Oil Price Watch 2008

3rd April 2008: I am going to do a new run of the Oil Price Watch over the next month. But first, where did we leave it around this week last year ....?.

Week ending March 31st, 2007 The price of a barrel of Brent crude hit $69.14 before easing slightly but has still increased by more than $7 in two weeks. Price at end of week $68.17

And now, 3rd April, 2008? Today a barrel of Brent crude oil was $102.95 a barrel.

Obviously a lot of water has flowed under the bridge and oil down the pipeline in the course of the last year. We are not going to go over what has happened over the last year, but what we will be doing is on this occasion a (mostly) daily watch. Before we start, recommend you read the overview of the Oil Price Watch here

.. and for the record , previous runs of the Watch are archived here

Week ending April April 5th, 2008: Brent crude rose 0.5 per cent for the week. The FT reported gasoline stocks fell 4.5m barrels, more than double the market expcted for a decline of 2m barrels, and prompted a surge in oil prices as concerns grew over supplies of petrol for the summer driving season (Issues 3(a) and 4 from Oil Price Watch).

The FT also reported that in testimony to Congress, Jeffrey Harris, chief economist of the Commodity Futures Trading Commission, (the US futures markets regulator), said there was little evidence that changes in speculative positions were driving oil prices higher. Mr Harris said strong oil demand in China and India, a weak dollar and geopolitical tensions in oil producing countries were the best explanation for rising crude prices. Some senators on the Energy and Natural Resources Committee disagreed. "There is an orgy of speculation in the futures market," said Byron Dorgan, a Democrat. Price at end of week: $104.26

April 7th, 2008: The FT reported that a fire at Neste's Porvoo key refinery in Finland helped push oil prices up on Monday. It reports Opec continued to reject hopes for a supply increase by the producer group. "The world's oil stockpiles are now adequate for 53 days, and this shows that there is no shortage," said Abdullah el-Badri, Opec secretary-general. The FT also noted oil prices were further boosted by news that China has agreed a substantial cut in tax on crude imports to help oil refiners limit heavy losses on processing crude (the FT comments China is the world's third-largest importer of crude and Chinese demand growth picked up strongly early 2008).

All of these should encourage Issues 3(a) type effects from Oil Price Watch in so far as they would be expected to push the price higher than would otherwise be the case. Price at end of day: $107.00

April 8th, 2008: Oil prices slipped slightly as the FT reported a Reuters survey that US crude stocks were expected to have increased 2.2m barrels last week, helped by a rise in imports. It also noted that some analysts think there could be a significant jump in refinery output as production of petrol is expected to increase approaching spring, following a sharp increase in crude imports in the previous week. Indications here of Issue 3(b) type effects from Oil Price Watch.

The FT also reported that oil prices were forecast to average more than $100 a barrel this year, according to the US Energy Information Administration (the statistical agency of the US Department of Energy). The EIA warned that the global oil market remained "fundamentally tight" in spite of a slowdown in US oil consumption and growing risks to global economic growth ("tight" here can be taken to mean there is not much slack capacity in the world market). Price at end of day: $106.14

April 9th, 2008: Oil reached record heights today with Brent jumping $3 to $109.34 a barrel. The FT notes shrinking US petrol reserves are leading to concerns about supplies. The FT also reports that Adam Sieminski, chief energy economist at Deutsche Bank, said the latest rise was the continuation of a rally from $50 to $112 a barrel since January 2007. He said there were several factors behind the rise, including increasing Chinese demand, under-investment in oil infrastructure, geopolitical risks in oil-producing countries such as Nigeria and Iraq, and the weakness of the dollar. “This rally just doesn’t want to quit,” Mr Sieminski said.

