Production and Prices
Last week oil prices were dominated by a rebound in the equity markets and the prospects for another production cut at yesterday’s OPEC meeting. All week a stream of mixed signals emerged from various OPEC sources as members pondered the issue of another cut. Starting the week at $47 a barrel, oil fell as low as $42 and then rebounded to close at $46. The weekly US stocks report contained more
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OPEC’s Dilemma
The cartel could have either left production unchanged and prices relatively low, thereby contributing to helping the global economic situation from getting worse or perhaps even rebounding; or it could have continued efforts to force prices higher and risk causing an even greater and longer-lasting recession. As oil is the main source of revenue for most OPEC members, in several countries current
And OPEC’s Decision
The cartel will keep production quotas unchanged, will meet again on May 28th and September 29th, and will make concerted efforts to implement the remainder of the current 4.2 b/d production cut. The unmet portion of the cuts, announced during the fourth quarter of 2008, was reported last week by OPEC as being 800,000 barrels as of the end of February; however, outside observers report that exports
Forecasts
Last week saw a spate of new forecasts for the global economy and the demand for oil during 2009. The International Monetary Fund and the World Bank issued forecasts that were much bleaker than those issued by private forecasters. Both foresee the world economy shrinking for the first time since World War II. The three major oil forecasting organizations, the US’s EIA, the OECD’s IEA and
Briefs week of March 16, 2009
CERA: The direction oil prices take will depend more on a meeting of world leaders in London next month than on what OPEC decided Sunday, said Daniel Yergin, CERA chairman. There is now between 6 and 7 million barrels of spare production capacity for oil worldwide, Yergin said. He expects prices to average $45 a barrel this year, based on the drop in demand. (3/13, #7) Exxon’s oil discovery
Quote of the Week
“Oil is not only the world’s most important commodity, it’s a barometer of the global economy. It’s telling us the global economy is sick.” – Daniel Yergin, Chairman of Cambridge Energy Research Associates
Laying Down Tools
I am a directional driller, one of those fellows who steers a drill bit into petroleum targets thousands of feet beneath the surface of the earth. Recently I was on a rig and one of the young roughnecks asked me, “It is going to be bad, isn’t it?” I replied “I don’t think so. This well should be like most of the others around here.” “No,” he answered,
