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The Commodities Report

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Crude oil stays below 70$/b

Tue, Jun 9 2009, 09:56 GMT
by KBC Market Research Desk

KBC Bank

Headlines

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Brent and Distillates

On Monday oil fell below 68 $/b after a stronger U.S. dollar and profit-taking prompted a retreat from a seven-month high above 70 $ hit last week.
However, oil rose towards 69$/b, snapping two days of falls, on a weaker dollar and ahead of weekly stocks data forecast to show a fall in U.S. crude inventories.

Crude will stay volatile even after a price rally towards 70 $/b, as it is still unclear if the rise is due to the broader economy revival or a new speculative play.

Global oil demand has not rebounded to a level justifying seven-month price highs and a rapid rise could damage the prospects for a wider economic recovery, the IEA Executive Director Nobuo Tanaka told Reuters on Friday. Mr.Tanaka expected a 20% reduction in oil industry investment this year, a pattern that could eventually lead to a supply crunch by 2015.
IEA also expects OECD oil stocks to fall to 57 days by year-end from the current 63 days, if OPEC's production continues at current levels, along with the recovery in demand.

Goldman Sachs raised its 2009 year-end projection for oil prices from 65$/b to 85 $/b and dropped its previous forecast for a pullback in the next three months.
J.P.Morgan became the latest bank to lift its year-end oil price forecast, raising its target from 55 to 65$/b.

OPEC members are complying in May with 86% of output cuts agreed upon over the last year, underpinning a rise in crude prices, Venezuela's Oil Minister Rafael Ramirez said on Sunday. In April OPEC complies with 77% and with 82% in March..

Venezuela has been preparing to nationalize petrochemical projects and last week said it seized property of a U.S. gas service company as President Hugo Chavez steps up a drive to put key industries in state hands. The national assembly is currently reading a proposed law to put all petrochemical activity under state control, affecting Japanese and U.S. companies and extending the list of companies in the oil sector already in government hands.

The 2009 outlook for the oilfield service industry is much worse than expected as companies are hit hard by the steep decline in drilling, especially onshore in the United States, according to consulting firm Spears & Associates Inc.

National Iranian Oil Company (NIOC) has set up its first Beijing office to push for crude sales in China. Even if China's second biggest crude supplier, Iran sold China nearly half a million barrels each day in the first four months of this year, posted only 3% y/y rise, far below the 26% rally in exports from top supplier Saudi Arabia.

China's top refineries plan to raise their crude oil processing in June to record-high levels after some plants completed maintenance, encouraged by the recent fuel price increase and falling fuel stocks.
China raised diesel and gasoline prices on June 1 by 6-7 percent, the second and biggest increase this year, easing some pressure off refiners faced with rising crude oil costs.

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Published on  Tue, Jun 9 2009, 10:03 GMT