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Prices & supplies - May 31

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Texas to experience effects of export decline?
Jeffrey J. Brown, Energy Bulletin via email
Here in Texas it's possible that we are going to be experiencing very real effects of the net export decline in a matter of days to weeks.

The 2007 Annual (Total) Net Export Decline Rates for Mexico & Venezuela (EIA) are as follows, and the recent monthly data don't look any better.

Mexico: -16%/year
Venezuela: -7.6%/year

It's usually hazardous to pay too much attention to short term data, but in the past few weeks total net imports into the US have been dropping like a rock, so last week's EIA data fit the very short term trend. I wonder how much of it is simply a falloff in oil exports from Venezuela and Mexico--it looks like almost all of the recent decline in US crude oil inventories has been on the Gulf Coast.

If this is the case, refiners on the Gulf Coast are going to have to bid the crude price up. One of the problems is the considerably more time that it takes to replace oil imports from Venezuela and Mexico with imports from other sources--because of the distances to other oil exporters. It's possible that we could see some problems with refined product volumes in the Gulf Coast area in the very near future.

I just checked the EIA net import numbers. From 10/07 to 3/08, combined net oil exports from Venezuela and Mexico to the US dropped by 414,000 bpd. I betcha that combined net exports from Venezuela & Mexico to the US are now down by over 500,000 bpd from 10/07.

We may see some calls to release oil from the SPR. The problem of course is using emergency reserves to offset a long term decline in oil exports from two key nearby oil exporters.
(30 May 2008)
Jeffrey J. Brown is a regular contributor to Energy Bulletin who has written extensively on the Export Land Model. -BA

Venezuela increases petroleum imports despite vast deposits at home

Associated Press via IHT
Venezuela's state petroleum company, PDVSA, increased petroleum imports by nearly 150 percent between the first quarter of 2007 and the same period this year, bank statistics show.

A report by the Venezuelan Central Bank this week demonstrated that petroleum imports reached US$1.5 billion (€964 million) during the first quarter of 2008. The imports - which include diesel oil, gasoline and chemical additives for gasoline products - are the country's highest in more than a decade.

A spokesperson for PDVSA said the company had no immediate comment on the issue.

Economist Gustavo Garcia, a professor at a Caracas business school, said called the increase "one more factor that shows how production has fallen," forcing the company to purchase petroleum products outside of the country.
(30 May 2008)
Contributor Jeffrey J. Brown writes:
If everyone is moving toward net importer status, who is going to be exporting? I'm working on an essay on what may be a quickly developing problem on the Gulf Coast, as net oil exports from Venezuela and Mexico, which accounted for more than 20% of total US petroleum imports in late 2007, show an ongoing sharp decline. Venezuela has been showing a long term net export decline for several years, while Mexico is on the fast track to zero net oil exports, probably within six years.

Crude Oil Falls More Than $4 as Higher Prices Curb Fuel Demand

Mark Shenk, Bloomberg
Crude oil fell more than $4 a barrel on signs that record prices in the U.S. will prompt consumers to reduce fuel purchases and after the government said a supply drop was caused by ``temporary delays'' in unloading tankers.

Fuel consumption averaged 20.5 million barrels a day in the four weeks ended May 23, down 0.7 percent from a year earlier, the Energy Department said today. Inventories declined 8.88 million barrels to 311.6 million last week, the biggest drop since Sept. 17, 2004, according to the department.

... Crude oil for July delivery fell $4.43, or 3.4 percent, to $126.60 a barrel at 1:05 p.m. on the New York Mercantile Exchange. Futures reached a record $135.09 on May 22. Prices have more than doubled over the past year.

Oil traded at $129.23 a barrel, down $1.80, before the release of the report at 10:30 a.m. in Washington. Futures rose more than $2 from yesterday's close to $133.12 a barrel after the report's release.
(29 May 2008)

Energy agency foresees more expensive oil

Bloomberg News via Houston Chronicle
Oil markets are "stressed" by a lack of supply that's expected to continue for the foreseeable future, the International Energy Agency's deputy executive director said today.

Oil is a "commodity under stress," Bill Ramsey said at a conference in Paris. "Price are going up because there is no other option. There is not enough spare capacity throughout the system."
(28 May 2008)

Editorial Notes: UPDATE (May 31) Corrected typo in second-to-last paragraph of Jeffrey Brown's article. It should read:
I betcha that combined net exports from Venezuela & [not "to"] Mexico to the US are now down by over 500,000 bpd from 10/07.

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