Royal Dutch Shell Plc  .com Rotating Header Image

Daily Telegraph: Risk of oil crunch as OPEC squeezes tightening market

By Ambrose Evans-Pritchard
Friday 13/04/2007

The world faces the growing risk of an oil crunch this summer as OPEC supply falls to the lowest level in two years and stocks held by wealthy nations tumbled at the fastest rate in a decade.

The International Energy Agency said the oil-exporting cartel had taken 1.2m barrels a day off the markets since last September in a move to support prices through the unusually mild winter, but had now pushed the pendulum too far the other way.

Inventories held by the OECD club of rich states have fallen by 1.1m barrels a day over the first quarter, with continued falls in March, a time of year when countries normally replenish reserves.

Brent crude oil prices in New York rose 35 cents to $68.16 a barrel yesterday on the report, up 20pc from January lows. Brent crude rose above $58 a barrel in London.

“US gasoline stocks are the lowest in five years because of a very cold spate of weather in February so markets are going to get tighter over the next six months, even if there aren’t any seasonal disruptions,” said Lawrence Eagles, the IEA’s head of oil market analysis.

“OPEC has cut supplies to the market and we’re very concerned that this is already causing tightening at this stage of the year. The issue is whether refineries are going to be able to find the oil they need.”

Al-Qa’eda terrorist attacks in Algeria killing 24 people also caused jitters, renewing fears that another relatively pro-Western government in the Arab world could come under threat. Algeria is a major oil exporter and the second biggest supplier of gas to the European market. The bombings came the day after a fatal attack in Morocco.

Global demand for oil is relatively flat, but China seems to have an insatiable thirst as consumers switch from bicycles to cars.

The IAE said petrol consumption had jumped 14.5pc over the past year and use of jet fuel was up 26pc. The agency said China’s oil demand would rise 6.8pc this year to 7.6m barrels per day, becoming a major player in a global market of some 86m barrels per day.

John Hoffmeister, head of Shell’s US operations, said the world would have to learn to live under the permanent threat of higher oil prices until it reorganised its whole approach to energy.

“We have now faced two years of frankly unacceptably high prices because energy demand continues to exceed energy supply. We can get angry, or we can change public policy,” he said.

Non-OPEC production is edging up slowly with fresh supplies from the Caspian region, Russia and the Sudan.

But the once-powerful quartet of Norway, Britain, Mexico and the US is in steady decline, shedding 2.5m barrels a day to less than 15.5m barrels a day.

Barclays Capital said the IEA may have underestimated global demand, suggesting the market may prove even tighter than feared. It said Iraq had little hope of meeting its target of 3m barrels a day, and Iran’s refusal to back down over its nuclear programme raised the risk of escalation in the coming months. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

0 Comments on “Daily Telegraph: Risk of oil crunch as OPEC squeezes tightening market”

Leave a Comment

%d bloggers like this: