Oil Demand: Revised IEA Numbers Spike Oil Prices
By S.R. Nunnally, Market Report
Oil prices have climbed back above $73 a barrel today… on news that the International Energy Agency revised demand growth yet again.
This time, we’re up to a 2.5% rise in 2008 compared to the 2.2% rise that was forecasted just a few short weeks ago (above the original February forecast of 2.0%).
In total, that means demand should be at 88.2 million barrels a day in 2008, up from 86 million barrels a day. Wanna guess where oil supply’s projected to be?
Let me break it down:
OPEC production: 35.4 million barrels a day
Non-OPEC production: 51 million barrels a day
Total supply: 86.4 million barrels a day
Hmmm, even if the IEA hadn’t upped its demand forecast, we’d have a supply cushion of only 400,000 barrels a day.
I don’t even want to think about what a minor supply disruption would do to oil prices under those circumstances… and that’s with a cushion! I’d be hard pressed to even estimate where oil prices would be in the heart of hurricane season next year with a supply deficit of 1.8 million barrels a day.
Call it an unlucky Friday the 13th, if you will. But I’m calling it a harbinger of more than one unlucky day.
I’ve already raised my end-of-summer forecast for oil prices from $72.50 to $76.50. Based on this news, I should be thinking about raising it again.
I’ll look at the charts, and get back to you with a firm number, but in light of this new demand growth, we could be seeing a test of last summer’s highs: at or above $78.
I’ve been telling folks to take advantage of this move by looking at some smaller producers. Hold your core companies, like Exxon Mobil (XOM:NYSE) and Chevron (CVX:NYSE), but consider adding some smaller companies, like Petrohawk Energy Corp. (HK:NYSE).
I recommended HK to League of Wealth subscribers on March 2, 2007, and we’re up more than 32% so far.
Enjoy those gains! And if you’re interested in the League of Wealth, visit www.leagueofwealth.net for more information.