Prices and production
When the markets reopened on Monday, oil prices reacted to the IEA’s forecast of a 2.4 million b/d drop in global demand for oil this year by falling from $52 a barrel to circa $50. Even a major pipeline fire in Nigeria, which took 120,000 b/d off the market, did little to move prices. OPEC has joined the IEA in forecasting a decline in global production in 2009. The IEA is now estimating that global consumption will be 83.4 million b/d while OPEC puts the number at 84.1 million.
The weekly US stocks report showed crude inventories climbing by 5.6 million barrels to the highest they have been in nearly 19 years. US refineries operated at 80.4 percent of capacity last week, a level usually associated with widespread refinery outages following a Gulf hurricane.
US demand for petroleum products is now down by 5.2 percent as compared with last year. Gasoline demand is down by only 0.4 percent, but distillate and jet fuel demand is down by nearly 7 percent.
Recent estimates of the progress of OPEC’s production cut has output falling by an additional 90,000 b/d in March, but still 765,000 b/d above the 4.2 million b/d target. Iran alone continues to talk of additional cuts. The other OPEC oil ministers have been unusually quiet recently.
US import data for January shows US imports from OPEC countries falling by 818,000 b/d, but largely being replaced by an increase of 536,000 b/d from Brazil and Russia.
The Chinese continue to actively pursue foreign sources of oil with new partnerships to exploit Iraqi and Venezuelan oil in negotiation.
Most authoritative sources are reporting that the Treasury has directed GM to prepare for bankruptcy by June 1st. Government and industry officials continue to talk about a fast “surgical” bankruptcy that would have a slimmed down, debt-free GM functional in a few weeks. Others fear that the bondholders who could lose as much as $28 billion in the bankruptcy will prolong the issue in court.
Total SA Executive speaks out in Der Spiegel interview
Michel Mallet, general manager of French energy giant Total’s German operations, was quoted in an interview as saying that, “The old oil fields are dying. In the future, we will have to invest more and more just to maintain existing production…. Oil production will be technically complex in the future, which makes it expensive.
There are hardly any readily accessible oil fields anymore. The fields on the floor of the North Sea, for example, are practically empty. New reserves are only being found deep in the ocean, in remote regions like Kazakhstan or in the form of oil sands. None of this is cheap to produce.”