Peak Oil Redux Part VII
From 04/08/05 China and Oil:
This year, China’s crude imports have been falling and the dollar has rebounded. Yet, oil prices continue to rise. Rampant Oil speculation is challenging the Fed and China's Central Bank to tighten interest rates. The Fed may have to raise interest rates by 50 basis points at a future meeting to chase the speculators. (Probably after they drop the word "measured").
China’s crude imports in Jan & Feb 2005 declined by 12.8% from the same period last year. China’s oil demand has been exaggerated by a shortage of domestic electrical production capacity. China is investing domestically to correct the problem. As capacity for electricity ramps up and China slows down, their demand for oil will soften further.
Combine higher interest rates, a strengthening dollar, greater refining capacity, a slowdown in Asia & Europe and reduced Chinese demand. This could lead to a $15 a barrel reduction in the speculative premium currently in place at $55 a barrel.
From 04/13/05 Lower Oil:
In its report, the Paris-based IEA suggested that rising U.S. interest rates and energy costs would reduce global demand growth for oil this year by 50,000 barrels a day to 1.77 million barrels a day. The global energy watchdog also said slowing Chinese oil demand growth might dampen crude prices further.
"Fears of a surge in second-quarter Chinese demand are receding," the IEA said, as it noted that China's oil demand growth was significantly lower in the first two months of the year. Chinese oil consumption soared nearly 17 percent last year and was estimated by the IEA to increase another 25% this year. Demand was up 15 percent in November but growth slid to only 3 percent last month.
What a surprise, rising rates and a Chinese slowdown cause a pullback in oil, who'da thunk that? Think I'll have another Morley.
From Mish's GET Blog "OPEC research shows that days of forward cover is a far better indicator of oil prices than current inventory levels. While inventory levels may be at 5 year highs, the days of forward cover at current demand levels relatively low. In short there is no current glut in oil inventory levels."
From OPECS March report: "Over the last two decades, the days of cover in the OECD has dropped from 70 in 1984 to around 51 in 2004, while the absolute level of commercial oil stocks remained relatively unchanged."
"The widespread adoption of “just-in-time” stock management by companies, combined with under-investment in downstream areas such as refineries, terminals and storage facilities, has led to a widening gap between the days of forward cover and absolute commercial stocks levels."
"Although the relationship between days of forward cover and oil prices shows a better correlation than absolute stock levels, its predictive power has recently diminished, signalling perhaps a shift or transition to a new regime which is yet to be ascertained."
"since early 2004, the relationship between prices and stocks has broken down, both in absolute terms as well as in days of forward cover."
"Focusing only on this measure "days of forward cover" and excluding other factors related to fundamentals will continue to imply a market that is more tightly balanced, and could result in continuing high volatility."
"Other measures need to be considered when assessing fundamentals in the short term, especially during the periods of above-normal demand growth, such as capacity in the whole supply chain."
"Another, less-widely used method for assessing the current supply/demand balance is the days of cover for net oil imports. The most recent data indicate that the days of imports cover for IEA countries is in the higher range, at 114 days, or two days above this time last year."
Chinese demand falls, yet prices rise. Once again we address the Chinese demand canard which is central to the "increased" demand part of the peak oil hypothesis.
From OPECS March report we see that days of forward cover is but one measure of the supply demand relationship. Using days of cover for net oil imports shows that supply is actually increasing.
Furthermore, OPEC states that "other measures need to be considered" as the predictive power of days of foward cover has "diminished" and the relationship between stocks and prices with regard to days of forward cover has "broken down".
OPEC concludes that focusing only on days of forward cover will "imply a tight market and could result in higher volatility". In other words, OPEC is implying that the measuring stick commonly used, may not be properly calibrated nor adequate for the job at hand due to industry dynamics. Stay tuned, no flipping, more to come in Part VIII.
$130 Oil Justified? No Way
Oil Price Redux
OIL: Demand, Production and Speculation
Peak Oil - The Myth, The Legend, The Fraud
Spreading "Peak Oil" Crack
"Peking" Oil, the Saudis and China
Peak Oil? Not!
Peak Oil? Not! Part Deux
Peak Oil? Not! - Update
Peak Oil Redux Part I
Peak Oil Redux - Part II
Peak Oil Redux Part III
Peak Oil Redux Part IV
Peak Oil Redux Part V
Peak Oil Redux Part VI
Peak Oil Redux Part VII
Peak Oil Redux Part VIII
The Blame for $135 a Barrel Oil
Blame it on Markman's Myopia or The Day They Burned Ol' Dixie Down - A "Peak Oil" Commentary
Another Peak Oil Cufuffle Series
This year, China’s crude imports have been falling and the dollar has rebounded. Yet, oil prices continue to rise. Rampant Oil speculation is challenging the Fed and China's Central Bank to tighten interest rates. The Fed may have to raise interest rates by 50 basis points at a future meeting to chase the speculators. (Probably after they drop the word "measured").
