Prices and production
Oil has fallen by more than $4 a barrel since touching a new 2009 high of $82 last week. A stronger dollar and new reports raising concerns about the outlook for economic recovery were behind the fall. The weekly inventory report showing US gasoline stocks increasing by 1.6 million barrels vs. a 1.1 million drop forecast by analysts also contributed to the decline. After the report was issued, crude prices fell by more than $2 a barrel to close at $77.41. Thus far in 2009 US oil consumption is down by about 800,000 b/d to 18.5 million b/d as compared to the same period last year.
Prior to the steep price drop, several OPEC officials were talking about the possibility of a production increase at the December meeting. While some spoke of $80-85 as the price that would trigger a production increase, others opined that $100 a barrel would be more appropriate.
In the meantime, gasoline prices continue to rise this week as oil companies and refiners hold back on production and keep imports low in order to improve profitability. The average national gasoline price in the US is now about $2.68 a gallon, a 19 cent a gallon increase in the last month. The average in California is now above $3. In Wednesday’s trading, however, NYMEX gasoline prices fell 8.5 cents a gallon after the weekly report showed that US consumption had fallen to 8.86 million b/d.
China
Earlier this week there was a report that Chinese oil consumption is once again surging upwards. Although China’s oil consumption figures are not all together transparent, Reuters calculated that China used 8.17 million b/d last month, an increase of 460,000 b/d or 5.8 percent over August consumption.
Demand for oil in China was weak in the second half of 2008 and the first quarter of this year, but has been increasing steadily for the last six months. Chinese refineries processed a record 7.99 million b/d of crude last month and crude imports in September were 4.35 million b/d – 22 percent more than the 3.58 million b/d averaged in 2008.
It seems clear that increased Chinese demand had some role in the recent price increases. The sustainability of China’s GDP growth and increases in oil consumption remains to be seen in light of increasing economic difficulties in China’s main export customers.
Quote of the day
“(Steven Chu, US Secretary of Energy) was my boss. He knows all about peak oil, but he can’t talk about it. If the government announced that peak oil was threatening our economy, Wall Street would crash. He just can’t say anything about it.
— David Fridley, scientist at Lawrence Berkeley National Laboratory, quoted in an article by Lionel Badal (see Peak Oil News, 10/28, item #23)
