OPEC Oil Ministers Bless $100 Oil
December 26, 2010 by Douglas A. McIntyre
Several OPEC ministers said they believe $100 a barrel oil prices would represent a proper balance between supply and demand.
OPEC will do nothing to increase production before mid-year 2011, and it may not act then. Saudi Oil Minister Ali al-Naimi reiterated Friday that the Organization of the Petroleum Exporting Countries doesn’t need to meet again before June, Dow Jones reports
The global economy can withstand an oil price of $100 a barrel, Kuwait’s oil minister said on Saturday, as other exporters indicated OPEC may decide against increasing output through 2011 as the market was well supplied, Reuters writes
Except for a brief period last week, crude oil prices have been rising steadily from around $88.50/barrel to nearly $91/barrel on the NYMEX. That’s a rise of more than 2.8% in less than a week. The rise appears to be based on an expectation that demand for crude is picking up.
If that is accurate, then a report from the US Energy Information Administration should continue to push crude prices up. The EIA reports that crude imports rose an average of 1.1 million barrels/day last week and commercial inventories fell by 5.3 million barrels from the previous week. The DOE data showed a draw to crude stockpiles.
Gasoline inventories increased by 2.4 million barrels last week, and total petroleum products supplied averaged 19.7 million barrels/day, up 4.1% from the same period a year ago. Demand for gasoline averaged 9.2 million barrels/day, up 1.8% from a year ago.
Platts reported recently that analysts were expecting a drawdown of 2.4 million barrels in crude oil stocks, less than half the actual number.
Better expectations for the US economy combined with colder temperatures are the likeliest candidates for the drawdown in crude stocks and rising prices prices for crude in the US.
Chinese officials have raised the price of refined products there by 4%. Platts estimates that Chinese demand in November averaged 9.3 million barrels/day. Demand is expected to continue growing in China, and the government is raising prices now in an effort to curb the growth in demand.
If most of these factors come together with any unexpected reduction in supply, crude could be at $100 before the end of January which would be a huge threat to the global economic recovery.
Douglas A. McIntyre
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