China’s crude imports in Jan & Feb 2005 declined by 12.8% from the same period last year. China’s oil demand has been exaggerated by a shortage of domestic electrical production capacity. China is investing domestically to correct the problem. As capacity for electricity ramps up and China slows down, their demand for oil will soften further.
Combine higher interest rates, a strengthening dollar, greater refining capacity, a slowdown in Asia & Europe and reduced Chinese demand. This could lead to a $15 a barrel reduction in the speculative premium currently in place at $55 a barrel.
From 04/13/05 Lower Oil:
In its report, the Paris-based IEA suggested that rising U.S. interest rates and energy costs would reduce global demand growth for oil this year by 50,000 barrels a day to 1.77 million barrels a day. The global energy watchdog also said slowing Chinese oil demand growth might dampen crude prices further.
"Fears of a surge in second-quarter Chinese demand are receding," the IEA said, as it noted that China's oil demand growth was significantly lower in the first two months of the year. Chinese oil consumption soared nearly 17 percent last year and was estimated by the IEA to increase another 25% this year. Demand was up 15 percent in November but growth slid to only 3 percent last month.
What a surprise, rising rates and a Chinese slowdown cause a pullback in oil, who'da thunk that? Think I'll have another Morley.
From Mish's GET Blog "OPEC research shows that days of forward cover is a far better indicator of oil prices than current inventory levels. While inventory levels may be at 5 year highs, the days of forward cover at current demand levels relatively low. In short there is no current glut in oil inventory levels."
From OPECS March report: "Over the last two decades, the days of cover in the OECD has dropped from 70 in 1984 to around 51 in 2004, while the absolute level of commercial oil stocks remained relatively unchanged."
"The widespread adoption of “just-in-time” stock management by companies, combined with under-investment in downstream areas such as refineries, terminals and storage facilities, has led to a widening gap between the days of forward cover and absolute commercial stocks levels."
"Although the relationship between days of forward cover and oil prices shows a better correlation than absolute stock levels, its predictive power has recently diminished, signalling perhaps a shift or transition to a new regime which is yet to be ascertained."
"since early 2004, the relationship between prices and stocks has broken down, both in absolute terms as well as in days of forward cover."
"Focusing only on this measure "days of forward cover" and excluding other factors related to fundamentals will continue to imply a market that is more tightly balanced, and could result in continuing high volatility."
"Other measures need to be considered when assessing fundamentals in the short term, especially during the periods of above-normal demand growth, such as capacity in the whole supply chain."
"Another, less-widely used method for assessing the current supply/demand balance is the days of cover for net oil imports. The most recent data indicate that the days of imports cover for IEA countries is in the higher range, at 114 days, or two days above this time last year."
Chinese demand falls, yet prices rise. Once again we address the Chinese demand canard which is central to the "increased" demand part of the peak oil hypothesis.
From OPECS March report we see that days of forward cover is but one measure of the supply demand relationship. Using days of cover for net oil imports shows that supply is actually increasing.
Furthermore, OPEC states that "other measures need to be considered" as the predictive power of days of foward cover has "diminished" and the relationship between stocks and prices with regard to days of forward cover has "broken down".
OPEC concludes that focusing only on days of forward cover will "imply a tight market and could result in higher volatility". In other words, OPEC is implying that the measuring stick commonly used, may not be properly calibrated nor adequate for the job at hand due to industry dynamics. Stay tuned, no flipping, more to come in Part VIII.
$130 Oil Justified? No Way
Oil Price Redux
OIL: Demand, Production and Speculation
Peak Oil - The Myth, The Legend, The Fraud
Spreading "Peak Oil" Crack
"Peking" Oil, the Saudis and China
Peak Oil? Not!
Peak Oil? Not! Part Deux
Peak Oil? Not! - Update
Peak Oil Redux Part I
Peak Oil Redux - Part II
Peak Oil Redux Part III
Peak Oil Redux Part IV
Peak Oil Redux Part V
Peak Oil Redux Part VI
Peak Oil Redux Part VII
Peak Oil Redux Part VIII
The Blame for $135 a Barrel Oil
Blame it on Markman's Myopia or The Day They Burned Ol' Dixie Down - A "Peak Oil" Commentary
Another Peak Oil Cufuffle Series
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