Friday, June 13, 2008
Peak Of Oil Demand
Media has been plagued with articles on peaking of oil supply. Let's have a look at what some others say about the peaking of oil demand. But whats most important is with the fresh developments with CFTC, comments at the bottom.
TD: Overall, crude oil consumption growth so far in 2008 softened to a paltry 0.4%, in line with non-OPEC supply gains and well below overall total world production growth. OECD led the decline, with non-OECD demand growth to slacken further
Bespoke: Even with oil hitting record highs, China's oil imports during May reached their second highest levels on record
Unicredit: The increase in fuel prices in India, Pakistan, Indonesia, Malaysia will slow oil consumption growth only marginally since these countries account for only roughly 5% of global demand for oil. China may follow suit after the Olympics
Lehman: Market tends to conflate legitimate reasons for demand growth with what is likely a temporary spurt in recent demand for inventory related to Olympics
CIBC: Fuel subsidies breed soaring rates of domestic fuel consumption, particularly in OPEC countries, where gasoline is 25 cents/gal in Venezuela and 50-60cents/gal in Saudi Arabia, Kuwait and Iran. No sign of plans to remove subsidies soon in any of these countries
MSNBC: China's car ownership, at only 4% of the population, is expected to rise to 10% by 2015. The fuel-efficient Prius costs nearly twice as much in China as in the US
SG: At constant nominal GDP growth rates, oil burden would have to be US$190-200/barrel to drive oil burden index towards 1980 peak
Commonwealth Bank: Though global growth may slow down in 2008-09, economic development in emerging markets should contribute to oil demand in the long run to 2025
As per my call to short the bugget at US$139, one of the major catalyst I was looking forward to was regulatory changes to curb the seemingly unlimited position limits of many speculators. These are referred in the market place as the "London loophole". The Commodity Futures Trading Commission (CFTC) held talks yesterday with its UK counterpart about the possibility of introducing limits on traders' positions in London's oil markets. The belief is that traders are exploiting London's openess.
CFTC announced that it has created an interagency task force, which will include the Federal Reserve, to study the role of speculators and index traders in London and their trading activities. CFTC requires US exchanges to put in place limits on the size of positions taken by traders to reduce potential threat of market manipulation. The FSA has no such rule. It is hoped that a similar futures contract mirroring WTI traded on ICE Futures Europe would voluntarily impose position limits. Currently ICE does not. The wheels have begun to turn.
p/s photo: Andrea Fonseka