Rising crude oil inventories don’t necessarily mean dropping prices, said Sara Banaszak, senior economist at the American Petroleum Institute. “I wouldn’t say you would expect inventories to dictate the direction of prices,” she said.

Instead, inventories are more reflective of the “ballpark” level of
where prices should be, relative to recent movements, and not where
they’re headed, she said before a presentation at the Philadelphia
Federal Reserve Bank organized by Global Interdependence Center and
Philadelphia Council for Business Economics.

One factor providing support to crude prices is that the outlook for
non-OPEC production “is not especially strong” over the next few years.
Meanwhile, demand is expected to start rebounding in 2010 as the global
economy recovers, she said.

However, there are some factors to support the expectation of the
“lower steady state” for oil prices, she said, as she referred to the
EIA’s price forecast for crude oil rising to $72 a barrel in 2010.
“We’ve lost all this demand and it’s actually going to take a year or
two or three to get back up to where we were globally in terms of oil
demand.”

Also, surplus crude oil capacity is expected to grow, which is a
“cushion” for the global oil marketplace. Before, when the global
economy was growing faster than expected, there was less of a cushion,
and the tightness affected oil prices. Now, with the demand expected to
revive from its drop, “the cushion is back,” the economist said.

On natural gas, she said that volatility in gas prices won’t impact its
use. She noted that trade in natural gas is more limited and less fluid
than oil. “Natural gas has a lot of advantages for use in different
environments,” she said.

Also, natural gas is often used as the fuel of choice as a backup for
renewable forms of energy, she said. Another counterbalance to price
volatility is that “there is a lot more potential for supply in natural
gas,” she added.

In terms of oil contracts shifting out of dollars, she said, “if there
is a shift, it will occur slowly.” There may be some diversification
“at the margin” into euro and yen.

Climate-change legislation may be possible this year, but the
Boxer-Kerry bill doesn’t fully address the flaws of the previous Waxman
bill, she said.

She also stressed the need to access domestic resources for oil and
natural gas. She noted the Obama Administration’s push for wind and
solar energy. But they currently compose less than half of one percent
of yearly energy consumption in the U.S. Even the rapid growth of
renewable energy won’t be enough to meet the country’s energy needs,
she said.

Source: Wall Street Journal

Search to find what you want

• Tough Road Ahead for the Global LNG Industry

    The global LNG industry is in a crucial stage of it development as a key supplier of natural gas to the world markets. Natural gas has been touted as the fuel of the future due to its clean burning nature, thereby forecasting a positive outlook for future demand.

• Natural gas plunges 15 percent this month

    Natural gas prices have dropped by more than 15 percent in the past month as the country continues to sip at its energy reserves and a balmy November allowed many homeowners to leave the heat off. Retail prices for natural gas, or what many consumers will pay to heat their

• Oil edges above 71 dollars in Asian trade

    World oil prices edged above $71 a barrel in Asian trade Thursday as recent slide in prices prompted traders to invest more in black gold. Light sweet crude for delivery in January was seen trading at $71.08 a barrel at 11.30 a.m Singapore time while Brent crude was at $72.81

• Government reduces oil, gas price forecasts

    The government’s latest energy forecast calls for lower gasoline prices this summer and lower oil prices for the year. The Energy Department’s Energy Information Administration released its monthly Short-Term Energy Outlook on Tuesday.

• Korea said July crude imports from 8.7 percent

    Crude oil imports by South Korea, the world’s No.5 crude buyer, dropped 8.7 percent in July due to poor refining margins and weak exports of oil products, state-run Korea National Oil Corp (KNOC) said on Friday.  KNOC and South Korea’s four refiners — SK Energy , GS Caltex, S-Oil Corp and

• Gas prices spike 12 percent, even with storage facilities bulge

    Natural gas demonstrated again how much it has split from the direction of crude, as prices spiked more than 11 percent despite an enormous glut in supply. Crude prices fell for the second straight trading day. Analysts at Goldman Sachs said prices for natural gas may even triple over the winter,

• Natural gas falls after supply report

    Natural gas prices tumbled Thursday after a government report showed that even after a frigid two-week winter blast, U.S. stockpiles are still well above average for this time of year.Since March, natural gas held in underground caverns has remained at the high end of the five-year average.

• Record oil-gas-price-performance ratio in May Set To Be Narrow: Chart of the Day

    Crude oil has become so expensive compared with natural gas that the record price ratio between them probably won’t last, analysts say. The CHART OF THE DAY shows the prices of these commodities since 1990, when natural-gas futures started trading on the New York Mercantile Exchange, in the top panel.

• Record oil-gas-price-performance ratio in May Set To Be Narrow: Chart of the Day

    Crude oil has become so expensive compared with natural gas that the record price ratio between them probably won’t last, analysts say. The CHART OF THE DAY shows the prices of these commodities since 1990, when natural-gas futures started trading on the New York Mercantile Exchange, in the top panel.

• Goldman 2010 foresees oil at $ 90, higher in 2011

    U.S.