Hi all, the following latest edition of Oil Barrel NewsWeekly Review It is, of course, possible to look at the current strength of the oil price and believe that the optimists are right. Global economic indicators are looking more positive -- to some people’s minds, at least -- stock markets in the US and the UK are holding up and a weaker dollar is helping to boost prices. There were some draw downs of stocks in the US as the world’s largest consumer of hydrocarbons or fossil fuels for transport enters its so-called driving season. OPEC did not feel the need at its meeting in May to cut output levels to give prices a boost.
But the overwhelming body of opinion seems to be that on supply and demand alone there is nothing to suggest that prices should be at the level there are – just under US$70 a barrel, almost double the-less-than US$40 a barrel of four months ago.
As broker and analyst KBC Market Services put it in its Weekly Oil Comment (week of June 8): “Nothing has happened in the fundamental world to change our view that oil demand is very weak and that oil stocks are very high”.
It goes on to say: “Main market stocks increased! again in April and the surplus versus year-ago levels are now about 150 million barrels, a huge proportion of which is located in the US.”
As for demand, KBC says: “In our Monthly Oil Market Outlook published this week ( the week of June 8) we pointed out that the April oil demand in the traditional main six OECD markets (US, Japan, France, Germany, Italy, UK) was nearly 3 million b/d below last year. (It is now around 83 million b/d against 86 million b/d). This is incredible!
KBC concludes: “We believe that based on the fundamentals alone there is little likelihood of oil stocks depleting significantly in 2009 and our early look at 2010 isn’t much more encouraging. So prices shouldn’t have far to go upwards.
The view that the economic indicators are not that rosy and oil prices should not be where they are is shared by many pundits. The point is that speculators are back in the market. It may well be they know something most of us don&! #146;t know. They can see green shoots and are buying now to be ahead of the game. But probably not.
It is said that that it is a different kind of speculation to last year. This time around it is exchange traded funds (EFTs) as opposed to the more generalised commodity indices used last summer as the vehicle of choice for speculators. Some oil men tell us that speculators this year are buying physical cargos of oil and holding them in containers.
But it seems that speculative interest, whatever form it takes, makes it almost inevitable the oil price will breach the US$70 a barrel sooner rather than later. While it is comforting for oil companies, both large and small, to see a retoration to profitable margins, we are nevertheless back in bubble-land. Moreover, this time it is a bubble- land which seems truly divorced from fundamentals (at least last time there was a voracious global demand roaring away).
Calmer heads feel that whatever Saudi Minister Naimi d! ays about an oil price of US$85 it would be a good idea if prices did not get too far ahead of bed rock.
Our final speaker is Tom Winnifrith who is the Lead Fund Manager for the SF t1ps Smaller Companies Growth Fund, the UK’s top performing small cap fund of the last 12 months. He will talk about the outlook for oil, gold and equities. Tom started his career working as an oil analyst and his fund is heavily overweight in both gold and oil. The fund maintained a high cash weighting until September 2008 when it started buying equities aggressively as the rest of the world panicked. Definitely a contrarian, the performance stats from this fund are awesome and cannot be argued with. Tom is also the CEO of Plus-listed RSH, the owner of Oilbarrel.com.
26th Oilbarrel Conference - 18th June 2009 Sponsored By:
18th June 2009 9.30 am - 1.30 pm
The Brewery, Chiswell Street London EC1Y 4SD
Presenting companies include:
Tullow Oil Plc Northern Petroleum Plc Caza Oil & Gas Inc Leni Gas & Oil Plc Guest Speaker: Tom Winnifrith, Fund Manager of SF t1ps Fund
If you would like to attend this event, please contact Mary Smith at [email protected]
Latest News News : June 10, 2009 Providence Resources Exceeds Production Expectation With Its Vermillion 60 Well Offshore Louisiana In the US
The news, when it was announced recently was good. But now it
letter gives food for thought.
NDO Price at posting:
20.0¢ Sentiment: Buy Disclosure: Held
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