IEA warns of winter heating crunch : LUSENET : TB2K spinoff uncensored : One Thread

Tuesday July 11 6:39 AM ET

IEA Warns of Winter Heating Oil Crunch

By Richard Mably

LONDON (Reuters) - Oil refiners in the West now struggling with low gasoline stocks are likely to run into an even worse situation this winter for inventories of heating oil, the International Energy Agency warned on Tuesday.

In its monthly Oil Market Report the IEA said that refiners obliged to maximize gasoline supply in the United States and Europe were allowing a growing deficit in the distillates stocks that make up heating oil and diesel.

``The situation ... warrants serious attention. Because of low gasoline stock levels in the U.S. and Europe, refiners are maximizing gasoline production at the expense of heating oil,'' the Paris-based agency said.

The deficit in distillates stocks in Europe could deepen versus last year from 47 million barrels at the end of the second quarter to 58 million barrels by the end of the fourth quarter, the IEA said. In the U.S. the deficit could widen from 28 million barrels to 57 million barrels.

That would leave distillate stocks at least 25 percent lower than the lows at the end of 1999 when U.S. inventories were down to 171 million barrels and Europe at 223 million.

``It's not just in the U.S., Europe will also suffer,'' said David Knapp, the head of IEA's oil market division. ``And remember, heating oil stocks last winter were already at their lowest in a decade.''

Opec Dilemma

The IEA report highlights the dilemma for the Organization of the Petroleum Exporting Countries in its efforts to ease crude oil prices.

OPEC has raised export quotas twice already this year, and Saudi Arabia is expected to confirm a further increase soon, but the IEA said extra crude supply will not necessarily cure the shortage in petroleum products.

``With refineries and distribution pipelines operating near capacity, unplanned refinery or pipeline outages could cause real shortages,'' it said.

In addition, refiners have found difficulty in meeting tough new environmental standards for gasoline in the United States. Extra supply of OPEC's heavy, high sulphur crude is proving very expensive to refine into the new grades of gasoline.

A hiccup in Iraqi supply reduced OPEC output in June but underlying output from other cartel members rose and was bolstered by more supplies from Russian and its neighbors.

Net oil exports from the territories of the former Soviet Union rose 290,000 barrels a day to 4.33 million bpd, a post-Soviet era record.

The IEA said that the outlook for crude oil stocks looks more comfortable, particularly if Saudi Arabia makes good on last week's promise to raise output by 500,000 barrels daily.

Iea Revises Down 2q Stockbuild

Nevertheless, the IEA's data for inventory builds in the industrialized countries of the Organization for Economic Cooperation and Development shows a heavy downward revision.

Its estimate for the OECD stockbuild in all crude and products during April was revised down by one million barrels daily to just 700,000 bpd.

Estimates now are for a 1.7 million bpd OECD build during May compared to a forecast last month of three million bpd.

It is expecting a 480,000 bpd global stockbuild in the third quarter and a 660,000 bpd draw in the fourth.

The IEA said it recorded an abrupt turnaround in oil products consumption in OECD markets in May after declines in previous months.

But after two months of downward revisions, the agency left unchanged its projection for world oil demand this year at 76.2 million bpd, up from 74.9 million bpd in 1999.

-- Cave Man (, July 11, 2000


OPEC's June output 28.05 mln bpd, down 240,000 bpd, IEA says IEA: "OPEC 10" June output up 250,000 bpd at 25.49 mln bpd IEA: Iraq June output slides 490,000 bpd to 2.56 mln bpd

Bridge News London--July 11

OPEC oil production fell by 240,000 barrels per day (bpd) in June to 28.05 million bpd, the International Energy Agency said Tuesday in its latest monthly oil market report. The decline was mainly attributed to Iraq, which saw output fall by 490,000 barrels per day over the month, while the increase in production in the other 10 OPEC member countries totaled 250,000 bpd.

"June was the first month since last December when OPEC crude supply did not rise," the IEA said, adding that it wasn't a "coincidence" that both declines took place when the Iraqi oil-for-aid program "ended one six-month phase and began another."

Iraqi oil supply averaged 2.56 million bpd in June, down 490,000 from May's post-Gulf War high. Although the transition from Phase 7 of the oil-for-aid program, which expired on June 8, to Phase 8 was "relatively smooth," Iraqi crude lifters were initially cautious about chartering tankers due to high freight rates, the IEA said.

For the four weeks beginning June 3, weekly Iraqi exports averaged between 1.5 million bpd and 2.3 million bpd. The low occurred in the fourth week and was attributed by the Paris-based agency to "a delay in negotiations with buyers on Phase 8 contracts" resulting from a "disagreement on wording" of the memorandum of understanding between the Iraqi government and the UN.

