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EIA Issues Short-Term Energy And Summer Fuels Outlook, Expects WTI To Average $81 This Summer, Sees Stock At 58 Days Of Cover
Highlights from the just released pro-cyclical report out of the EIA.
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EIA's projections for West Texas Intermediate (WTI) crude oil spot prices have changed very little over the last five Outlooks
even as spot crude oil prices continue to fluctuate on a daily basis.
EIA expects WTI prices to average above $81 per barrel this summer,
slightly less than $81 per barrel for 2010 as a whole, and $85 per
barrel by the fourth quarter of 2011.
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EIA
forecasts that regular-grade motor gasoline retail prices will average
$2.92 per gallon during this summer's driving season (the period
between April 1 and September 30), up from $2.44 per gallon last
summer. The forecast has the annual average regular grade retail
gasoline price increasing from $2.35 per gallon in 2009 to $2.84 in
2010 and to $2.96 in 2011, primarily because of projected rising crude
oil prices. Average U.S. pump prices for regular gasoline are likely
to exceed $3 per gallon at times during the driving season, and already
exceed $3 per gallon in some areas. Projected annual average retail
diesel fuel prices are forecast at $2.95 and $3.12 per gallon in 2010
and 2011, respectively. -
EIA expects the
Henry Hub natural gas spot price to average $4.44 per million Btu
(MMBtu) this year, a $0.49-per-MMBtu increase over the 2009 average,
but a significant downward revision from the $5.17 per MMBtu projected
in last month's Outlook. The price outlook is lower
primarily because of an average 2 billion cubic feet per day (Bcf/d)
upward revision to the 2010 domestic natural gas production forecast.
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The
annual average residential electricity price changes only slightly over
the forecast period, averaging 11.5 cents per kilowatthour (kWh) in
both 2009 and 2010 and then rising to 11.7 cents per kWh in 2011.
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Estimated carbon dioxide (CO2)
emissions from fossil fuels, which declined by 6.6 percent in 2009,
increase by 2.1 percent and 1.1 percent in 2010 and 2011, respectively,
as economic growth fuels higher energy consumption. - OECD Petroleum Inventories. EIA
estimates that commercial oil inventories held in the Organization for
Economic Cooperation and Development (OECD) countries stood at 2.67
billion barrels at the end of the first quarter of 2010. This level is
equivalent to about 58 days of forward cover, and is about 69 million
barrels more than the previous 5-year average for the corresponding
time of year (Days of Supply of OECD Commercial Stocks Chart).
Although OECD oil inventories are still projected to remain at the
upper end of the historical range over the forecast period, they are
falling as a result of higher oil consumption and OPEC production
restraint.
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Wasn't it just 12 months ago when OPEC was making drastic and unprecedented cuts in supply? How can an oligopolistic commodity that is controlled by a cartel be so god damn volatile?
Shouldn't the ability to effectively regulate supply put some type of band on price?
I call bullshit on this rally to triple digits. Will it happen? Probably. Does it make sense? Well like everything over the past 2 years, absolutely not.
Check the baltic dry index and see if this correlation makes any sense. Last time oil hit trip digs the BDI was at all-time highs.
Far from it now:
http://www.bloomberg.com/apps/quote?ticker=BDIY:IND
the HARPEX shipping index is also non-confirming.
http://www.harperpetersen.com/harpex/harpexRH.do?showData=true&period=9&&checkedIndexes=0&floatleft=0&floatright=0&exponleft=0&exponright=0&indicator=0
"""""Shouldn't the ability to effectively regulate supply put some type of band on price?"""""
Sure. But the required premise of your conclusion is "OPEC can effectively regulate supply."
They can't. The best evidence for this was during the run up in price from 04 to summer 08. Price went up from about 20 to about 145. So what did Saudi Arabia do? Not much. Their production in summer of 08, when price was 7 times what it was just a few years earlier, was not higher than about what it averaged during the run up.
The only reasonable conclusion is that they didn't have the spare capacity they say they had. In fact, the best read on the remarkable and quick production drop in late 08 is that OPEC was finally able to breath after pumping full out.
They lost control of price because they didn't have the capacity they claim to have. Simple as that.
Does the rally make sense? Absolutely. The world is producing less oil every day, and wanting more every day. Why wouldn't price rise?
