More doom and gloom

From: Glenn Morton <>
Date: Thu Aug 12 2004 - 07:21:42 EDT

There are some interesting things in the news about oil production.
There are some missing barrels, which has caused quite an interesting

"But there is a mystery in the figures. Global oil demand is
approximately 81 mb/d. With non-Opec crude production at 49.92mb/d and
Opec's at 29.26 mb/d, plus 3.51 m b/d extra for gas and other liquids,
total production is 82.8. This suggests that stocks should be building
by 1.8 mb/d globally, which would noramlly be enough to see prices fall.

        "So the question is, where is that oil going? Some believe it
may be going undisclosed to China or India." Oliver Morgan,"Why Oil
Pipelines have become a Tightrope," The Observer(Business), Aug 8, 2004,

Others think the oil is not even being produced. If there were a 1.8
million b/d surplus, in 30 days you would have an additional day of
production, yet the inventory stocks of oil is not going up. What is
happening may be described in another article:

        "For Opec members, overstating output and capacity is part of
each country's strategy in bidding for higher quotas within Opec. In
practice, the more important determinant of future quotas is past
production. The official output statistics from Iran are especially
inaccurate, the research reveals."
        "Up to 400,000 bpd are being double-counted because some of its
oil is refined abroad and is sent back to Iran. " Alister Heath, "Opec's
Bogus Figures to Blame for Oil Price Hike," The Business, Aug 8, 2004,
p. 1
        "In a bid to hide the fact that they are not producing as much
oil as they claim, some Opec countries are also over-reporting their
consumption of oil. This allows them to produce less exaggerated export
figures, Lombard Street Research said." Alister Heath, "Opec's Bogus
Figures to Blame for Oil Price Hike," The Business, Aug 8, 2004, p. 1

Why is this game important? Because it means that OPEC's claims to be
able to increase the world's production might not be as great as

In related news, in June, for the first time in 11 years, the United
Kingdom was a net importer of oil. That means, that instead of adding
to the world's oil supply, the UK is slurping it up adding to the upward
pressure on prices. They will be a net exporter again later this year
but the trend is down and eventually they will be a net importer every
month, instead of for an occasional month.

A note to Walter, who believed the OPEC report that they would add
capacity and who wrote:
>Then the story changes:

The story, is a story, apparently. What I see happening is that the
high cost of oil will cause a recession, which will take place next
year. Recessions have followed oil price increases by 14 months for the
past 30 years. That will reduce demand and the price will drop then. It
won't be due to higher supply. It will be due to no one having jobs. It
is at those times when oil prices drop that the industry lays off and
early retires people. I am not ready to retire. Thus, I hope I am
Received on Thu Aug 12 07:59:59 2004

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