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Today's Market WrapUp 10.08.2007 Mon Tue Wed Thu Fri Kirby Archive Inconvenient
Truths I’d like to spend a few minutes on a topic that Jim frequently covers on his radio program – Peak Oil. It bears mentioning – over-and-over – because too many folks are still caught up in the notion that Peak Oil is something “we all” don’t have to worry about in the here-and-now. Nothing could be further from the truth. Let’s stop and consider just how wrong the ‘don’t worry be happy crowd’ have been where the current / observable oil market situation is concerned – shall we: World Oil Prices The world oil price cases in this report are the same as those in EIA’s Annual Energy Outlook 2007. In the reference case, world oil prices decline from $68 per barrel in 2006 to $49 per barrel in 2014, then rise to $59 per barrel in 2030 ($95 per barrel on a nominal basis). When one stops and considers that the pronouncement above was made – 5 months ago - in May of 2007 – it’s hard not to wonder just how, or why, ‘experts’ could be clinging to a hypothetical-reference-case so clearly, utterly and empirically WRONG. Contrast this against China’s most recent oil consumption growth profile as reported by Businessweek: China's net oil imports to fuel its booming economy rose 18.1 percent in the first eight months of this year, a state news agency reported Sunday. Net oil imports were 757.5 million barrels from January to August, the Xinhua News Agency said, citing government customs data. Total imports were 773 million barrels, while exports were 15.5 million barrels. Doing a bit of very simple math: 757 million bbls x .181 / 243 days = 563,855 bbls of ‘new’ Chinese demand per day in the first 8 months of 2007 alone This does tend to support the following: The International Energy Agency expects global oil production in 2007 to total 84.43 million barrels per day [OPEC: 30.41 million barrels per day, Non-OPEC: 50.02 million barrels per day], while global consumption is expected to rise to 85.92 million barrels per day. The major factors in rising demand? Emerging market demand [primarily China] and gasoline-based / heating oil-based consumption in the United States. Consumption in Europe's developed nations and other regions of the world also contribute to demand growth, but China and U.S. lead the pack. Reality does have a way of biting – doesn’t it? Seen through the prism of this reality – one where current demand exceeds current supply – is it any wonder why so many areas of the oil producing world find themselves ‘at odds’ with the world’s largest consumer of crude oil? On a related note, I wonder how many folks have stopped to consider; is it really any wonder that the U.S. Petro-dollar hegemony – as measured by the US. Dollar Index – has entered uncharted territory at the very same time as global crude oil demand is exceeding supply?
Today’s Market The Japanese stock market was closed on Monday in observance of Health-Sports Day. North American markets ended the day mixed with the DOW losing 22.30 points to 14,043.70, the NASDAQ up 7.05 to 2,787.37 and the S&P off 5.0 to 1,552.60. NYMEX crude oil futures fell 2.20 per barrel to close at 79.02. Interest rates were unchanged on the day with the benchmark 5 yr. government bond ending the day at 4.34% while the 10 yr. finished at 4.64%. On foreign exchange market the U.S. Dollar Index gained .44 to close at 78.67. The precious metals complex was down hard with COMEX gold futures losing 8.70 to 733.40 per ounce while COMEX silver futures lost .15 to 13.28 per ounce. The XAU lost 2.27 to 169.00 while the HUI fell 5.76 to 388.73. On tap for tomorrow, at 2:00 p.m. the FOMC is due to release the minutes of their Sept. 18, 2007 meeting. Wishing you all healthy investment returns and a pleasant evening! Rob Kirby Copyright © 2007 All rights reserved. Contact
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