News Archive

SIMULATORS IPAD/ANDROID UPDATE

Version 1.6

The new release has included Floating Drilling Rig Demand Simulator, which projects rig demand at the historical rate of change, at constant intensity and at progressively rising intensity that would accompany growing real value for oil and gas. Also in the new release, POPS and SPOPS simulators have been updated with modified inputs and models.

ENERGY INVESTMENT ISSUES

Stena Steer May 2012

The physical oil market is worth almost $4 trillion a year at current prices. Just to maintain current demand supply balance means adding more than 3 million barrels a day in new capacity each year at a cost of at least $200 billion. That spend is on top of the ongoing operating and capital cost of producing 90 million barrels a day of liquid fuels.

THE OIL SELLERS WILL STAY IN BUSINESS

Oil Export

There is a fear that oil export trade will dry up soon when home consumption outruns production in the 30 or more exporting countries. The worry is that these states will follow the UK and Indonesia in a switch from exporter to importer. Within a decade or so, the story goes, no more oil will be for sale in international trade because the exporters have used all their available oil at home to fuel their strong new economies. OPEC will be dead and may be replaced by GASPEC led by Russia and Qatar with Nigeria and others hanging on to the natural gas export wagon.

TOMORROW'S GAS - THE LNG MARKET

Unstable prices and costs drive fast shifting sands of natural gas risk and reward

This edition of Tomorrow�s Gas focusses on a comparison between the LNG carrier and floater markets. The global gas and LNG markets, with particular emphasis on China, the U.S. and Australia, are also featured.

U.S. SHALE GAS AFTER THE GOLD RUSH

The shale gas gold rush is over

"The shale gas gold rush is over", Art Berman announced at the ASPO-USA Webinar last week. Shale gas producers are plagued by historic low gas prices brought about by a drilling frenzy at high costs. Well production decline is often drastic and 2012 is set to develop as a terrible year for producers with LNG offering new prospects.

RIG MARKET SNAPSHOT

FLYING FLOATERS

Rig Market Snapshot examines offshore field development, drilling intensity and presents a new set of long term results from our floater market simulator.

SPOPS SIMULATOR IPAD/ANDROID UPDATE

Version 1.5

The new release has some new features in the SPOPS simulator including a pie chart showing different components of the world liquid supply; SPOPS also marks the changes of the results when input is changed. Also in the new release, a new "Synchronise" button is added to allow the user to fetch the latest news stories.

FLOATER MARKET AND OIL MARKET

March 2012

ARCTIC DRILLING BARRIERS AND GATEWAYS

Arctic assumed high priority for The United States and Russia

OFFSHORE RESOURCE POTENTIAL

Stena Drilling fleet expands as global exploration boom takes off from the tropics to the Arctic

ECONOMIC GROWTH OUTLOOK AND OIL PRICES

Economic Growth Outlook and Oil Prices

SNAPSHOT: THE VIEW FROM DAVOS

Surprising Equilibrium

MACROECONOMICS SNAPSHOT

DOUBLE DIP RECESSIONS TAKE SHAPE

Petrologica's projections last November of a triple dip economic cycle with a much lower oil demand profile has been almost echoed by the latest assessment by the International Monetary Fund. Oil prices may rise rather than fall again after 2012 due to supply side constraints and OPEC management. The downward correction to economic growth prospects justifies OPEC caution over demand growth. OPEC is reluctant to commit hundreds of billions of dollars in a new spare production capacity buffer to defend consumer countries against higher prices.

GAS PRICE SNAPSHOT

NORTH AMERICAN GAS PRICE READY FOR A REBOUND

North American gas prices may now be at their low point. A rebound is likely soon. While internationally traded gas prices have been rising quickly, the shale gas boom in the USA has swamped the market and sent prices to their lowest point for some years.

TOMORROW'S GAS - ENERGY LIQUIDITY

Tomorrow's Gas

Technology, price and resources bring oil and natural gas closer together towards a global fuels market.

FUEL'S PARADISE LOST

How we ate the earth and face food and fuel starvation

Energy resource supply is infinite but our ability to pay for it is finite.
Access to the energy store is limited by time and money.

