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Oil Touches $100 a Barrel on Supply Concern, Increased Demand

Mark Shenk and Nesa Subrahmaniyan, Bloomberg
Crude oil rose to $100 a barrel for the first time in New York as record global fuel consumption threatens to outpace production.

Oil’s gain, extending last year’s 57 percent rally, was boosted by forecasts that U.S. stockpiles dropped to a three-year low last week. Unrest in Nigeria, Africa’s largest oil producer, also spurred prices.

“This is the culmination of everything that we talked about last year,” said John Kilduff, vice president of risk management at MF Global Ltd. in New York. “Various geopolitical problems have deteriorated overnight, in particular Nigeria and Pakistan. Commodities, and in particular oil, have become safe havens in a dangerous world.”

Three-figure prices may bring energy costs near the tipping point that will cause global economic growth to falter.

… Higher prices have been cast as vindication for a theory that the world has reached the maximum rate of oil production as explorers fail to discover major new fields to replace aging deposits being tapped in countries such as Saudi Arabia, Kuwait and Iran.

While Saudi Arabian Oil Minister Ali al-Naimi and Exxon Mobil Corp. President Rex Tillerson have said oil supplies will last for decades, energy traders are increasingly debating the amount of available crude.

Investors who back the peak-oil theory, such as Boone Pickens, a Dallas hedge fund manager and former oil executive, have led the price rally of the past two years.
(2 January 2008)
Related articles at Reuters and at Yahoo News.

The Bet

Robert Rapier, The Oil Drum
While I won my $1,000 bet on oil prices by a whisker, I know a lot were rooting against me. They should be happy to know that my bad karma is not going to allow me to keep the money. So, the lesson I learned years ago is reinforced: Don’t bet.


In December of 2006, there was a lively discussion here about what would happen with oil prices in 2007. Although almost everyone felt that oil prices would rise, some argued that oil prices would rise to $100 by the end of 2007. A major reason for this belief was that Saudi Arabian oil production was declining at the time – and many felt like this meant that oil production in Saudi Arabia had peaked.

While I felt that IF Saudi production continued to decline, we would certainly see oil prices go to $100, I didn’t think it likely that they were experiencing involuntary decline. Therefore, I offered to bet $1,000 that we would not see oil reach $100 before the end of 2007.

*[TOD Editor] note: Robert really did miss by a whisker – one trading day – front month crude touched $100 today)
(2 January 2008)

Russian Oil Output Growth Accelerates From 7-Year Low

Eduard Gismatullin, Bloomberg
Russia, the world’s second-largest crude oil supplier, boosted production growth last year, after output in 2006 rose at the slowest pace in seven years.

The country raised output 2.4 percent to 491.5 million tons (9.83 million barrels a day) last year, up from 480 million tons in 2006, when production gained by 2.1 percent, according to the Energy and Industry Ministry. Growth in 2006 was the smallest since 1999.

Pipeline exports to countries outside the Commonwealth of Independent States fell 0.5 percent to 220.6 million tons last year, according to the ministry’s CDU-TEK unit.
(2 January 2008)
Contributor Jeffrey Brown (westexas) says “Latest data from Russia (12/07) show a 6.7% decline in total exports from 12/06,”pointing to another article from Bloomsberg not yet on the Web (Patricia Chua on Jan 2 – “a summary of December’s preliminary oil output report from CDU TEK, the Energy Ministry’s central dispatch unit in Moscow.”).

OPEC Review:Group Could Fail To Meet World Oil Demand By 2037

Natalie Obiko Pearson,, Dow Jones
A newly published report by Organization of Petroleum Exporting Countries indicates the group will be much harder pressed than previously thought to meet the world’s surging oil needs and could realistically fail to supply its share of global oil markets by 2037.

The report in the December issue of the OPEC Review, published by the organization’s Vienna-based Secretariat, also says Kuwait is likely to be an extremely inconsistent and unstable supplier and questions Saudi Arabia’s assertion it is capable of meeting world oil demand for the next 50 years.
(2 January 2008)

Woes mount for Mexico’s state oil titan

Marla Dickerson, Los Angeles Times
Output is declining rapidly, but national pride and politics may block possible fixes.

MEXICO CITY — With crude oil topping $95 a barrel, these should be heady days for Petroleos Mexicanos. Mexico’s state-owned oil monopoly, known as Pemex, generated record revenue of about $100 billion in 2007.

But at a ceremony marking the 69th anniversary of the nationalization of Mexico’s oil industry last year, Pemex General Director Jesus Reyes Heroles wasn’t in a celebratory mood.

“The situation of Petroleos Mexicanos is critical and merits immediate attention,” the company’s top executive said.

Indeed, 2007 tapped a gusher of concerns for the world’s sixth-largest oil producer.

Pemex managed to lose $1.2 billion in the third quarter. Output is declining, as are exports and proven reserves. Mexican Energy Secretary Georgina Kessel said last month that Mexico’s crude production, which averaged about 3.1 million barrels a day in 2007, could fall as much as one-third in less than a decade if the nation didn’t move fast to reverse the slide.

The consequences could be painful, not only for Mexico, which relies on oil revenue to fund about 40% of its federal spending, but also for world markets, which are feeling the pinch of tight supplies. Mexico is the No. 2 provider of petroleum to the United States, behind Canada.
(2 January 2008)

Political Peak Oil: Price Spikes to $100 on Nigerian Unrest

Dan Shapley, The Daily Green
When Supplies are This Tight, Human Violence Breeds Price Volatility

n Nigeria, six armed men killed four policemen and three civilians before being killed themselves. The nation’s oil infrastructure wasn’t damaged, and the flow of oil wasn’t disrupted.

But the unrest helped send oil futures soaring to $100 a barrel, where the price continues to hover in the first day of trading of 2008.

This is peak oil.

No, it’s not that we’ve pumped up every drop of crude oil that million-year-old plankton provided for us. Not necessarily. This isn’t geologic peak oil. It’s political peak oil.

Here’s how we define political peak oil at The Daily Green: The world supply of oil is tight, tight enough that any disruption – or threat of disruption – to that supply causes price spikes with real consequences.
(2 January 2008)
Welcome to the Daily Green which has been following peak oil stories. -BA