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Oil Monitor to Slash Estimate Of World’s Supply of Crude
Neil King Jr. and Peter Fritsch, Wall Street Journal
The world’s premier energy monitor is preparing a sharp downward revision of its oil-supply forecast, a shift that reflects deepening pessimism over whether oil companies can keep abreast of booming demand.
The Paris-based International Energy Agency is in the middle of a large study of the condition of world’s top oil fields. Its findings won’t be released until November, but the bottom line is already clear: Future crude-oil supplies could be far tighter than previously thought.
The IEA has predicted for several years that crude-oil supplies will arc gently upward to keep pace with rising demand, topping 116 million barrels …
The decision to rigorously survey supply — instead of just demand, as in the past — reflects an increasing fear within the agency and elsewhere that oil-producing regions aren’t on track to meet future needs.
….The IEA’s pessimism over future supplies has been building for some time. Last summer, the agency warned that OPEC’s spare capacity could shrink “to minimal levels by 2012.” In November, it said its analysis of projects known to be in the works suggested that the world could face a shortfall by 2015 of as much as 12.5 million barrels a day, unless there was a sharp drop in expected demand. The current IEA work aims to tally the range of investments and projects under way to boost production from the fields in question to get a clearer sense of what to expect in production flows.
“This is very important, because the IEA is treated as the world’s only serious independent guardian of energy data and forecasts,” says Edward Morse, chief energy economist at Lehman Brothers. Examining the state of the world’s big oil fields could prod their owners into unaccustomed transparency, he says.
(21 May 2008)
Comments by Kevin Drum at Washington Monthly:
The IEA’s concern is with both the absolute condition of the world’s oil fields and the amount of investment being made in new projects. Either way, though, a shortfall of 12.5 million barrels is huge. If that’s an accurate assessment, prices are going to have to double another couple of times to bring demand into line with supply. $500 oil, anyone?
Record oil prices signal ‘new world’
Shawn McCarthy, Globe and Mail
Markets confounded by new class of investors making long-term bets on crude; rare trading patterns mark shift in sentiment
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OTTAWA – Investors are placing huge bets that today’s record crude prices are headed sharply higher in the coming years, essentially gambling that scarce resources and a weak U.S. dollar will trump the age-old law of supply and demand.
As crude for near-term delivery shot past $133 (U.S.) a barrel yesterday, many analysts were more focused on the stunning price increases in futures contracts covering oil deliveries for the next eight years.
Amid “peak oil” warnings of scarce supply and a permanently weakened U.S. dollar, traders have driven future prices well above current levels, a rare pattern in oil markets known as contango.
“It seems that we’re living in a completely new world,” said Peter Beutel, president of Cameron Hanover, a Connecticut-based risk management firm.
(22 May 2008)
‘Peak oil scenario’ approaching faster than expected
An Lu (ed), Xinhua
ABERDEEN, Scotland — After successfully forecasting current oil prices at the first All Energy conference in 2001, John Westwood, an energy expert, said here on Wednesday that “more pain is to come” for world energy.
Speaking at the opening session of the All Energy’08, the 8th in the annual series, John Westwood, Chairman of energy analysts Douglas-Westwood, a research consultant company for international energy industries, said “there is a strengthening view that the ‘peak oil scenario’ is approaching much faster than any of us expected.”
He said people such as Christoph De Margerie, CEO of Total, and T. Boone Pickens believe the world will never exceed its current level of production as new oil fields fail to compensate for declining ones.
The energy expert said recently published statistics suggest production from ten out of the top 13 international oil companies, including BP, Chevron, Total and Shell may have already passed it speak.
He said that in 1970 such oil companies controlled about 80 percent of world reserves whereas today that 80 percent is in the hands of national oil companies.
(21 May 2008)