SPOPS OIL PRICE SIMULATOR UPDATE

Petrologica Short-term Oil Price Model

Our 2012 forecast: $108 a barrel average

THE LNG BOOM

January 2012

Demand for gas is projected to increase rapidly. This growth stems mainly from power generation. LNG demand grows even faster than the gas market. The LNG tanker and liquefaction capacity expansion booms, however, bring risk.

THE LOST BARRELS

How low energy values and the race for profits wasted a precious oil resource

A century of huge economic growth has been fed, fuelled and watered by seemingly unlimited supplies of food, energy and water as well as metals and other natural resources. Abundance also means waste so we have left at least two out of every three barrels of oil in the ground and wasted at least half of the oil recovered with inefficient systems and unnecessary use amongst the richest consumers.

ENERGY COMPANIES REGAIN THEIR STRENGTH

November 2011

WORLD ENERGY FORECASTS

Feast or Famine

Seemingly conflicting outlooks from IEA and OPEC are the focus of this report. The intention is to discover the true case of future energy forecasts.

FLOATER MARKET

November 2011

As part of Petrologica's continuing dedication to providing the most up-to-date information possible, the following report is a collection of recent updated charts for the Floater Market.

SPOPS UPDATE

Petrologica Short-term Oil Price Simulator

The SPOPS has been updated for this month.

RIGMAX

Petrologica floating rig model 2011

Offshore floating rig demand has been riding the wave of higher oil prices since the crash of 2008, rescuing the market from severe over-supply and soft day rates. This surge of oil company cash is expected to keep rig demand and day rates strong through 2012. Current demand expansion may even outrun supply in 2012 despite the growth in capacity of some 40 rigs which have already been added in 2010/11. In the medium term drilling demand will again be strengthened by both rising oil and gas prices, steadily absorbing new capacity. Downside risks include a new financial crisis that could destabilise corporate spending as well as oil markets and a resurgence of upstream costs that could undermine drilling budgets.

TOMORROW'S GAS

The LNG boom

This snapshot of the outlook for LNG market summarises some of the views expressed at the recent Global LNG conference in London at the end of September is to be followed by a study aimed at defining the resulting requirement for LNG shipping capacity for the medium and longer term.

NON-OPEC PRODUCTION ANALYSIS

Snapshot report

THE BOTTOM LINE
LIQUIDS SUPPLY OUTLOOK FALTERS AS WORLD ECONOMY WEAKENS
"The global economy is in a dangerous new phase. Global activity has weakened and become more uneven, confidence has fallen sharply recently, and downside risks are growing.” IMF World Economic Outlook September 2011

SHALE GAS IN CHINA AND USA

Snapshot report

China's more centrally planned economic controls will enable unconventional gas to take its place in the energy market without the very volatile disruptions now upsetting the North American market.

However, it is uncertain whether shale gas production in USA will continue to grow at the high rates predicted by agencies and analysts given the depressed and uneconomic gas price.

US SHALE OIL IN PERSPECTIVE

Market Snapshot

Shale oil projections for the USA are taking on the same hype as experienced for shale gas last year, before the economic reality caught up with the investors’ exaggerated expectations of profitability.

OIL PRICE AND FLOATER MARKET

September 2011

Amidst global economic turmoil, oil prices are fluctuating significantly. This report examines the effects this is having on oil markets as well as providing some updates on forecasts for the rest of the year.

INTERIM RESULTS LONG-TERM OIL PRICE MODEL

July 2011

Recent developments have caused changes to to be made to the Long Term Oil Price Model. This snapshot examines what changes have been made and how they affect the model.

OIL MARKET SNAPSHOT: BREAKING POINT

World demand has been and will be much higher than expected

Petrologica's oil demand forecast model has consistently projected higher growth than reported by any of the international agencies. The agencies have now made upward adjustments to both past and future demand. The current release of 2010 world oil demand data by EIA and IEA is about 1.6 Mbd (million barrels a day) higher than previously estimated. Therefore the demand forecast this year and next year has been revised upward. 90 Mbd will be reached next year rather than 2015. By 2015 under the IMF GDP growth assumption, demand could exceed 96 Mbd according to the result from Petrologica's latest simulator updates. The market for oil and other liquids is at its first real watershed, where a sustained imbalance between demand and supply is imminent.

