AKA ‘Demand is in the toilet‘, part 2.
Opec says it could take until 2013 for demand to recover to last year’s level. As is the cartel’s wont, the forecast is more bearish than the IEA’s medium-term forecast published two weeks ago, which saw a net rise in demand through to 2014 – albeit a much leaner one than previously forecast.
The cartel has provided a handy chart of how it has revised its forecasts since last year:
At the first major international meeting this year on climate change, in Bonn in early April, environmental campaigners wore T-shirts emblazoned with the question “What age will you be in 2050?”
It was a reference to the long-term targets for emissions cuts under discussion for inclusion in the successor to the Kyoto protocol. Nations were talking about committing to a halving of global emissions by 2050 – a target based on scientific advice contained in the 2007 report of the Intergovernmental Panel on Climate Change – but the point the campaigners were making was that targets so far in the future are not enough in themselves. They wanted shorter term targets too, of emissions cuts by 2020.
Yep, Baker Hughes‘ worldwide rig count did rise slightly in June – from 1,983 to 1,987. But not only is it a year-on-year decline, but the numbers still look very poor compared to the annual averages for the past few years:
Baker Hughes Worldwide rig count, June 2009 (XLS file)
Rig counts: no prizes for guessing (FT Energy Source, 07/04/09)
More bad news in oil services (FT Energy Source, 20/03/09)
Oil prices extended their recent retreat, sinking towards the $62 a barrel level on Wednesday, as traders looked forward to the latest US weekly inventories data for an update on demand conditions in the world’s largest economy.
Base metals and soft commodities were mixed as nagging concerns about the global economy’s recovery prospects weighed on sentiment.
In energy markets, Nymex August West Texas Intermediate slipped 33 cents to $62.60 a barrel while ICE August Brent lost 23 cents at $63.00 a barrel.
US weekly inventories data, due out later in the session, were expected to show a fall of 2.4m barrels in US crude stocks last week, according to a poll of analysts by Reuters.
Gasloine stocks were forecast to have increased 600,000 barrels, rising for a fourth week in succession, while distillate stocks (including heating oil) were expected to have risen 2m barrels.
Nymex August RBOB unleaded gasoline traded just under 1.5 cents lower at $1.7182 a gallon while Nymex August heating oil slipped just over a cent to $1.5859 a gallon.
Weak profit margins were expected to limit US refineries demand for crude. Refinery utilisation was seen slipping 0.1 percentage points to 86.9 per cent.
Read the full commodities report
How much will the G8 meeting achieve on energy? A key reference to halving greenhouse gas emissions by 2050 has already been dropped from the draft communique.
And as if fixing banks, supporting agricultural development and building some kind of pre-Copenhagen statement on climate change weren’t enough, the UK and France are also pushing for international efforts to control oil prices at the G8 meeting beginning today in Italy. The FT reports that Nicolas Sarkozy and Gordon Brown want “oil producers to agree a target price range, based on a clearer understanding of the long-term fundamentals”.
It’s been on the cards for a while.
Investors faced with a paucity of opportunities have been piling into passive commodity funds all year, and now the United States Natural Gas Fund has hit the limit of shares it can issue. From Bloomberg:
The fund applied with the U.S. Securities and Exchange Commission to register 1 billion new shares on June 5. The wait will temporarily halt the fund’s recent growth. Outstanding shares have increased to 281.4 million, more than eight times the level at the start of the year.
Concerns about the size of positions held by these passive funds has been growing since the beginning of this year (even Jim Cramer has joined in), and some fear their large positions are distorting the market. UNG held 18.7 per cent of the open interest in August contracts on Nymex yesterday, according to Bloomberg.
When the House of Representatives passed its climate bill, some environmentalists cheered that the US had taken a step in the right direction. Others complained it had not gone far enough, and that the Obama Administration should have been more active in ensuring it had.
Perhaps these latter criticisms explain why Ken Salazar, Secretary of the Interior, is putting pressure on the Senate, warning that the US cannot fully unleash renewable energy’s economic engine unless the Senate puts an upper limit on the emissions of heat-trapping gases that are damaging the environment.
Rising oil price a risk to global recovery
Sarkozy and Brown want oil producers to agree a target price range (FT)
CFTC prepares crackdown on oil speculators
Signal of a tougher approach to oversight of these markets (FT)
Analysis: Back to petroleum
BP retreats from alternative energy (FT)
Australia uranium miners set for growth
A deficit was likely after 2012 due to delays in starting new mines (Reuters)