Oil markets face greatest uncertainty ever

Has there ever been a time of greater uncertainty in global oil markets? It seems doubtful.

Even the Persian Gulf crisis surrounding Iraq's blitzkrieg attack and takeover of Kuwait, followed by the US-led coalition to oust Iraq from Kuwait, pales in comparison. One has the sense that truly no one has a good handle on where the unfolding drama that started with last week's terrorist attacks will lead.

President George W. Bush's stirring, no-nonsense speech last night left the unavoidable conviction that Operation Infinite Justice will not end with Osama bin Laden and Afghanistan. Already military and intelligence officials are talking up the prospect of a strike against Iraq. Baghdad's gloating over the terror attacks don't do anything to deter that possibility.

Some may dismiss Bush's speech as mere bluster and saber-rattling. That seems highly unlikely, however, given the mood of the US public today-and given the strategic necessity in a war against terrorism of recognizing that empty saber-rattling would be an invitation to still more terror attacks.

Already, the media have peppered Washington officials with queries as to what other targets there might be in the antiterrorism campaign. And while no one is talking beyond Afghanistan or the stray hint at Iraq, there is the inescapable conclusion that other major oil exporters might be targeted. Even the moderate Middle East governments that are friends and allies of the US must worry-as Pakistan does today-that an attack on Bin Laden and an Islamic country will inflame extremist groups in their own countries, possibly destabilizing their governments. There remains a strong possibility that nations seen as friendly to the US might themselves be the targets of terrorist attacks. Recall that Bin Laden's chief complaint against the US, beyond its support of Israel, is that the US has a military presence in Saudi Arabia-which millions of Muslims see as sacred land. The twisted logic of terrorists can contain even the self-contradictory notion of attacking land sacred to them and its citizens to rid it of infidels.

Such scenarios complicate oil supply availability in other ways. The prospect of military or terrorist attacks on such nations is likely to scare off insurers-an industry already facing the biggest financial setback in its history with the collapse of the World Trade Center towers and related loss of thousands of lives-from insuring tankers, drilling-production facilities, and the like. Without such protection or even with such protection but at an astronomically higher cost, there is no telling how much production or tankering might dry up. There may certainly be enough spare productive capacity in OPEC-namely Saudi Arabia-to take up the slack if Iraq's supplies are again removed from the market, as is likely to occur, regardless of whether the attacks go beyond Afghanistan.

But what happens if Saudi tankers are targeted? If terrorists sow mines in the Gulf of Hormuz? If there's an assassination attempt on the Saudi royal family? If the public outcry in Iran causes the moderates to lose sway? Don't be dismissive of such seemingly wild scenarios. On Sept. 10, would any of us have found the simultaneous hijacking of four airliners used as flying bombs intended to destroy the World Trade Center, the Pentagon, and perhaps the White House anything but a far-fetched plot from a Tom Clancy wannabe?

Perhaps worst of all is that the campaign President Bush spoke of is one he described as a long one, often involving covert attacks by US special forces. When the war that's being waged has no way of being accurately gauged as to its scope or duration, that merely increases the uncertainty.

Demand picture

Yet even with such troubling prospects for world oil supplies, the near-term consensus is decidedly negative.

While oil prices spiked a couple of dollars in the wake of the terrorist attacks, they have fallen back, largely on OPEC's assurances about supply.

But the focus now is on the picture for oil demand. Beyond the immediate depressive effects of millions of barrels of jet fuel overhanging the market because of the shutdown of aviation in much of the world last week, there is also the longer-term prospect of slumping demand owing to the impending likely slide into global recession.

The reduction in jet fuel demand owing to reduced aviation is projected to reach as much as 400,000 b/d over the winter, estimates the London-based Centre for Global Energy Studies. CGES puts the overall decline in global oil demand year-on-year to about 400,000 b/d. At the same time, OPEC is likely to be slower than it has been in the past to cut output as demand falls, easing up on its price band target defense so as to not appear to be profiteering. Consequently, CGES pegs dated Brent possibly falling as low as $22/bbl in first half 2002.

But the events of the months to come could just as easily propel oil prices to double those levels. Uncertainty will rule the oil market, perhaps for a long time to come.