LNG MARKET SNAPSHOT

The leap from global surplus to shortage pushes natural gas towards oil market dynamics

Natural gas begins to follow oil market dynamics
Gas demand has bounced back in 2010/11.
Growing energy shortages in China have triggered an LNG import flood.
The threat of long term gas trade and shipping surplus is gone.
American shale gas boom goes sour.
Look for rising gas prices everywhere.

AMERICAN ENERGY STRATEGIES

Trouble at home and abroad

This report examines the current position of the USA with regards to its current oil and gas consumption, production and import rates. Given last April's incident in the Gulf of Mexico and its tendency towards shale gas, the country's future will need to make up for some deficits somewhere.

SPOPS PETROLOGICA SHORT-TERM OIL PRICE SIMULATOR UPDATE

SPOPS

We have been working continuously on our simulators to assess and quantify the weight of each of the many drivers in the price formation mechanism.

At this stage in a continuously changing market, three drivers are dominating price movements and as a consequence we have recently modified our SPOPS simulator.

THE FLOATING DRILLING RIG MARKET

Offshore business

New capacity overwhelms demand, holds down day rates,
improves field development project economics and thus
accelerates demand for drilling

Drilling cost is the largest component of the cost of new oil from deep water resources. Very high rig day rates have damaged new field economics in recent years.

A rig market surplus now will hold down costs as oil prices rise, so improving upstream economics.

TOMORROW'S OIL

LUXEMBOURG APRIL 2011

The state of play for the fuels of tomorrow as revolution engulfs OPEC's heartland, as nuclear power takes another setback and Obama restates energy policy.
What it all means for offshore business and the rig market

GTL VERSUS LNG

The gradual merging of oil and gas markets.

A report looking at the new processes which look set to bring oil and gas markets closer in the future.

DESERTS ON FIRE

Trouble in the Middle East and North Africa

A snapshot of the current wildfire of revolution, insurrection and regime change across Islamic Middle East, North African and Central Asia. Half the world's oil exports are in the firing line.

ENERGY AT RISK

Japanese nuclear power system damage

In the aftermath of the earthquake and tsunami in Japan, a veil of uncertainty surrounds the immediate future of energy production in Japan. These recent events may well shape the long-term energy future of the company as well.

MIDDLE EAST MELTDOWN - PRESENTATION

The Future of Oil and Gas Prices

Amid political unrest and reported alternatives for the liquids market, this report examines how the situation as a whole stands in the Middle East and looks to the future of production of energy in the region.

SNAPSHOT - GAS TO LIQUIDS

Natural gas ready to jump to liquid fuels market

With the price for oil on a very steady increase and the price of natural gas failing to keep up with the pace, converting natural gas to liquid fuels may well be extremely lucrative. This snapshot report examines the current situation of converting gas to liquid.

MELTDOWN SNAPSHOT

February 2011

In the midst of political unrest in many oil producing countries in and around the Middle East, this report examines the effects all this will have on the oil market, using the most recent available figures.

JACKUP MARKET

In focus

Focussing on the Jackup market, this report looks at this specific area of the market in order to give a good analysis of the current status.

FLOATER MARKET

In focus

From the basics to future projections of its development, this report looks into the details surrounding the floater market.

ENERGY MARKET - STATE OF PLAY

Petrologica for Stena Drilling Luxembourg December 2010

IS WALL STREET LOSING FAITH IN OIL?

THE RISE AND RISE OF STATE CAPITALISM IN ENERGY

Oil has long been a strategic resource rather than just another commodity. Now it may be too big, too valuable and too expensive to be led by private companies seeking the best returns on capital and too hard to access and control except for state companies. “If oil is getting so difficult to produce, why are we doing it any longer”, asked Jeffrey Currie of Goldman Sachs at a London conference this week.

