies, after Russia
hinted it might be forced to join the conflict on Serbia's side.
Russian President Boris Yeltsin warned today that the NATO
allies should ''not push us into military action. Otherwise,
there will definitely be a European, possibly a world war.''
Russia is the world's third-largest oil producer.
While most analysts doubt that Russia and NATO will come to
blows, any suggestion of war usually helps boost oil prices.
''People are buying on the back of this unrest,'' said Knut
Thomseth, crude oil trader at Norsk Hydro in Oslo. ''They (the
Russians) have a big chunk of global supply.''
Higher crude prices boosted shares of drilling and other oil
service companies, led by Weatherford International Inc., up
2 3/16 at 26 13/16, and Rowan Companies Inc., up 1 1/8 at 12 1/2.
These companies are more sensitive to a gain in the crude prices
than the large integrated oil majors as high prices increase
demand for exploration projects.
The Philadelphia Oil Service Sector Index of 15 companies
rose 3.23 to 65.6 points, its biggest gain in almost two weeks.
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