So a combination of demand side and supply side issues, with expectations having a strong role to play

The FT also reports The IMFund warned on Wednesday that crude oil prices would remain about $95 on average this year and the next, despite global economic worries. Price at end of day: $109.34

April 10th, 2008: not much news or action in the market today after yesterday, and the price settles back from its high of yesterday, possibility that the market had overshot. Oil Price at end of day: $108.20

April 14th, 2008: the FT reported crude oil prices boosted by supply disruptions in Nigeria, the US and Mexico, and robust demand, particularly for diesel and heating oil, in emerging countries. It also noted siignals that Opec, the oil producer’s cartel, is lowering its production to match a seasonal slowdown in demand, also helped to push prices higher. All Issues 3(a) from Oil Price Watch Oil Price at end of day: $109.33

April 15th, 2008: Brent crude hit $112.08 a barrel, a new record. The FT reports several factors over concerns over to supply; in Mexico the three main export terminals were shut for a second day due to bad weather in the Gulf of Mexico, a senior Russian oil executive added to supply concerns by telling the Financial Times he believed Russian production had peaked at 10m barrels a day, and Opec said this week that world oil markets were well supplied. it said it expected a seasonal slowdown in demand – which the FT said was a signal that it may consider lowering its production quotas. Again, all Issues 3(a) from Oil Price Watch Oil Price at end of day: $112.08

April 21st, 2008: The FT reported that oil surged tonew records on Monday, with doubts about the outlook for short and long term supply growth from Opec, the oil cartel. It commented that Opec oil ministers meeting with their biggest customers at the International Energy Forum in Rome on Monday stated that they saw no need to pump more oil, in spite of record crude prices. Iraq's oil minister, blamed high prices on speculation, saying: "There isn't much Opec can do." "Opec is producing as much as the market requires. As a matter of fact there's some surplus on the market," Venezuela's energy minister, said prices were likely to stay at around current levels and would not fall much further than $90 a barrel, because production costs had increased.

The FT also notes that major consuming countries have called on Opec to produce more oil, but to no avail. The IEA, the energy watchdog, warned in its most recent monthly report that in the coming months Opec may reduce production as the cartel fears a demand slowdown caused by the US's economic woes and the end of winter in the western hemisphere, when the need for heating oil declines.
It also stated that on long-term supplies, the message from Opec was no more encouraging as Saudi Arabia confirmed it would hold back any further capacity expansion plans, beyond the 12.5m barrels a day target the kingdom is expected to reach by next year. Oil Price at end of day: $113.44 a barrel (after touching a fresh peak of $114.86).

April 22nd, 2008: The FT reports US Gasoline stocks fell for a sixth week, as expected, but the decline of 3.2m barrels was larger than the consensus forecast for a decrease of 2.3m barrels. Issues 3(a) from Oil Price Watch The overall trend is still up. Oil Price at end of day: $115.76 a barrel

April 23rd, 2008: The FT notes oil prices were struggling for direction. In spite of record pump prices for petrol, US demand showed further signs of improving, averaging 9.24m b/d over the past four weeks, up by 0.9 per cent compared with the same period a year ago. So still some upward pressure from demand side.Oil Price at end of day: $116.46 a barrel

April 25th, 2008: oil settling around $116 at least for the moment. Question - how much of this high price is fuelled by speculation? Oil Price at end of day: $116.34 a barrel

. And we have oil supply strikes in Scotland about which I will say more in a couple of days

April 29th, 2008: Ok, now, it is getting personal. FT headline today is "oil near $120 as Grangemouth strike bites". Grangemouth is in Scotland and only a few miles away from where I work.

The FT notes that oil neared $120 a barrel on Monday amid supply concerns following the start of a strike at the Grangemouth refinery in Scotland and further violence in Nigeria.

Brent crude touched a high of $117.51 a barrel then slipped back to $116.66 a barrel.
The UK government has insisted that the UK is "nowhere near" having to impose emergency powers to restrict fuel supplies to essential users. Well, that's a relief...

The FT also notes today that a rise in oil prices to $200 a barrel has not been ruled out by Chakib Khelil, president of Opec. The FT noted Mr Khelil said that oil supplies were adequate but blamed the rise in oil prices on the slide in the dollar. All this just in time for me to catch a plane to Dubai tomorrow, where the idea of an oil shortage is ... well, interesting. And we in Scotland produce the stuff as well? How am I going to explain that over there?

By the way if you are wondering …. is about Issues 3(a) from Oil Price Watch Oil Price at end of day: $116.34 a barrel

This particular oil price watch suspended. Now have to find somewere to fill my car with diesel, which I understand is on the way to $3 a litre here ....