THE PRICE OF ICE

Arctic Conference November 2010

1. The cold frontier: Arctic oil and gas as a strategic issue
2. The resource base
3. Price, price, price
4. Arctic economics
5. How Arctic projects match big new global plays

TOMORROW'S OIL OCTOBER 2010

2010 A YEAR OF MILESTONES AND SIGNPOSTS

The year 2010 marks a crossroads in global energy markets with signposts pointing to fundamental changes ahead.

1. THE BIG PICTURE of the world oil market is still dominated by a big signpost that points down a highway of supply too narrow to carry the accelerating road train of demand. Petrologica plots the route map.
2. OIL PRICE defies demand and supply fundamentals and becomes a financial commodity asset. Both demand and supply are increasingly insensitive to the price of oil.
3. IRAQ challenges Saudi Arabia with a reserves hike to 146 billion barrels and plans to push production to 12 million barrels a day, which would make the country the world’s largest producer, if it happens.
4. VENEZUELA stakes a claim at the top of the world’s oil reserve rankings as “unconventional” heavy oil goes mainstream
5. CHINA leads state company rush to secure access and ownership of a huge portfolio of global oil assets, limiting private sector expansion
6. BP’s MACONDO blow-out moves the bar upwards for deep water oil and gas costs but will not deter exploration and production
7. North American SHALE GAS hits hyper hype and runs into trouble too

DEMAND SIMULATOR UPDATE

Demand Simulator

Petrologica's Demand Simulator uses the latest GDP growth assumptions.

TOMORROW'S OIL 0910

Oil Field Development Cost Trends Analysis

Drivers of an upstream spending recovery 2010-2015. Looking ahead to better margins

OIL PRICE SNAPSHOT 0910

NO MAN'S LAND: The four year hiatus

As long as the world can produce as much oil as it did three years ago in 2007, there should be no shortages until 2012 and so oil prices should be steady through 2011. This year demand for oil is accelerating quickly out of the downturn, but global consumption is not expected to match the last monthly peak in late 2007 until June next year at close to 88 million barrels a day. The financial crisis has brought a four year long hiatus in the evolution of the oil market during which demand fell and recovered and when oil prices both soared and plunged. The price of oil is likely to remain close to $80 a barrel for the next 12 months as the market crosses the no man's land between pre-crisis growth and recovery to previous levels of economic activity.

TOMORROW'S OIL 0810

Squeezing the next barrels from shale

Oil does not flow easily in America anymore. There’s either too much and it’s out of control in the Gulf of Mexico or too little from the old Texas oil fields. Instead a new frontier for precious new supply is the challenge of squeezing liquids from shale rock: the new shale oil rush. Investors may make more money from this shale oil than they do from shale gas at current energy prices, but the USA will depend much more on deep water oil from the Gulf of Mexico.

ENERGY DEMAND SNAPSHOT

The Coal Train Crash

All energy market eyes have been fixed on the rising price of oil over the last decade. Oil has risen to more than three times the value of other fossil fuels, gas and coal. A global natural gas glut, triggered by recession and the shale gas boom in North America, means gas is selling for the equivalent of about $25 a barrel compared to liquid fuels at around $80 a barrel. Coal has been cheaper still, but suddenly, the prospect of imminent peak coal supply has jumped ahead of the peak oil bogeyman.

NEW FUELS SNAPSHOT

The New Fuels Economy

The old energy order is breaking down and a new global energy economy is beginning to challenge the old guard represented by OPEC and the international major oil companies. Growth in the market for liquid fuels no longer flows from new crude oil whose new supply is being undermined by old field decline and by the complications and high costs of difficult deep water plays such as the Brazilian sub-salt and from dangerous reservoirs in the Gulf of Mexico. Instead the extra barrels flow from Canadian tar sands, biofuels, natural gas plant liquids and now from marginal plays such as Bakken oil shales.

THE RUNAWAY OIL TRAIN

Putting the brakes on consumer subsidies

The old world grew fat on cheap oil but the IMF wants to stop the new world doing the same. The old world economies are growing increasingly fearful that the new world will run away with what remains of global easy oil supplies and trigger an energy crisis and probably another financial crisis too. It is now becoming clear that attempts to use climate change policies as a lever to force down fossil fuel consumption will not work. Much higher oil prices have not slowed consumption in the new high growth economies because they often use subsidies to cushion the consumer from the impact of $100 oil.

