The warnings may finally be coming true. Four months after the OECD warned that the soaring oil price could damage the economic recovery in developed nations (since when Brent has advanced another 19 per cent), the IEA has noticed that global oil demand has begun to flatline.
In its March Oil Market Report, it notes the first month of near-zero growth since the summer of 2009, which was just as the recovery was getting under way.
Part of the decline in demand is because of the Japanese refinery capacity which was knocked out by the earthquake and tsunami.
A global backlash against nuclear power in the wake of the Fukushima crisis would lead to higher prices, less energy security and higher carbon emissions, according to Fatih Birol, chief economist at the International Energy Agency.
Birol was speaking as part of the FT’s weekly energy podcast, and told us that if countries around the world scaled back their nuclear ambitions, it would be highly damaging.
Analysts are currently rushing out their forecasts for 2011, and one thing that almost everyone seems agreed on is this: oil prices will remain high.
Last week, Barclays predicted that oil would hit $100/barrel at points during the next year. Today, Moody’s has made a slightly lower prediction, saying that it expected prices to average around $80/barrel over the year. (It is worth pointing out that these two are not mutually exclusive).
As ever, the driving factor is Chiinese demand:
Oil finally moved sharply higher late in the year, thanks to continued strength in Asia (particularly China), a weaker US dollar and an improving outlook for western economies…
We expect these fundamental and technical dynamics to continue in 2011, keeping oil prices strong.
Yesterday I blogged about the growing consensus among analysts that the price of oil was heading in only one direction: upwards. Barclays Capital, in fact, forecast it would hit $100/barrel this year, with Opec only taking action to increase production after a price spike.
Now the IEA has fired a warning shot across Opec’s bows with a stark warning from its chief economist, Fatih Birol. As Birol told the FT:
It is a very telling story. 2010 rang the first alarm bells and 2011 price levels could bring us to the same financial crisis times that we saw in 2008.
Image by Shell
In this week’s readers’ Q&A session, Peter Voser, the chief executive of Shell, answers your questions.
In the first of two posts, he addresses when and how the next oil price shock might happen, the future of the North Sea and why Shell left the Falklands.
In the second post, published above, he discusses the future of natural gas, the controversial process of “fracking” and why biofuels are the answer to powering transport.
Next in the hotseat is Chris Huhne, the UK energy secretary, who will be answering your questions on electricity market reform next Thursday, December 23rd. Send in your questions for consideration by the end of today – Friday, December 17th – to firstname.lastname@example.org.
But for now, over to Peter:
Wednesday’s weekly EIA oil inventory data is worth coming back to on Thursday.
Not only did the EIA report an exceptionally large and unexpected crude draw, it turns out the draw was the largest of its kind for this time of year since 1989.
The snaps via Reuters:
Opec today raised its predicted level of oil demand for 2011 from 86.83m barrels per day to 86.95mbpd, or an increase of 120,000 barrels.
This would imply its current forecast is that demand growth will be 1.2mbpd higher than this year.
Interestingly, this comes out a few days after the IEA released its World Energy Outlook, showing its predictions have gone in the opposite direction. According to calculations by JCB Energy Markets, the IEA has “slashed 7.5mbpd out of its 2030 world oil demand forecast”.
In a way, Chevron’s $4.3bn deal for Atlas Energy – giving it a foothold in the Marcellus shale gas field – was not particularly surprising. After Exxon and Shell made similar moves to take advantage of the US shale boom, Chevron was simply playing catch up.
But two things about the deal have raised eyebrows: the company’s previous resistance to such a strategy and the persistently low price of gas.