Oil prices fell after the International Energy Agency (IEA) said demand for crude this winter would be lower than previously forecast, due partly to the impact of record prices. Nymex December West Texas Intermediate fell $3.43 to $91.20 a barrel, while ICE December Brent lost $3.44 as $88.54 a barrel.
The latest round in the battle for $100 oil appeared to have been lost by the bulls on November 13 as the bears found encouragement from comments in the IEA’s November report the there were strong signs that higher prices were depressing demand.
The IEA cut its forecast for oil demand in the fourth quarter of 2007 by a hefty 570,000 barrels a day to 87.1 million b/d. Added to a cut in the October report, the reduction in the demand forecast for this winter reached 900,000 b/d.
The IEA’s forecasts eased pressure on Opec to announce a further supply increase as delegates gathered in Saudi Arabia for a historic heads of state meeting. Opec chief rejected US calls for increased oil output to cool record prices, saying the market is already well supplied. But the oil group’s secretary-general said a final decision would be made by Opec ministers at a meeting in Abu Dhabi next month, as prices dropped from highs near $100 a barrel.
Inventories: Oil inventories were still at the average level of the past five years and were sufficient for 53.5 days, a margin considered fairly safe. There is plenty of oil in the market and there is no shortage, says the Opec chief.
The Opec chief said the group will not allow any shortage of supply to occur and called on the United States to help in resolving its refinery bottlenecks which are contributing to the price hike.
Opec members are investing 150 billion dollars on 120 projects to raise their capacity by five million barrels a day in 2015. The 12-member group plans to increase its capacity by 19 million barrels in 2030, he said.
Oil prices rose sharply to close to 100 dollars a barrel last week over concerns of tight supplies, geopolitical tensions and a decline in US oil inventories. Prices however lost some ground on November 13 after the International Energy Agency (IEA) lowered its global demand forecast for crude for the fourth quarter this year. The IEA, the energy policy adviser to major developed countries, cited weaker economic activity in the United States and pointed to an increase of 410,000 barrels per day in Opec output in October
Opec is expected to earn a record $658 billion this year from their oil exports and then see their business grow by $104 billion next year.
Members of the Opec are flush with cash from rising global oil demand and high crude prices, which for US oil has nearly doubled from its low at the beginning of the year to a record $98.62 hit in the week ended November 11.
High prices will lift Opec’s net oil export revenues by $53 billion, or 9 per cent, for 2007 compared with last year, based on new estimates from the US Energy Information Administration. The oil producer group is set to ship a record $762 billion in oil during 2008, 16 per cent more than this year, according to EIA projections.
US imports: Much of that oil will be heading to the United States, the world’s biggest crude consumer. US oil demand averages about 21 million barrels a day, with 3 out of every 5 of those barrels imported. Opec provides almost half of total US crude oil imports.
The producer group accounts for 30.4 million barrels of the 84.8 million barrels of average daily global oil output, said the EIA, which is the US Energy Department’s independent analytical arm.
Of Opec’s 12 members, Saudi Arabia represents almost a third of the group’s total oil export revenue, bringing in $190 billion this year.
For 2008, the EIA expects Saudi Arabia to raise $213 billion from oil exports, up 12 per cent. The next five largest Opec oil export earners for this year are: United Arab Emirates ($62 billion), Iran ($56 billion), Nigeria ($55 billion), Kuwait ($54 billion) and Algeria ($50 billion).
Opec member Indonesia is actually a net oil importer because it consumes more oil than it produces, and will lose about $4 billion this year, the EIA said.
Iraq, which is a member of Opec but is not subject to the group’s production quotas, is forecast to bring in $36 billion this year from oil exports and $40 billion next year.
Gold:
The price of gold reached $845.84 an ounce on November 7, the highest level since 1980 and within touching distance of its all time peak off $850. However it has fallen since to $794 a troy ounce. It bounced back to trade above $800 on November 13, as bargain hunters resurfaced and weaker dollar helped the metal.
Gold posted its biggest percentage loss since October 2006 on November 12, after investors liquidated positions on sliding oil and a wave of risk aversion, which hit equity and foreign exchange markets.
Futures contract: In other bullion markets, the key gold futures contract for October 2008 delivery on the Tokyo Commodity Exchange fell to its lowest in almost 3 weeks a 2,815 yen per gramme before ending at 2,887 yen, down 36 yen from November 12 close. The most-active December gold contract on the US exchange fell $3.0 an ounce to $804.60.
Platinum rose 2.1 per cent to $1415 a troy ounce on November 13, after Johnson Matthey released its interim review predicting a supply deficit this year.
John Reade at UBS noted that growth in autocatalyst demand for platinum had slowed sharply this year, due to increased recycling and to lower sales of small diesel vehicles in Europe. However, Johnson Matthey said it expected tighter emissions standards to require more platinum to be used in each vehicle in the future.
Platinum: The world platinum market would end 2007 in a big deficit, with the metal seen hitting a record high of $1,575 in six months on strong fundamentals and buoyant gold prices, said Johnson Matthey, the world’s top platinum refiner and fabricator.
The market deficit was seen at 265,000 ounces this year. It had a surplus of 65,000 ounces in 2006 following seven successive years of deficits.