BEYOND MACONDO

Floating and deepwater rig market update

•The BP blow-out is unlikely to damage deep water drilling for long

•The Gulf of Mexico floating rig drilling moratorium may tighten the 2011 market if postponed 2010 wells are added to ongoing drilling plans for 2011 and 2012

•A 6 month freeze transfers some 15 rig years of work into 2011 and beyond at a time when some long term rig contracts are ending and as new rigs arrive

•This delayed demand may strengthen rig rates

•The USA is heavily dependent on deep water oil so the need to drill remains strong

•The downside risk is higher costs and longer lead times on drilling permits that may deter some operators from committing to higher budgets

•But by 2011 upward oil price pressure will be growing, promising higher revenues

•Operators may persuade government to shorten or relax the deep drilling ban once the blow-out is under control in exchange for tougher regulations

•Total floater market still headed for decline in 2011, but delayed newbuildings and stronger committed demand has slowed day rate falls and maintained 100% utilisation for the highest spec deep water rigs

BLACK SWANS AND SITTING DUCKS

Gulf of Mexico deep water oil drilling and production outlook

Gulf of Mexico deep water oil close to economic breaking point.
Biggest impact of Macondo blow-out on US oil production will be rising costs eroding both new production plans and decline management

SNAPSHOT: THE MACONDO SYNDROME PART 2

Deepwater Horizon fallout takes shape

The wider impact on the deep water rig market and on deep water production in the Gulf of Mexico will depend not only on anger in the White House but on the price of oil threatened by a possible double-dip recession and a concurrent unwinding of oil demand and oil price too. The twin effect of rising deep water drilling costs and softer oil prices would damage rig demand in the short term and certainly damage oil production potential from the US Gulf.

OIL PRICE SNAPSHOT

REALITY CHECK

Oil prices are falling back towards the levels that would be set by the fundamentals of demand and supply. However, this drop has nothing to do with falling demand or high stock levels, yet. Oil has been more of a financial asset than an industrial commodity since the financial traumas of 2008, so value is now set by futures, derivatives and currency markets and has been inflated as markets recovered and the dollar fell and now deflated by the recent reversals.
Sooner or later the oil price will fall back into the basic demand and supply mechanisms. The threat or reality of a double dip recession, triggered by fears over too much debt, may slow or stop economic growth recovery in the OECD. This will mean oil demand goes negative again in the old economies and slow down in the new economies. This switch would then delay the collision between rising demand and falling supply, pushing back the risk of a major price spike.

OIL DEMAND: CHINA

China's Copenhagen commitment

The pace of oil demand will have little impact on overall emissions trends and targets. China has given almost nothing away so far in the climate dialogue, partly because per capita emissions are already far below OECD levels and partly because carbon intensity is falling fast anyway.

TOMORROW'S OIL 0510

The Runaway Oil Train

Oil demand may become a runaway train that far outpaces any possible scenario for liquid fuels supply growth. Unless per capita oil consumption in the east and in the other new growth economies stops growing, then oil demand is likely to be much higher, by as much as 25%, than all the western agencies and OPEC have been forecasting recently.

SNAPSHOT: THE MACONDO SYNDROME

Beyond the Deepwater Horizon

The issues and implications of the Macondo well blowout in the Gulf of Mexico Mississsippi Canyon deep water play, a snapshot report with particular focus on: Exploration and Production, Costs, Canada, Greenland, and BP.

WHY AMERICA MUST BET ON SHALE GAS

The broad perspective of shale gas in the usa and the world

Without new and large supplies of natural gas the United States is facing a severe energy crisis. So far, the USA can do little about dependence on imported liquid fuels but can avoid a big import bill for foreign LNG by investing in shale gas and other unconventional sources, even if the cost is higher than market price for now. The unconventional gas pioneers, mainly independents, are being supported or replaced now by the international majors and by some foreign state companies. These new players can afford to wait for higher prices to make profits. Arctic gas from Alaska will play a role too, but not for at least a decade when a $40 billion gas pipeline can be built to bring supply thousands of miles south to market.

