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Grab the Guns -- Peak Oil is Around the Corner!

Report: OPEC has lost control over oil prices

Friday, September 24, 2004

LONDON — OPEC members have lost control over the oil market.

A report by the Center for Global Energy Studies asserted that the price of crude oil was no longer under OPEC control. The report said OPEC, with spare production capacity of 1.5 million barrels per day, does not have sufficient capacity to significantly reduce oil prices, which have exceeded $47 a barrel.

"This leaves only the thinnest margin to cope with the unexpected and the market is worried that it could quickly be used up in the event of an interruption to supply or a cold winter," the report said.

The center said OPEC production in the third quarter of 2004 reached 29.19 million barrels per day. The figure did not include Iraq.

OPEC Lifts Quotas, Oil Prices Still Rise

Wed Sep 15,12:11 PM ET

VIENNA (Reuters) - OPEC on Wednesday lifted oil supply quotas by one million barrels a day, four percent, in a renewed bid to force down stubbornly high crude prices.

The pact is designed to underscore the intent among the Organization of the Petroleum Exporting Countries to exert downward pressure on prices that last month neared $50 a barrel.

But the new deal is expected to make little difference to actual supply flows because OPEC is already pumping almost flat out.

With prices failing to react, and certainly showing no sign yet of a serious reversal, the agreement may only heighten worries about OPEC's inability to cope with the fastest growing oil demand in a generation.
"This is a signal to the market not a change in total output. It will have a psychological effect on prices," said Iranian Oil Minister Bijan Zanganeh.

"Practically speaking quotas are all but suspended at the moment so where they are set is not important," said Alirio Parra, a former OPEC president.

Traders ignored OPEC and crude traded up 76 cents to $45.10 a barrel as a hurricane battered U.S. Gulf oil operations and weekly data showed a big fall in U.S. crude stocks.

[the following blockquote added 9/27/04]
Oil Near $50 on Supply Fears in Nigeria

LONDON (Reuters) - Oil prices surged to new record highs on Monday near $50 for U.S. crude as Nigeria emerged as the latest focus for worries about supply security on world energy markets.
Growing concerns over militancy in Nigeria, OPEC's number five producer, are compounding worries about supply security in Russia, Saudi Arabia and Iraq.

"All these factors create apprehension in the market and reinforce the view that we're on a knife's edge in terms of supply and demand," said Daniel Hynes, industry analyst at ANZ Bank in Melbourne.

"The uncertainties heighten the risk premium applied to this market."

Global supplies have risen strongly this year but are still straining to meet the fastest demand growth in 24 years. World crude output is close to its limit after many years when OPEC producers kept large volumes untapped.

The lack of a supply cushion has reinforced the view among some investors that oil near $50 is not overpriced, despite a 50 percent jump crude prices since the start of the year.

"The market faces the prospect of years without sufficient flexibility or insulation from shocks during a period of extreme geopolitical stress," said analyst Paul Horsnell of Barclays Capital.

In Nigeria, rebels seeking political reforms in the impoverished oil-producing Niger delta, forced the closure by Royal Dutch/Shell of 30,000 barrels a day as a security precaution.

The militants, threatening output from the country that pumps 2.5 million barrels daily, said at the weekend they would seek to extend the uprising across the West African producer's entire southern delta oil region.
Uncertainty over supplies from YUKOS, Russia's top exporter, also is supporting prices. YUKOS last week trimmed deliveries to China.

In Saudi Arabia, clashes between security forces and suspected al Qaeda followers served as a reminder of the threat to stability in the world's biggest producer.

In Iraq, insurgents fired mortar bombs at the oil ministry building on Saturday, causing minor damage but no injuries.

But Iraqi oil exports, temporarily at least, are as high as they have been since last year's U.S.-led invasion.

Iraqi pipelines have been the target of frequent sabotage attacks. But on Monday deliveries resumed through the main northern line to Turkey after repairs from a bomb attack Sept 2. Southern exports were near full capacity.

from Jane's Defense Weekly:

Geologists and analysts have been saying for some time that estimates of global oil reserves may be dangerously exaggerated. If you take oil prices currently at around US$37 a barrel, the highest for nearly 15 years, US petrol prices at record levels and you add terrorist attacks and diminishing supplies, you have a recipe for inflation and economic slowdown. The question of reserves becomes a much more important factor.
As the world's natural resources shrink and global warming changes the environment, competition for unimpeded access to them has intensified and will continue to do so. About four-fifths of the world's known oil reserves lie in politically unstable or contested regions.

For some background to peak oil this is one good place to begin, here's another, and yet one more.

Now go read this again.