This Week in Petroleum

[HenryTo]

Hot off the press last night and straight from the EIA:

http://tonto.eia.doe.gov/oog/info/twip/twip.asp

Please take a look at the third chart from the top on the left side of the page. Given the continuing tightening of credit from Central Banks all around the world (the monetary aggregates for the Euro zone has been expanding at a good pace but most of it went to the maintanence of a welfare state), and given the above chart (updated through May 13), I believe oil prices will continue to go down here. Not to mention that the oil price has just pierced through its 200 DMA.

[HenryTo]

Looks like we're safe until we at least head back to the low $40s.
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OPEC fine with price drop, for now
Cartel head sees no need to cut production at next meeting, comfortable with $40-$45 price range.
May 20, 2005: 7:59 AM EDT

DEAD SEA, Jordan (Reuters) - OPEC is content to allow oil prices to fall into the $40-$45 a barrel range, seeing no need to cut production when it meets next month, the cartel's president said Friday.

"Until now we see no reason to cut. There is no need to trim, we will continue at this level," said Sheikh Ahmad al-Fahd al-Sabah, Kuwait's oil minister, in an interview with Reuters at the World Economic Forum.

The Organization of the Petroleum Exporting Countries would continue pumping in excess of its own official output limits, at about 30.5 million barrels per day (bpd), allowing stocks to build further on a comfortably-supplied world market, Sheikh Ahmad said.

OPEC is producing about a million barrels daily above its official 27.5 million bpd output target, with another 2 million bpd from Iraq, not included in quota arrangements.

Those volumes were likely to push oil prices down into the range $40-$45 a barrel, Sheikh Ahmad said, a range he called "acceptable."

U.S. crude for June delivery was trading just above $47 a barrel in pre-market electronic trading Friday.

The OPEC president said only a downward revision in the forecasts for world oil demand growth in the second half of the year might require a change in OPEC thinking. OPEC meets June 15 in Vienna.

His comments underline OPEC's commitment for lower oil prices that will protect the global economic growth required to keep oil demand rising.

Led by China, world fuel demand grew at a 28-year high of 2.8 million bpd, 3.5 percent, last year but is expected to slow this year to about 1.8 million bpd, 2.2 percent.

Prices hit $58 for U.S. crude last month, fueling concerns about an oil-led slowdown in world economic growth.

Inventories
Since then, leading producer Saudi Arabia has tapped spare capacity, turning the structure of the world oil market into contango, pricing prompt crude at a discount to future months.

That makes it commercially viable for refiners to store more crude and prevents speculators making a profit simply by holding oil futures and rolling contracts from one month to the next before expiry.

Sheikh Ahmad said inventories among OECD countries were now at 53.8 days of forward demand and higher levels would be comfortable for OPEC.

Though stocks were above the average five-year range, more stored oil was needed to meet higher demand, he said.

World demand peaks in the fourth quarter at a projected 86.1 million bpd, up from 83.8 million in the third, according to the Paris-based International Energy Agency.

Sheikh Ahmad said oil ministers could set a new official OPEC price target later this year at a meeting to be hosted by Kuwait in late November or early December.

OPEC earlier this year ditched its obsolete $22-$28 price target and Sheikh Ahmad said ministers had individual preferences in a wide range anywhere between $30 to $50 a barrel.

"I think there is a lot of change in the market and we have to be careful what to decide but maybe at the end of the year we can reach a decision," he said.

"We hope there is a resolution on this issue of the price band in Kuwait."