OIL PRICE SNAPSHOT APRIL 10

Long Term Fundamentals Underpin High Oil Prices

Current demand and supply balances suggest that oil prices should be around $40 a barrel. Instead they have been pushing towards $90. The conclusion is simple: prices are no longer being driven by the immediate balance of demand, supply and capacity, as they were in the initial transformation of oil’s value from its long term trend of around $20 to its new band of value between $70 and $100.

THE BOTTOM LINE ON SHALE GAS

US Shale Gas Market

Closer look at the shale gas phenomenon to try to separate out the euphoria from the real world data. The bottom line is that while resources are huge, production is difficult and costly, is falling well below earlier expectations in terms of well life and recovered reserves and in most cases does not make money at current market prices.

THE AMERICAN SHALE GAS BOOM

Shale Gas Success Hits Arctic Prospects

The American shale gas boom is kicking the feet out from under the global natural gas market just when big new investment decisions are needed to secure new gas to feed global market growth after 2015.

RESOURCES SNAPSHOT

West Africa's Growing Potential

Yet-to-find hydrocarbon liquids potential on and offshore West Africa looks to be significantly greater than was estimated a decade ago. The jump from potential to production will be more difficult. African offshore production will struggle to stay close to 3.5 Mbd in the next decade unless more discoveries are translated into producing fields.

US NATURAL GAS SUPPLY

Shale and Arctic control growth now

This report updates the US Shale Gas report of March 2009 with fresh long term forecasts, price assumptions and the current debate over a possible shale gas bubble and its implications for supplies of Arctic gas as part of the future baseload for the US market.

SHTOKMAN PROJECT UPDATE

Gas glut delays Shtokman

Shtokman field partners, Gazprom, Statoil and Total, meet this week (February 5 2010) to discuss the challenges to the field development programme in the light of fading prospects for LNG exports to North America due to the surge in shale gas supply and a collapse of gas demand in European markets. Rumours of project cancellation are premature but delay in start-up to 2015 or beyond is probable.

TOMORROW'S OIL 0110

Oil price follows the new virtual economy

All the standard market indicators suggest low oil prices, but the market stubbornly flies a price of over $80. The world’s largest markets in the OECD are still in the demand doldrums with most indicators of the real economy in the USA heading downwards: employment, industrial production and with them oil demand. Liquids supply was up significantly in 2009 and so stocks of crude oil and products are much higher than normal: usually a sure signal for low oil prices.

TOMORROW'S OIL 1209

Dusk and dawn of two oil worlds

The oil market is reaching the crossover point between two worlds in demand, supply and price. Yesterday's oil supply remains huge and the dominant market force but is reaching the end of growth and the start of a slow but dangerous decline, barely substituted by tomorrow's oil which is not regular crude oil at all, but a mixture of gas liquids, biofuels and unconventional viscous oil.

A sustainable flow of liquids to feed the oil market is only achievable at values to the producers of at least three times the average values of the last 25 years. Tomorrow's oil market means a radical and painful break from oil that is under-valued and over-used. The turmoil of the last two years marks the breakpoint.

Yesterday's demand was governed largely by tandem growth of the economy and oil consumption in the old economies of the OECD. Tomorrow's demand may mean an end to growth in OECD oil demand and a transfer of growth entirely to non-OECD states .

The war on carbon in the guise of climate change policies has much more to do with managing an energy market crisis by forcing down demand to avoid supply shortages across the whole energy spectrum than with temperature changes over the next 100 years. Raising energy costs to the consumer without transferring value to the producer makes an oil crisis much worse.

THE STORY OF OIL

Oil has been part of modern life for longer than you think

A brief history of human uses of oil, from its earliest uses in waterproofing houses, its value as a commodity in Babylonian times, its uses in construction, mummification, road building, war and lighting.

OIL & MONEY 2009

Headlines from Oil & Money Conference 2009

The world oil market will move slowly towards a production plateau somewhere between 90 and 95 million barrels a day at best in the period 2015-2020. More supply than demand through 2010. Demand catches up with weakening supply 2012, but all growth is non-OECD. New price spikes threaten fragile economic growth again soon afterwards.

