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Tuesday, October 23, 2018

Record high oil price and record high oil consumption



The price of oil has reached a record high level at the same time as oil consumption is record high. The International Energy Agency (IEA) expect oil demand to increase by a healthy 2.4% in 2008, up from 1.5% in 2007. Even Europe is projected to increase oil consumption in 2008 after a couple of years of decline. The world economy is expected to pull through both the high oil prices and the financial turmoil. Is then all well?



Looking at the IEA figures for oil imports to the Organisation for Economic Co-operation and Development (OECD) countries in 2007, there is a decline in both crude oil and product imports.


The declining OECD imports are in line with the tanker tracking commissioned by Organisation of Petroleum Exporting Countries (OPEC). The total tanker trade traditionally correlates strongly with Middle East oil production. The graphs below show that tanker sailings from the Middle East have, on average, been below the level of last year. The second graph also shows that tanker spot fixtures are declining.  



 Oil stocks are relatively low and U.S. commercial oil stocks mid-October were 7 VLCC loads below the level at the same time in 2006.


Lloyd's List reports that at least four countries are increasing their oil exports this month by installing new systems, restarting production platforms and improving infrastructure. Saudi Arabia will increase production to 9m barrels per day as part of its share of OPEC's output rise promised last month. State-run Saudi Aramco is producing around 8.7m bpd this month, and is opening mothballed wells and fields to meet demand from refiners.


Angola will see its oil production rise to around 2m bpd, as new deepwater oil fields come on stream. Oil major BP has started production from the Greater Plutonio project off the coast of Luanda, and output will be rising from this production ship to 200,000 bpd this quarter.


Traders say BP is increasing output from the Ceyhan terminal in Turkey, after raising output from a pipeline that runs from Caspian Sea oil fields, off Azerbaijan. Shipments are expected to total around 21.2m barrels of crude in November, or about 707,000 bpd. Output from Ceyhan could rise if Iraq can continue pumping crude from its northern fields, but political tensions with Turkey may disrupt output.


Controlling demand and setting environmental standards has principally been the work of government, but in the U.S. the business world is taking action. Its main objective is to reduce energy consumption and thus save money, but it has had the added benefit of developing a greener image with customers.


Contact: Erik Ranheim