Oil Jumps Above $58 as Demand May Outpace Production Growth
June 17 (Bloomberg) -- Crude oil in New York surged above $58 a barrel for the first time since reaching a record in April on signs that producers will struggle to meet growing fuel demand during the second half of the year.
``There is no question that the market is going to $60,'' said Kyle Cooper, an analyst with Citigroup Inc. in Houston. ``There is a lot of fear and hype about the possibility of us running out of oil, and it has stuck.''
Global oil use will jump to 86.4 million barrels a day in the fourth quarter, 200,000 barrels more than forecast a month earlier, an International Energy Agency report showed this week. The world pumped an average of 83.8 million barrels of oil a day in the first quarter. U.S. crude-oil supplies fell 4.9 million barrels in the last two weeks, Energy Department figures show.
Crude oil for July delivery rose $1.12, or 2 percent, to $57.70 a barrel at 1:55 p.m. on the New York Mercantile Exchange. Futures touched $58.15 a barrel, the highest intraday price since a record $58.28 was reached on April 4. A settlement at the current price would be a record. Prices have risen 7.5 percent this week and are up 50 percent from a year ago.
Oil prices may rise next week as producers strive to meet growing demand from refiners, a Bloomberg survey showed. Thirty- five of 68 analysts and strategists surveyed, or 51 percent, said oil prices will increase next week. Eighteen, or 26 percent, said they will fall, and 15 forecast little change.
``Going over $60 will require a catalyst,'' said Jason Schenker, an economist at Wachovia Corp. in Charlotte. ``A major event such as a hurricane, massive crude-oil inventory draw, or destabilizing geopolitical event will be needed.''
The increase may accelerate if prices rise above so-called resistance at $58.28 a barrel, according to traders who watch charts to predict price movements.
$70 a Barrel
Crude-oil prices are likely to reach $70 barrel once they breach the record, said John Murphy, chief technical analyst at StockCharts.com. Oil futures in New York have exceeded the 200- day moving average since a dip in May. That suggests a 70 percent to 80 percent chance of oil's reaching $70, said Murphy.
``I don't think there's any doubt we're headed higher,'' Murphy said in an interview today. ``We had a correction and came back to the 200-day moving average,'' he said. ``If we get through $58, $70 will be the next big number.''
Prices rose in 1974 after an oil embargo that followed the Arab-Israeli war and from 1979 through 1981 after Iran cut oil exports. The average cost of oil used by U.S. refiners was $35.24 a barrel in 1981, according to the Energy Department, or $75.44 in today's dollars.
`Sudden and Unexpected'
``In the 1970s the rise in prices was sudden and unexpected,'' said Rick Mueller, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. ``We were more dependent on oil and the economy was weaker. The manufacturing sector was a bigger piece of the overall economy and was hit hard by the price rises.''
The Organization of Petroleum Exporting Countries agreed two days ago in Vienna to raise production quotas by 500,000 barrels a day to 28 million beginning on July 1, and left open the possibility of another gain by the same amount, if needed. OPEC members are already exceeding the new production target.
Oil output in Russia, which vies with Saudi Arabia for the position of top oil producer, rose an annual 2.1 percent in May, according to the Federal Statistics Service. That's less than a 3 percent annual increase in April. Russian output surged 8.7 percent in 2004, according to the IEA.
Russian output growth is faltering after tax charges against OAO Yukos Oil Co., the country's largest oil exporter last year, led to the confiscation of the company's biggest producing unit and slowed investment in the nation's oil industry.
In London, the August Brent crude-oil futures contract rose 95 cents, or 1.7 percent, to $57.17 a barrel on the International Petroleum Exchange. Prices touched $57.56, the highest since Brent reached a record $57.65 on April 4.
A security threat today forced the U.S., U.K. and Germany to shut their missions in Lagos, Nigeria's commercial hub. The West African country produces sweet oil that's easier to process into high-value fuels such as gasoline and diesel. Nigeria is the fifth-biggest source of U.S. oil imports.
The U.S. Senate is debating energy legislation that President George W. Bush has sought since he entered the White House in 2001. The House already has passed its version of the bill. Bush advocates increasing the use of coal, natural gas and nuclear power as well as fuel additives such as ethanol, to cut U.S. reliance on oil imports.
Valero Energy Corp., the top-performing Standard & Poor's 500 stock this year, said it expects second-quarter profit to rise to a record as margins on refined fuels widen. Valero is reaping profits as U.S. fuel consumption grows and discounts for cheaper grades of crude oil used in the company's refineries widen.
