Friday, April 16, 2010

New Oil Supplies Grow, Oil Demand Shaky

The IEA is increasing its 2010 oil supply outlook for Canada and Russia. Non-OPEC producers are expected to continue increasing their output this year.
“Non-OPEC prospects are looking brighter,” the Paris- based adviser to 28 countries said in the report. “Upstream investment decisions made before both 2008’s price surge and slump are starting to bear fruit. New upstream projects are coming online and ramping-up production.” _Businessweek

OPEC is concerned that speculation may be driving the price of oil more than actual demand. Saudi ministers are likely to ramp up production to prevent prices from being driven up too high.
Saudi Arabia, OPEC's most important member which helped rally other members around the $70-80 price preference last year, hasn't weighed in on the subject but some OPEC delegates say the kingdom will likely quietly push more oil into world markets to prevent prices from rising too much.

Saudi Arabia, a moderate on prices among OPEC members, has around 4.5 million barrels a day in spare production capacity--more than the total capacity of OPEC's second biggest producer, Iran--and could produce more barrels in order to keep oil inventory brimming and maintain a lid on prices. _Ordons

China is beginning to clamp down on local demand for diesel and gasoline, by raising local prices for the fuels.
China, the world’s second-largest energy user, will increase gasoline and diesel prices by as much as 4.6 percent starting today after global crude costs climbed.

The average retail gasoline and diesel price will rise by 320 yuan ($47) a metric ton, the National Development and Reform Commission said on its Web site yesterday. The NDRC said the fuel price gain will add 7 basis points to the April consumer price index month-on-month. _Bloomberg

Peak oil pundits typically expect oil demand from China to continue to drive fuel prices up -- in spite of an ongoing recession in the US and Europe. Peak oil believers also claim that neither OPEC nor non-OPEC producers have significant spare production to satisfy any rebound in global oil demand -- when it finally comes.

Reality check: Both China and India (and Russia and Brazil) are exporting nations. Russia is particularly vulnerable if oil prices fail to rise over $100 a barrel. But China and India are vulnerable to a continued global recession as well.

If demand for BRIC goods continues to decline, there will be little basis for any big jumps in oil demand from China and India.

There are significant questions about the reliability of economic figures coming out of China's CCP government. While 60% of China's GDP is connected to the construction and real estate boom, the sad truth is that Chinese construction is shoddy and prone to collapse prematurely, and Chinese real estate has bubbled to such an extent that no one can afford to buy it except speculators.

Of course there are limits to any physical resource that originates on a finite planet. But that truism is precious little foundation for building the hugely ambitious house of cards known as peak oil doom.

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