Oil could top $105 in major supply outage: expert
Haitham Haddadin, Reuters
A Goldman Sachs (GS.N: Quote, Profile, Research) projection that oil prices could top $100 a barrel in the event of a major supply disruption could be conservative in the current tight market, said a senior executive with the investment bank.
Other energy experts told an energy forum late on Saturday in Kuwait that global oil market fundamentals point to generally higher energy prices as demand growth outstrips new supply.
“We thought that maybe somewhere within $50 to $70 (oil price) we might get the economic damage and that it would take a major, not a minor, disruption to get to the $105 number,” said Arjun Murti, Managing Director at Goldman Sachs.
“If we truly did have a major outage in a major exporting country then $105 will prove conservative,” Murti added at the National Bank of Kuwait energy forum.
…
“We believe that oil markets are in the early stages of what we are calling a multi-year ‘super-spike’ period”
(28 May 2006)
IMF’s Rato says high oil prices here to stay
Reuters, Yahoo! India
MADRID – High oil prices are here to stay and world interest rates are likely to continue to rise, the International Monetary Fund’s Managing Director Rodrigo Rato said in remarks published on Sunday.
“Oil prices are going to remain at high levels given the forecasts of rising demand and the supply limitations,” Rato said in an interview with Spanish newspaper El Mundo.
“They bring clear risks of inflation and (risks) to growth,” he said, adding that so far most economies had been able to absorb the added cost of oil without much extra inflation
(28 May 2006)
Energy Industry Fortifying Plans, Equipment in the Gulf of Mexico
Lynn J. Cook, Houston Chronicle (via Rigzone)
Still bloodied from last year’s hurricane season, the energy industry is building up its defenses in the Gulf of Mexico for another round with Mother Nature.
Hurricane season begins Thursday, and federal officials report that 22 percent of crude oil production and 13 percent of natural gas production in the Gulf is still derailed.
Consumers are going into storm season with gasoline costs already approaching the prices seen after Hurricanes Katrina and Rita wrecked rigs and closed refineries. So if the Gulf is hit again with hurricanes, prices could be pushed even higher.
Though it’s impossible to “hurricane-proof” a platform or pipeline, people in the industry appear to be hellbent on trying to do a better job at prepping for the upcoming storm season than they did last year.
They are looking for ways to reduce the enormous amount of lost production that occurred last year and which set off spikes in energy prices.
Companies are scrambling to lock in contracts for tug and helicopter services, and squirrel away extra valves, meters and piping needed to make fast post-hurricane repairs.
(29 May 2006)
Helicopter crisis hits oil firms
BBC News
A severe shortage of helicopters and pilots threatens the North Sea oil and gas industry, a leading firm has said.
The high price of oil means offshore activity is unprecedented, stretching supplies and crews to the limit.
Bristow, one of the world’s leading helicopter operating companies, said it was “scouring the world” for helicopters, crews and technicians.
(28 May 2006)
China: Stable long-term oil supply predicted
China Daily
China can maintain a healthy oil supply with new discoveries in its sea and land-locked western regions, despite growing exploration difficulties, experts claim.
Zhai Guangming, an academician of the Chinese Academy of Engineering, said China’s annual oil output could reach 185 million to 195 million tons.
(29 May 2006)
Douglas Low of ODAC comments “Possibly the number one reason economists give for suggesting we are not short of oil is we have not been looking very hard and there is lots left to find, especially in Russia, Africa and the Middle East. Now representatives from China are using the same tactic. In summary, ‘new discoveries’ means the oil has not been found yet and therefore may not exist in the large quantities implied, and ‘despite growing exploration difficulties’ suggests the recent track record does not support such optimism.”
UPDATE (June 1) Reader LH adds:
Statistics on most of China’s economy often bears little resemblance to what is actually happening on the ground. This is illustrated in the article from the China Daily (“Stable long-term oil supply predicted,” EB 16594).
For example, on the supply side, the article states that, “Zhai Guangming, an academician of the Chinese Academy of Engineering, said China’s annual oil output could reach 185 million to 195 million tons.” However, according to the IEA’s Monthly Oil Report for March 2006, “the Chinese forecast is revised up by 30 kb/d for 2006 to 3.71 mb/d”; this is just shy of 185 million tonnes per year.
Meanwhile on the demand side, the article states, “The National Development and Reform Commission has predicated that China will consume 330-350 million tons of oil by 2010.” The March Monthly Oil Report shows the projected total product demand for 2006 is 6.935 Mb/d or 345 million tonnes per year.
Would drilling more Alaskan oil cut prices?
John W. Schoen, Senior Producer, MSNBC
The week’s vote in the House to approve drilling for oil in the Arctic National Wildlife Refuge has several readers — including Kelly in Georgia — wondering if there’s enough extra oil up there to make a difference.
…
So let’s go with the 10.4-billion-barrel estimate. The Energy Dept. figures that, from the day final approval is granted, it would take seven to 12 years to begin producing oil. That means ANWR oil would come on stream in 2013 and peak at about 876,000 barrels per day in 2024.
How much impact will that have on oil prices? Here’s where people on both sides of the ANWR debate start to play a little mischief with the numbers.
The U.S. currently uses about 21 million barrels of oil a day, about 6 million of which is produced domestically. But that domestic production is declining as older fields dry up. So adding ANWR oil won’t bring an increase in U.S. oil production, it will barely make up for the lost production from declining fields. Nor will it make up for the increased demand of another 1.5 million barrels a day by 2013 — unless we figure out a way to conserve a lot more oil.
On the other hand, 10 billion barrels is a lot of crude. Drilling proponents say it amounts to something like 20 years worth of imports from Saudi Arabia. (While that sounds pretty good, it overlooks the fact that only about 10 percent of U.S. oil imports come from Saudi Arabia.) If all 10 billion barrels were recovered, at 1 million barrels a day, production would last for 27 years. But that’s not likely.
In any case, drilling in ANWR isn’t likely to make much of a dent on the cost of crude. With global demand of some 85 million barrels a day — and rising — even an extra 1 million barrels a day wouldn’t be enough to have a significant long-term impact on prices. Assuming global demand continues to grow by 2 percent a year, a million barrels a day will represent about 1 percent of overall demand by 2013.
(30 May 2006)
Shoen also answers a question on ethanol quite knowledgably in the same column. -AF