The profit margin for turning a barrel of oil into heating oil and gasoline is about $11.21 today, based on futures prices on the New York Mercantile Exchange. The margin, also called a crack spread, touched $14.49 in early April, the highest in at least 15 years.
U.S. refineries operated at 96.7 percent of their capacity in the week ended June 10, the highest since July, the department's report showed. Production of distillate fuels rose 4.2 percent to a record 4.4 million barrels a day.
Heating oil for July delivery rose 1.15 cents, or 0.7 percent, to $1.637 a gallon in New York. Heating-oil futures are 59 percent higher than a year ago. Gasoline for July delivery rose 2.02 cents, or 1.3 percent, to $1.618 a gallon. The motor fuel is 36 percent higher than a year ago.
Gasoline prices also rose on the unplanned closure of a gasoline-making unit at the Royal Dutch/Shell Group's Deer Park, Texas, refinery, the sixth-largest in the U.S. The catalytic cracker, with a 67,000 barrel-a-day capacity, is being shut for 10 to 14 days for repairs, a Shell spokesman said in an e-mailed statement late yesterday.
This logic doesn't hold much weight.
So executives want to end the fossil fuel lifestyle in order to further enrich themselves in a post-peak world in which their money will be useless and the only thing of value they will possess is land, which they won't know how to work, and which anyone with enough guns can just take from them?
They'll have the oil. It will be money in a worst case scenario, and in the so-called 'doomer 1' scenario that seems most likely, it will simply be horrendously expensive, of which they will make a killing off of it if it were to hit $150, maybe $200 a barrel. The first half of the world's oil was selling for a hell of a lot cheaper than that!
There aren't many alternatives that do not involve fossil fuels (your electric car requires considerable expenditure of fossil fuels to make all its components--and it needs fossil fuels to pave the roads it drives on) to at least get the infrastructure in place, and these alternatives are typically not as economically viable as oil, so they aren't supressed.
You obviously didn't read my topic much. It was documented, fact after fact, that the oil industry even spent their own money to keep alternatives out of the mainstream, lobbied against legislation for their adoption, and even spread untruths about the technology with vicious ad campaigns. Even bought up a viable battery patent for a battery that could cost $4,500 per that would last 250,000 miles, allow 200 miles per charge in volume for 20,000 cars per year.
The oil that would be use to make the car is about as much as the oil used to make cars today. But the real benefit is the fact that after production, the car consumes no oil, affectively killing about 90% of its oil useage. Plus components can be fully recycled after they wear out, and reused, over and over and over again. An electric car's motor could have it last 30 years and 500,000+ miles, 4 times longer than a normal gas car.
As for the paved roads, the amount of oil they consume is minute compared to the amount of oil our current cars guzzle in fuel. Automobile fuel accounts for 40% of America's oil use. We could cut that 40% down to less than 5% with today's technology. More reductions in consumption could be made in other areas besides automobiles as well.
They don't make money, so they don't come to market.
Correction. They don't make as much money. They can still make money. EV businesses like AC Propulsion are pulling in net profits.
Peak oil isn't happening because some executives are getting rich--peak oil is happening because too many people are demanding a finite resource.
Again, you miss the point. We can reduce consumption of this finite resource drastically with today's technology without sacrificing too much of our lifestyle. At leastm today. When we have 8 or 9 billion people, then we're fucked, or if we let the oil decline go too far while remaining too dependent on it, we're also fucked.
Those people consuming most of the oil are ironically, us, the rich. The Earth produces annually enough resources for all working adults to attain about $5,000 GDP consumptionm, of which they will have to share with their families and such. Take an electric car, that in mass production would cost $15,000, and last 30 years? Guess what, we can still have our cars. We could make a Peru like income go farther if we increase efficiency, thus increasing standard of living. The key is in reducing the consumption associated with everything we do. You don't do that, and you don't have sustainability.
But capitalism as we know it, along with short term profits, are reliant on mass consumption. Either reduce consumption voluntarily by increasing efficiency, or peak oil will do it for us and collapse our economy, and maybe cause a mass dieoff, at least a dieoff worse than we see today. 30,000 children die each die from starvation, dehydration, and lack of medicine, not because we don't have the resources, but because they cannot afford what they need.
The unnecessary felling of a tree, perhaps the old growth of centuries, seems to me a crime little short of murder. ~Thomas Jefferson