Mind you that like everything else that comes from the government, forecasts has been altered to be politically palatable, this does not include political risk premiumof incident between Israel& Iran or the effects of further serious erosion in the euro like. There is plenty of oil its FX and Political effects, along with ZIRP helicopter Ben, its getting better mentalitythat are influencing prices now.
One problem with this analysis - it seems to assume the unit of measure is stable. It is not.
Oil today almost 87$, makes you wonder. Follows rather nicely stocks and gold. If this ropping up goes on, as the Zero Hedge collective seems to imply, then say goodbye to whatever "recovery" one wants to believe in. Oil over 85$ is toxic to the world economy.
Funny how some great manipulators shoot themselves in the foot.
This is the time for all armchair economists, like most of us, to apply Ocham's razor.
In the 50s, the greatest oil thinker of all time predicted the U.S. would max out oil production in about 1970. He was right. He also predicted the world would max out about the year 2000. He was right. It was easy to see then, it's easy to see now.
When we've known for 50 years that the world would start running out of oil about now, why is it that it's seems to many to be such a stretch to attribute the recent price volatily and run up to supply constraints? Why do people invoke conspiracies?
Peak Oil is the unifying theme. We've known about it for 50 years. We've ignored it for about 49 of those.
If the reason that you believe that we haven't just passed peak world oil production is because "some guys in media news/corporations/sovereigns/economists tell me that there is plenty (somewhere!)" then I ask you this -
What is more likely - that the listed group would lie to you to keep you from changing your joe 6 pack improvident spending? Or that there's a conspiracy to drive up the price on the world's most critical - hands down - commodity, knowing full well that high oil price causes depression?
Are the oil tankers that were leased still floating at sea full of oil? I wish we could get more clarity on that potential supply and its present status.
No, oil tanker rates have fallen considerably, which means most of that stored supply has come out. (And we didn't get all that much of it--most seems to have gone to China.) But what's happening now is that we're getting closer to the contango levels and tanker rental rates where it makes sense to send the oil back out onto tankers again.
Bernanke's stock market is like a monster that can't be killed, killing everything around it.
Floating storage comes down as the contango curve comes down as your no longer being paid to carry the floating storage. Right now season factors are at work refinery maintence so tanker rates are going down, the cost of carry.
if contango (over supply) means that people will store at sea, and backwardation means we have too little supply, then how will oil prices ever drop again? will it require contango, but not large enough for storing to be profitable? is it all dependent on expectations?
Yes expectations do matter FX, Geopolitical, fundamental conditions, the problem is this is an opaque market where the fundamental data is not properly transmitted, its all secrets for example in Arabia counting tankers is a espionage act. What may cause prices to come down again is a double dip or more likelyfurther weakness in the Euro, or a Miracle Fed Tightening could bring it down.
weakness in the Euro (USD growth) hasn't caused oil to drop to this point, so i am not sure how it will matter going forward. a double dip seems like the only possible scenario. the Fed won't tighten unless we head even further into the stratosphere in oil and stock prices. i guess we can expect that whatever happens with the economy, oil will eventually follow.
Yeah basically, we will see.
No contango merely means that the future price is higher than the near term price. Supply expectations can play into the futures price though.
http://en.wikipedia.org/wiki/Contango
The Schork report just e-mailed me back and said that floating inventories are way down from previous highs in Nov 2009. The storage cost outweighs the contango benefit, so storing at sea is no longer viable.
Or - - - there is no extra oil to store.
It'll cross $100 by July.
It's really easy: either the Saudis and the Oilbank have the oil, and they gonna bring bring the price under 85$ (remember: GS and the Saudis want this as a "upper ceiling"), OR... there is really not that much oil around as claimed. We will find out soon, I guess, just wait and see.
As I said: interesting (and fun to watch,... well sort of)
I think they don't have the oil. The Saudis biggest field Ghawar has been producing pretty much full speed since 1951. They want to get the price high enough to try to cut off some demand to take the pressure off themselves, but since demand is fairly inelastic as it is found in over 6000 products, (many of then essential for modern civilisation to continue business as usual) the price has to get really high for this to happen.
Well lets see. If the dollar is conservatively down 15% since June '08 when oil was $147 then 147*0.15=22.05, 22.05+147 = oh lets just round it to $170. Don't believe it. If Israel flicks a booger at Iran it'll get there.
Manolo - you're 100% right.
It's put up or shut up time. They don't have the oil. My best guess is that a fake attack by some "Yemeni" or "Iranni" terrorists will cause a major oil disruption, thereby allowing SA to save face while oil goes to 200.
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