RUSSIA BETS ITS FUTURE ON THE ARCTIC

Snapshot Update

Russia's plan to double natural gas exports by 2030 is in trouble within weeks of the new energy strategy being announced by Energy Minister Sergei Shmatko.

"The hard reality is that Russia cannot go it alone with its own energy companies if it is to avoid decline of both oil and gas production."

The new energy plan is ambitious and risky because it depends almost entirely on Arctic resources, likely to cost ten times as much as in the fading old giant fields. The trouble comes immediately because Russia needs more foreign cash, equipment, technology and project management skills to ensure timely start-up of projects already under way. These urgent requirements must be balanced with the strategic imperative to ensure state control over almost all energy resources. More urgent still is the need to find a balance between the cost of Arctic hydrocarbons and current market prices. Russia will need higher gas prices.

WARNING: BEWARE PHANTOM ECONOMIC RECOVERY SIGNALS

THE ECONOMIC CRISIS IS NOT OVER YET

Rising oil and other commodity prices and early signs of economic recovery may be misleading. China may have turned the corner, but the rest of the world has not.
The World Bank has just issued the most pessimistic forecast yet of the fall in economic growth in 2009, predicting a drop of 2.9% in global GDP this year. The forecast is matched by a similar report from the OECD.

OIL PRICE: WHAT NEXT?

Mid 2009 Oil Markets

The fundamental fact of the current oil market in mid-2009 is that oil exporters can and sometimes do control the price of oil, especially from downside risk, but less from upside risk. This was NOT the case between 1985 and 2005.

Exporters, along with everybody else from consumers to other producers, do NOT control either financial markets or the world economy. This means, in simple terms, that while exporters can control how much they sell, they do not yet know how far consumption will fall this year or whether it will grow again next year. Therefore, they do not themselves know how much oil they should produce and sell to achieve their target price, which from Russia to Saudi Arabia is loudly signalled at around $75 a barrel, just $5 short of market prices on June 5.

TOMORROW'S OIL

Forecast: Low spend means high price

Oil prices mirror the weather: predictable with care and practice, changeable with the prospect of long term climate change towards a higher temperature.

The oil price weather systems are on the move right now with a period of low pressure to be followed by a high pressure system building from the south.

OIL MARKET SNAPSHOT

PEAK OIL: DEMAND OR SUPPLY?

THE LIMITS TO GROWTH: MARKETS OR GEOLOGY?
Markets and money are setting the limits to growth of oil demand and supply, not exhaustion of the earth's energy resources nor exhaustion of technological ingenuity to create new fuels. OPEC's frustration with both consumers and financial markets is easy to understand. While consumer countries argue for low prices and at the same time warn of climate change challenges linked in part to low energy prices, OPEC members are forced to shut in capacity, delay or cancel new production projects and to accept much lower revenues. Meanwhile, there is a growing perception that one consequence of the global economic crash is that oil demand may resume with little or no growth beyond previous peak levels. No surprise then, that OPEC is pushing for take or pay contracts with consumers to underpin investment in new capacity over the next decade.

BLIND MAN'S BLUFF

Tagging supply to invisible demand

PEGGING OIL SUPPLY TO AN INVISIBLE DEMAND TARGET
OPEC and the oil companies in general are playing a game of blind man's bluff, trying to peg their budgets, production plans and spending to fast moving targets of economic activity, oil demand and prices. 

THE NEXT PRICE REBOUND

First through the ceiling, then through the floor and then the rebound

Petrologica predicted more than two years ago that a fresh oil market breakpoint would be reached in 2008/9. That tipping point has been and gone. We suggested earlier this year that a $140 a barrel price would burn off  years of unnecessary fat in discretionary consumer demand and that oil demand would fall significantly in rich countries . The financial and now wider economic crisis compounds that forecast.
We said then that the cost of new oil has at times risen faster than crude prices when averaged over a period of time, discouraging new investment and setting a high de facto price floor of $100 or more. When prices fall below that floor, new investment stalls.