Saturday Oil Report -- April 14, 2012

Source: Decline of the Empire

Oil prices are edging down, with Nymex WTI going for $102.83 per barrel, and Brent selling for $121.58. I don’t want to read too much into this, but I’ll go out on a limb and lower the alarm level. In the previous report, and the one before that, we were in the red. I see things easing somewhat from here, assuming nobody bombs Iran’s nuclear facilities.

Oil Alarm Level — Orange

I was harshly critical of Obama’s little scheme to take Iranian oil imports off the world market without raising oil prices, but I should note here that I don’t think “the plan” will work. In fact, several Eurpean countries who import Iran’s oil have already been granted waivers from the new sanctions. China and India will do whatever they want to do, and they’re not going to stop using Iranian crude. In short, Obama is bluffing.

The International Energy Agency (IEA) believes oil market conditions are easing.

(Reuters) – The oil market has broken a two-year cycle of tightening supply conditions, the International Energy Agency said on Thursday, as demand growth weakens and top exporter Saudi Arabia increases output.

The agency, which advises industrialized nations on their energy policies, said increased supply and slowing demand growth might already point to a significant rise in global oil stocks. Stubbornly high oil prices could be expected to ease when markets woke up to the shift in trend, it added.

Oil prices rose to highs not seen since 2008 of $128.40 a barrel on March 1, mainly because of worries about the impact of sanctions on Iran’s oil exports. Oil stood around $120 on Thursday. The IEA said prices could fall further.

“Easing first quarter 2012 fundamentals have seen prices recently lose most of the $5 per barrel they gained in March. The muted impact so far is partly because much of this extra supply has been stockpiled on land or at sea,” said the IEA.

Both OPEC and the IEA expect the global economy to grow, and oil demand to grow with it, but at a much slower pace than in 2010 and 2011.

OPEC and the IEA agreed on the outlook for oil demand growth this year, leaving their forecasts unchanged at between 800,000-860,000 barrels per day – broadly unchanged on last year and less than a third of the growth seen in 2010.

These statements should be taken with a grain of salt. These are economists making these statements. These guys are delusional in the usual sense. They always expect oil demand to grow. Who knows what the real story will be? These latest statements are as close to a bearish report as we’re going to get out of these guys.

There was “weak” economic news out of China.

LONDON — Oil prices fell on Friday, dragged down by prospects of weaker crude demand from China as data showed the country’s economy grew at the slowest rate for nearly three years, analysts said.

New York’s main contract, West Texas Intermediate crude for delivery in May, dropped 66 cents to $102.98 a barrel.

Brent North Sea crude for May lost 51 cents to $121.20 per barrel in London midday trade.

“The weak (Chinese) GDP data has caused prices to retreat almost immediately, along with other commodities,” Justin Harper, market strategist at IG Markets Singapore, told AFP.

China’s National Bureau of Statistics (NBS) said the Chinese economy, the world’s second-biggest after the US economy, expanded by 8.1 percent in the first three months of 2012, slower than the 8.9 percent year-on-year growth in the previous quarter.

China’s GDP only grew 8.1% in the first quarter. What was the real growth rate? Divide the official NBS number in half and then substract 0.7%. That yields 3.35%.

Just kidding! But you see what I mean.

(Reuters) – China’s implied oil demand rose 3.4 percent in March from a year earlier to 9.46 million barrels per day (bpd), the lowest in five months, Reuters calculations based on preliminary government data showed on Friday.

The daily rate was 200,000 bpd, or 2 percent, lower than the 9.66 million bpd in February, which was the second-highest level on record, Reuters figures showed.

Implied demand is a combination of crude oil throughput and net imports of refined oil products, ignoring stocks changes which are seldom disclosed by the government.

We must await future developments in China. An odd thing is happening in the United States. Look at this demand chart from the gasoline section of the latest This Week In Petroleum (EIA).

Gasoline demand is rising, as it always does in the spring, despite these high gasoline prices. Demand stood at 8.681 million barrels per day in the week ending April 6. A year ago, demand was 9.181 million barrels per day, so consumption is down about 5.5% year-over-year.

Have gasoline prices peaked? It’s hard to say. AAA Fuel Gauge has the national average price at $3.904 for a gallon of regular unleaded, but that average was $3.932 a week ago.

So we’re in waiting mode. Have global oil prices peaked? Have U.S. gasoline prices peaked? There’s some not-yet-convincing evidence which suggests that the current crisis is over. Only time will tell us if this tentative conclusion was merely an illusion. What will oil prices be in two weeks? I think they will be a few bucks lower than they are right now, but as usual, my crystal ball is a little fuzzy. I can’t seem to get rid of some persistent cloudiness. Maybe I need a new one

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