I will believe the Saudis don't see any upcoming problems with Ghawar when they cancel one of their projects due to low oil prices. If they continue to be full steam ahead with increasing their capacity then I think they are aware that Ghawar may not be as robust in 5 years time as they would like us to believe.
Joined: May 18, 2006 Posts: 4727 Location: Minneapolis, MN
Posted: Wed Jul 02, 2008 8:01 am Post subject: Weather Could Put Even More Wind in Sails of Oil Prices
Quote:
July 1, 2008
By The Canadian Press
The price of crude oil hit yet another record on the last day of a tumultuous first half, spurting past US$143 a barrel before ending lower on demand fears and a resilient U.S. dollar.
Crude has shot up nearly 50 per cent since the start of the year, in large part on the dollar’s troubles, and analysts expect that trend to remain intact as the second half of 2008 begins.
A U.S. government report lowering oil and gasoline demand estimates and a U.S. dollar hanging tough nullified investor concerns over supply, a fragile global economy and continued tensions in the Middle East.
"What this shows is that demand destruction in the U.S. is a lot larger than previously thought," said Phil Flynn, an energy analyst at Alaron Trading Corp. in Chicago. "There are more signs that demand is deteriorating."
Light, sweet crude for August delivery lost 21 cents to settle at $140 a barrel on the New York Mercantile Exchange. In early electronic trading, the contract hit a record $143.67.
The U.S. Energy Information Administration reported that oil usage in April was lower than previously estimated, falling to 4.2 per cent to 19.768 million barrels per day from 20.631 million. That was 3.9 per cent lower than in April 2007 and the lowest level for the month in six years.
The price of oil, which began 2008 at $96 a barrel, has risen in part on expectations of higher demand in China and other developing nations. But its almost relentless advance has also forced consumers and businesses to cut back the amount of gas and oil they use; it is also posing a threat to U.S. economic growth that could further slice into demand.
Retail gasoline, which has been tracking oil higher, reached a new national average in the United States of $4.086 a gallon, according to a survey of stations by AAA, the Oil Price Information Service and Wright Express. The previous record of $4.08 was reached June 16; since then, oil has moved past $140 and been setting new records of its own.
Gasoline’s surge higher has clearly affected consumer spending in the United States. The concern is that the inflationary effects of higher oil and gas will force consumers to cut back their spending on non-essentials further in the months ahead.
Meanwhile, as the Atlantic hurricane season enters its second month, many energy industry observers are taking bets on how a major storm in the Gulf of Mexico could affect already volatile commodity prices.
In 2005, three big hurricanes walloped the Texas-Louisiana coastline — home to key oil refineries and major offshore natural gas operations — and sent oil, natural gas and gasoline prices to then-record levels.
This year the U.S. National and Oceanic and Atmospheric Administration is predicting an above-average hurricane season, with up to 16 named storms and nine hurricanes.
With concern over supply already causing energy prices to soar, investors are keeping a very close eye on the weather forecast, said Barry Munro, an oil and gas analyst with Ernst & Young.
"Hurricane season plays a very direct impact on how speculators view natural gas prices. They effectively trade on weather," he said in an interview from Madrid, where industry heavyweights were meeting for the World Petroleum Congress.
Three years ago, hurricanes Katrina, Rita and Wilma disrupted supply enough to send natural gas to record highs. But by December, the market swung in the opposite direction, with an oversupply depressing prices.
Only in recent months have natural gas prices begun to recover, closing at US$13.35 per thousand cubic feet on the New York Mercantile Exchange on Monday after languishing at about half that a year ago.
"The speculation left the market as people really properly assessed what the real net supply disruption was," Munro said.
Lanny Pendill, an oil and gas analyst with Edward Jones, said the market is concerned about whether there will be enough natural gas in the system for the high-demand winter season.
"If you look at the natural gas inventories, at least in the U.S., right now they’re about in line with the five-year average numbers. But they’re down about 15 per cent relative to where we were last year," he said.
"We’re going to have to see some pretty decent refills over the coming months in order to get storage levels back towards that 3.4 (trillion cubic feet) that we’ll likely require for the winter months."
Geopolitical tensions, particularly surrounding Iran, also continue to boost oil prices. Traders were digesting reported comments from the commander of Iran’s Revolutionary Guards, who warned that if his country is attacked, Tehran would strike back by barraging Israel with missiles. In a report published Saturday in the conservative Jam-e-Jam newspaper, Gen. Mohammad Ali Jafari said that if Iran were provoked, it would also move to control a key oil passageway in the Gulf.
Iran is the world’s fourth-largest oil exporter and about 60 per cent of the world’s oil passes through the strategic Strait of Hormuz.
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Then stop driving to work, duh..... 