The IEA reported that crude oil production in the 'OPEC 10' member countries rose by an aggregate 250,000 in June to 25.49 million bpd. Saudi Arabia saw the largest increase on the month of 100,000 bpd --its fifth successive monthly rise. Nigeria saw the next main improvement, of 55,000 bpd, amid a significant contribution from Brass River which came back onstream in mid-June after a shutdown caused by a pipeline bombing in mid-May.

-- Cave Man (, July 11, 2000.

Cave Man, I'm starting to think you're talking to an empty auditorium here. Same experience I've had trying to spread the word on other fora. The whole y2k experience has soured the online community to any sort of news that can be labeled "doomer," even though there is hard evidence to back this up and at least begin a debate. I remain unconvinced that the End of Cheap Oil will create a future as grim as some paint it, but it will require major changes in lifestyle and expectations.

Question: Are you a member of Jay or Bruce's egroups, and have you thought of posting the Convince Sheet here? It's now available to the public by going to and clicking on "Files" on the left side of the page. Bruce Thomson has a standing $1,000 (Canada) offer to anyone who can prove the CS wrong.

-- Cash (, July 11, 2000.

Cave Man,

This won't sit well with cpr, either.

-- J (Y2J@home.comm), July 11, 2000.


Question: Are you a member of Jay or Bruce's egroups, and have you thought of posting the Convince Sheet here?

No, I am not a member, but I do lurk.

I have read the convince sheet, very well researched. I have not considered posting it, rather long. A truncated version some people might read.

Oil depletion and peak production is as exciting as a vanilla milkshake to most people. This subject will get little attention until we hit a major price spike.

-- Cave Man (, July 11, 2000.

CPR won't like this one either.

Minister says Kuwait not in output rise talks

Kuwait (Reuters) - Kuwait, one of a few key Opec oil exporters with excess capacity, said yesterday it is not in talks with others to raise oil output.

"Nope," said Kuwait Oil Minister Sheikh Saud Nasser Al Sabah when asked if he was consulting with other oil producers to raise output.

Saudi Arabia last week surprised fellow exporters with an intiative for an additional 500,000 barrels per day (bpd) in an attempt to bring world oil prices down to the desired $25 a barrel from around $30 a barrel.

Saudi Arabia's attempt to play a one-man band on oil supply is not getting a warm reaction from the rest of OPEC. You have to wonder: is S.A. just playing to U.S. interests or does it still think it can drag the rest of OPEC along without suffering consequences later? Most of OPEC is pumping at max and they LIKE the money flowing their way. Or is it a market play -- announce a supply increase, watch the market drop, then buy in and let the market rise again as the promised oil fails to materialize?

-- Cash (, July 11, 2000.


Good questions. I question the extra spare capacity Saudi Arabia claims (on a sustained basis). The last time Saudi Arabia pumped 10 million barrels a day was 1980. there are reports that SA's largest field, Ghawar (100 billion barrels), is having water incursion problems, I doubt the Saudi's would want to take the risk of damaging their resevoirs.

-- Cave Man (, July 11, 2000.

Cave Man (interesting handle -- you live in an underground house, perhaps?), I've heard rumors about the Ghawar field as well. I'm also hearing conflicting reports about Kuwait's ability to increase production. It is repeatedly lumped with S.A. and the Emirates as having excess capacity, but there have been recent industry reports that seem to indicate it might be at maximum right now, especially with the effort to replace the 450,000 b/day of distillate output lost in last month's refinery explosion with a matching amount of crude.

The interior political dynamics in OPEC also bear watching. Saudi recently went through a very quiet shift in bosses, and I'm wondering of the new guys are using this as an attempt to show leadership within OPEC, as well as show the US who its friends are in case the fundamentalists get tired of being bought off.

-- Cash (, July 11, 2000.


"The interior political dynamics in OPEC also bear watching."

I found this interesting:

"In a stunning move last week, officials in Saudi Arabia said the kingdom was prepared to unilaterally boost oil output by 500,000 barrels a day to force prices lower. The Saudis support a price of $25 for the OPEC reference basket of seven crudes, which now trade above $28.

The Saudi move was ordered by Crown Prince Abdullah and caught the oil ministry off guard, sources familiar with the issue said.

Naimi was left in a difficult position of back-tracking on the matter, stressing to perturbed fellow oil-exporters that Saudi Arabia wouldn't act unilaterally without consulting them." ndustry-c1-ener.html

-- Cave Man (, July 12, 2000.

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