By OGJ editors
HOUSTON, July 21 -- The world needs more crude oil priced at a level that makes it economic to refine, said analysts at the Centre for Global Energy Studies (CGES), London.
CGES squarely places the blame for today's tight oil market on the Organization of Petroleum Exporting Countries. The organization continues to assert that the world is well supplied with crude and refuses to accept that production needs to rise, CGES said in its latest Monthly Oil Report.
The report refutes the assertion that the market has enough oil, pointing out that global oil inventories fell for six consecutive quarters between the fourth quarter of 2006 and the first quarter of this year.
OPEC shows no signs of being willing to increase its own production, as it continues to blame high oil prices on factors other than its own production policy, including the weak US dollar, geopolitics, and market speculators, CGES said.
While OPEC forecasts 2008 production growth outside the organization at 560,000 b/d, first-half production was down 330,000 b/d. This implies a surge in non-OPEC output of 1.45 million b/d in the second half.
CGES also said refinery runs will rise only if it becomes profitable to process the marginal barrel of supply without cracking it, since margins on straight-run processing are poor due to weak gasoline and fuel oil markets. Currently refineries are running at capacity of their upgrading units but not to capacity of their distillation units, according to the report.
"In the absence of additional supply, only a global recession, destroying enough demand to reduce the need for OPEC oil, can set prices on a downward path. It is a bleak picture and one that has OPEC's production policy among its key features," CGES said.