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Can OPEC and Non OPEC Stop the Oil Price

Andrew McKillop, Petroleum World
Since October 2006 world oil demand, as in previous years since 2002-2003 has fallen away from the Summer Demand Peak. During the July-August 2006 summer peak, world oil demand on a wide all liquids base probably hit at least 87.5 Mbd.

Prices also hit all-time nominal records, around 78 USD/bbl. This was however lower than the absolute purchasing power corrected oil price peak, attained during the 1979-1981 Oil Shock, at about 110 USD/bbl in 2006 dollars. We should note that this only concerned specific and smaller shipments, and at the time no 24-hour world oil market existed.

Pricing and settlement systems utilised in the early 1980s were not strictly comparable with current systems.

World oil demand, at least since about 2002, is now structurally variable. This structural change in the behavior of the world oil market is beginning to be recognized, and traces its origins to several key factors. These include climate change, de-industrialization in most OECD countries reducing year-round national oil demand peaks but raising summer vacation, car driving and airplane travel oil demand peaks, higher oil prices resulting in ‘just-in-time’ buying, reduced physical inventory capacities relative to average daily consumption – and many other smaller factors.
(22 Feb 2007)
Contributor MG writes:
This is quite interesting and not usually discussed in great detail: seasonal variation in demand.

Ontario’s gas shortage a symptom of infrastructure problem

Staff, Canadian Broadcasting Corporation
An Ontario refinery fire has left gas stations with dry tanks and higher prices because the province depends too heavily on imported fuel, an independent retail group says.

Jane Savage, president of the Canadian Independent Petroleum Marketers Association, said the Feb. 15 fire at Imperial Oil’s Nanticoke plant has triggered “a very severe shortage.” “I’d characterize it as probably the worst supply situation the industry here in Ontario has seen in decades,” she told CBC News Online on Wednesday. ..

Although a small fraction of the province’s thousands of gas stations ran out of fuel, pump prices moved well above 90 cents a litre in many places, up from the 70s in January’s mild spell.

The crippled refinery normally converts 118,000 barrels of crude oil a day into about 12 million litres of gasoline and varying amounts of jet fuel, heating oil, diesel fuel and other products, Imperial spokesman Gordon Wong said.

The fire has temporarily halved its gasoline output and also reduced production of diesel and heating oil, he told CBC News Online. Imperial hopes to avoid having furnaces go cold at this time of year, he said. “We’re giving priority to heating oil customers.”
(21 Feb 2007)

No manipulation found in Calif. crude prices

Ben Geman, Greenwire via Rigzone
Price differences between California heavy crude and benchmark West Texas Intermediate (WTI) are “consistent” with changing market conditions and apparently not the result of price manipulation, according to a Government Accountability Office report released yesterday.

The differences between WTI and various California oils have fallen but remain high by historical standards, GAO says. The report tracked three California oils, the heavy Kern River and Thums, and the intermediate Line 63. The report concludes these changes are the result of several market trends.

The first is that in mid-2004 Middle East producers began increasing heavy crude supplies, which helped “depress” the prices of other heavy crudes, including California’s, GAO notes. ..

The report says GAO investigators could not find “any evidence that any market players” had manipulated prices during the period of increasing price differentials. But GAO adds, “we cannot rule out this or other possible factors or events that we could not observe” that could explain some of the changes in price differentials.

The report also notes that there is some history behind the suspicions. It cites litigation that began in the mid-1970s and went on for two decades in which the state of California alleged seven producers had conspired to keep their posted prices below the true market value of their oil, thereby illegally reducing royalties.
(21 Feb 2007)