OGJ Hotline Market Pulse
Latest Prices as of Sept. 21, 2001

Click here to enlarge image

null

Click here to enlarge image

null

Nymex unleaded

Click here to enlarge image

null

Nymex heating oil

Click here to enlarge image

null

IPE Gas oil

Click here to enlarge image

null

Nymex natural gas

Click here to enlarge image

null

NOTE: Because of holidays, lack of data availability, or rescheduling of chart publication, prices shown may not always reflect the immediate preceding 5 days.

*Futures price, next month delivery. #Spot price

Related Articles

EIA: US oil output fell 50,000 b/d in May

07/07/2015 Total US crude oil production dropped 50,000 b/d in May compared with April and is expected to continue falling through early 2016 before growth re...

BLM approves ROW for Elko gas pipeline expansion project

07/07/2015 The US Bureau of Land Management’s Tuscarora, Nev., field office signed a decision record approving a right-of-way for Paiute Pipeline Co.’s (PPC) ...

Obama urged by IPAA president to lift ban on US crude exports

07/07/2015 Commending the administration for its actions allowing some condensate to be exported as a petroleum product, Independent Petroleum Association of ...

MARKET WATCH: NYMEX, Brent oil prices take dive on world oil oversupply concerns

07/07/2015 US light, sweet crude oil prices plummeted more than $4/bbl on the New York market July 6, marking a 5-month low, while Brent crude oil prices on t...

Woodside lets contracts for Browse LNG project

07/06/2015 Woodside Petroleum Ltd. has let more contracts for the Browse floating LNG project offshore Western Australia. The contracts, awarded to a Technip-...

Emerging producers offered guidelines for governance

07/06/2015 Like most worthy endeavors, governing oil and gas activity at the national level is easier said than done-especially where oil and gas never before...

The price of oil and OPEC-history repeating?

07/06/2015 The world oil market today is characterized by a standoff between the Organization of Petroleum Exporting Countries (OPEC) and non-OPEC producers a...

Gas faces more competition from coal, renewables, IEA official says

07/06/2015 Natural gas faces growing competition from coal and renewable energy sources at a time when its potential demand growth is slowing down, an Interna...

MARKET WATCH: NYMEX oil prices fall on rise in US rig count

07/06/2015 US light, sweet crude oil prices edged down going into the July 4 holiday weekend on the New York market after Baker Hughes Inc. reported July 2 th...
White Papers

2015 Global Engineering Information Management Solutions Competitive Strategy Innovation and Leadership Award

The Frost & Sullivan Best Practices Awards recognise companies in a variety of regional and global...
Sponsored by

Three Tips to Improve Safety in the Oil Field

Working oil fields will always be tough work with inherent risks. There’s no getting around that. Ther...
Sponsored by

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by
Available Webcasts


OGJ's Midyear Forecast 2015

When Fri, Jul 10, 2015

This webcast is to be presented by OGJ Editor Bob Tippee and Senior Economic Editor Conglin Xu.  They will summarize the Midyear Forecast projections in key categories, note important changes from January’s forecasts, and examine reasons for the adjustments.

register:WEBCAST



On Demand

Predictive Analytics in your digital oilfield - Optimize Production Yield and Reduce Operational Costs

Tue, Jul 7, 2015

Putting predictive analytics to work in your oilfield can help you anticipate failures, plan and schedule work in advance, eliminate emergency work and catastrophic failures, and at the same time you can optimize working capital and improve resource utilization.  When you apply analytic capabilities to critical production assets it is possible to reduce non-productive time and increase your yield.

Learn how IBM's analytics capabilities can be applied to critical production assets with the goal of reducing non-productive time, increasing yield and reducing operations costs.

register:WEBCAST


Cognitive Solutions for Upstream Oil and Gas

Fri, Jun 12, 2015

The oil & gas sector is under pressure on all sides. Reserves are limited and it’s becoming increasingly expensive to find and extract new resources. Margins are already being squeezed in an industry where one wrong decision can cost millions. Analyzing data used in energy exploration can save millions of dollars as we develop ways to predict where and how to extract the world’s massive energy reserves.

This session with IBM Subject Matter Experts will discuss how IBM Cognitive Solutions contribute to the oil and gas industry using predictive analytics and cognitive computing, as well as real time streaming for exploration and drilling.

register:WEBCAST


The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.

register:WEBCAST


Emerson Micro Motion Videos

Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected