Oil shock - $50 per barrel within the next year?

greenspun.com : LUSENET : TB2K spinoff uncensored : One Thread



Economist on 'oil shock' Economist predicts oil prices may soar, complicating the Fed's rate policy August 18, 2000: 6:25 p.m. ET

NEW YORK (CNNfn) - Oil prices have been on the rise and could spike sharply higher as the U.S. appetite for foreign crude oil increases moving into the winter months, an economist at Goldman Sachs said Friday.

In a weekly update for clients, William Dudley, Goldman's director of U.S. economic research, warned there is a 10 percent probability that crude prices will exceed $50 per barrel within the next year.

He cited faster global economic growth, a seasonal increase in demand, very low oil inventories, and a sharp fall in unused capacity among the Organization of Petroleum Exporting Countries (OPEC) as reasons for the potential "oil shock."

What's more, he said, such a sharp rise in oil prices could throw a wrench into the Federal Reserve's efforts to guide the soaring U.S. economy to a soft landing rather than a hard one.

"If such an oil shock occurred, the risk of a hard landing would increase," Dudley said. "Fed officials would be faced with conflicting objectives -- on one hand offsetting the restraint exerted by higher oil prices on economic activity, and on the other hand keeping inflationary expectations in check."

Dudley pointed out that the last three U.S. economic downturns were precipitated, in part, by higher oil prices. However, he also noted that certain macroeconomic factors have changed since then, including an economy that is less energy intensive and has a more moderate inflationary environment.

U.S. oil prices have been rising steadily all year, spiking sharply this summer. According to a government report released Friday, rising crude oil prices drove the U.S. trade deficit to a record high of $30.62 billion in June.

And light sweet crude futures traded on the New York Mercantile Exchange rose for the third straight day on Friday despite reaffirmation from the president of OPEC that the cartel would raise output if prices remain stubbornly high.

September crude oil futures rose 5 cents to $31.99 amid continuing concerns over tight U.S. crude inventories, currently near 24-year lows.

For the week ended Aug. 18, U.S. oil prices rose 97 cents per barrel, and since the beginning of August oil prices increased by nearly $5 a barrel.

Prices rose even though OPEC President Ali Rodriguez reiterated Friday that the cartel was committed to keeping prices within its $22-to-$28 per barrel price target mechanism.

"If prices in the market stay above $28 day after day, production will rise by 500,000 barrels per day," Rodriguez, who is also Venezuelan Energy and Mines Minister, told reporters in Caracas

-- Newsman (nman@is.this.news?), August 21, 2000


Iran faces huge gasoline shortage The rise in domestic consumption will not allow Iran to export any diesel fuel in the current Iranian year, according to source.

August 21, 2000, 02:41 PM TEHRAN (Reuters) - Iran, OPEC's second largest oil producer, plans to import about $3 billion worth of gasoline over the next five years, a senior energy official was quoted as saying on Monday.

"This is a very heavy burden on the government. The high consumption of gasoline is a major problem for the country," Reza Kasaeizadeh, who coordinates refinery policies, told the Hamshahri daily.

Iran will pay an estimated $7.5 billion in subsidies for refined oil products in the year begun in March, of which $2 billion alone would go towards subsidising gasoline prices, he said.

Iran has some of the world`s lowest fuel prices, with a litre of regular petrol selling for several US cents.

Periodic government attempts to raise prices in order to limit demand and ease the burden on the budget are generally beaten back by a parliament fearful of public reaction.

Huge domestic shortage

An official said recently that Iran's consumption of oil products exceeds international norms by an order of 10, forcing it to import six million litres of gasoline per day.

He said average daily consumption of oil products was estimated at 46 million litres, enough to put the country on a par with India, which has more than 12 times the population.

Kasaeizadeh said Iran, which has the world's second largest gas reserves, should switch to using more gas and also improve quality of its roads and technology in car-making to save gasoline.

He said Iran would not be able to export any diesel fuel in the current Iranian year, which began on March 20, because of a rise in domestic consumption of more than 10 percent.

Liquefied natural gas for exports has also been diverted for domestic use for the second year in a row, he said.

Kasaeizadeh said Iran had spent about $370 million to upgrade refined oil products and related services and would budget another $300 million for it this year.

He said a $500 million project would be tendered soon to upgrade the Abadan refinery, one of Iran's oldest. Another project, worth $40 billion, seeks to upgrade the refinery at the Gulf port of Bandar Abbas.


-- Cave Man (caves@are.us), August 21, 2000.


http://quote.bloomberg.com/fgcgi.cgi?ptitle=Top%20Financial% 20News&s1=blk&tp=ad_topright_topfin&T=markets_bfgcgi_content99.ht&s2=b lk&bt=blk&s=AOaFWlRSIQ3J1ZGUg

Mon, 21 Aug 2000, 1:43pm EDT

Crude Oil Rises on Speculation of Minimal OPEC Output Rise

By Stephen Voss

New York, Aug. 21 (Bloomberg) -- Crude oil rose for a fourth session, extending this month's rally to 20 percent, on speculation that OPEC won't boost output much even with U.S. inventories close to a 24-year low.

The Organization of Petroleum Exporting Countries meets Sept. 10 to consider increasing output for a third time this year. Saudi Arabia, the world's biggest producer, last month called on OPEC to raise production before the meeting, yet such members as Iran and Kuwait, which don't have much extra capacity, opposed the move.

``It's high-anxiety time,'' said Andrew Lebow, a senior vice president and broker with ED&F Man International Inc. in New York. ``The market obviously thinks OPEC isn't going to add much new supply.''

Crude oil for September delivery rose as much as 91 cents, or 2.8 percent, to $32.90 a barrel on the New York Mercantile Exchange, the highest price for a contract closest to expiration since June 30. Oil prices are 50 percent higher than a year ago.

In London, Brent crude oil for October settlement rose as much as 71 cents, or 2.3 percent, to $31.15 a barrel on the International Petroleum Exchange.

Inventories of crude oil in the U.S. are down 10 percent from a year ago, according to the American Petroleum Institute, while heating oil supplies are down 38 percent.

Heating oil for September delivery rose as much as 2.29 cents, or 2.6 percent, to 92.20 cents a gallon on the Nymex. It was the highest price for a contract closest to expiration since Jan. 31, when frigid temperatures and low supplies sent futures prices to $1 a gallon, and some retail prices over $2.

Mounting Pressure

Pressure is mounting on Saudi Arabia from consuming nations to raise output. Saudi Arabia is one of the few OPEC members to have spare capacity, and in early July it proposed an immediate 500,000 barrel-a- day rise in production.

The country's de-facto ruler, Crown Prince Abdullah bin Abdulaziz, received a letter last week from U.S. President Bill Clinton, asking him to use his influence within OPEC to lower oil prices, the Cyprus- based Middle East Economic Survey reported, without citing its sources.

Concern about oil-led inflation helped push U.S. Treasury bonds lower amid speculation rising prices could lead the U.S. Federal reserve to raise interest rates later in the year, though the Fed wasn't expected to raise rates when it meets tomorrow.

Oil stocks rose, building on gains made during the rally in crude oil. Exxon Mobil Corp., the world's biggest publicly traded oil company, rose 21/64 to 83 5/16. Halliburton Co., the world's largest oil services company, rose 3/16 to 52 7/8.

Rodriguez Comments

OPEC president Ali Rodriguez of Venezuela said last week that the group won't make any decisions on output increases before its September meeting, and should be cautious about boosting production again after raising it twice before this year.

``The market doesn't give Rodriguez any credence,'' Lebow said. ``I think you need something from the Saudis, and they've been fairly quiet. That adds to the uncertainty about supply.''

Also helping prices rise were reports that Tropical Storm Debby was headed for a collection of Caribbean islands including the U.S. Virgin Islands, where the Western Hemisphere's second- largest refinery is located. Debby was about 280 miles east of the Leeward Islands, heading west at 22 miles an hour, the National Hurricane Center in Miami said. It was expected to reach hurricane strength later today.

``People start to get nervous when anything gets near to the Hovensa refinery,'' said Chris Schachte, an energy analyst at GSC Energy Corp. in Atlanta. The Virgin Islands refinery is owned by Hovensa, a joint venture between Venezuela's state-run oil company Petroleos de Venezuela SA and Amerada Hess Corp.

-- (another@oil.story), August 21, 2000.

Tropical Storm Debby May Hit Big Refinery 12.46 p.m. ET (1746 GMT) August 21, 2000

NEW YORK  Tropical storm Debby, packing winds of 70 miles per hour, has a 43 percent chance of striking the Caribbean island of St. Croix, home to the Western Hemisphere's largest oil refinery, the U.S. National Hurricane Centre (NHC) said on Monday.

Concerns that the storm, expected to reach hurricane strength within the day, would strike the island's 545,000 barrel per day Hovensa refinery prompted company officials to partially shut down the plant and helped boost crude oil prices on the New York Mercantile Exchange (NYMEX) more than a dollar to $33.00 a barrel.

The Hovensa refinery on St. Croix in the U.S. Virgin Islands group is jointly owned and operated by Amerada Hess and Venezuela's PDVSA, and is a major producer of refined products to the continental United States.

At 11 a.m. EDT, Debby was centered about 280 miles east of the Leeward Islands near latitude 15.7 north and longitude 57.3 west, and had maximum sustained winds of 70 miles per hour, just under hurricane strength, the NHC said.

It was moving west-northwest at about 22 mph, and had a 43 percent chance of passing within 65 nautical miles of St. Croix within the next three days, a 39 percent chance of hitting St. Thomas, and a 35 percent chance of hitting San Juan, the NHC said.

An earlier NHC forecast Monday morning pegged the chances the storm would hit St. Croix at 27 percent.

Tropical storms form and are given names when maximum sustained winds break 39 mph and become hurricanes when top

-- Cave Man (caves@are.us), August 21, 2000.

So, does this mean that I should plan on continuing to riding my bicycle to work?

-- (kb8um8@yahoo.com), August 21, 2000.

Natural gas prices surge to record highs

http://quote.bloomberg.com/fgcgi.cgi?ptitle=Oil%20News&touch=1&T=energ y_news_story.ht&s=AOaGNIxUTTmF0dXJh

-- Cave Man (caves@are.us), August 21, 2000.

No problem.

cpr tells us that crude prices are due to drop any day now.

Right, cpr?

-- (here_we@go.again), August 21, 2000.

Moderation questions? read the FAQ