You are here
Freddie Mac gets lawsuit warning from SEC
By Brad Foss
Associated Press
Friday, August 13, 2004
http://news.yahoo.com/news?
tmpl=story&u=/ap/20040813/ap_on_bi_ge/oil_15
WASHINGTON -- With so much uncertainty roiling
oil markets these days, analysts say one thing is
clear: The world's supply cushion is perilously thin.
Whether the amount of extra fuel that could be
pumped in a pinch is 1 million barrels a day, as
many believe, or significantly more than that doesn't
really matter, they say, because the amount of
actual production at risk these days is even greater.
As a result, the threat of output disruptions in Iraq,
Russia, Venezuela, and beyond has thrust crude
futures above $46 a barrel for the first time the
latest run-up coming even after Saudi Arabia offered
the market all it had. If global demand continues to
rise at current rates, don't expect cheap prices
any time soon, analysts said.
On Friday the price of crude for September delivery
surged to $46.58 a barrel on the New York Mercantile
Exchange, a rise of $1.08. That is crude's highest
Nymex settlement on record, although on an
inflation-adjusted basis it is still about $11 below the
price leading to the first Gulf War.
In the past, a comfortable surplus of available output,
or capacity, could be depended on to temper the
blow that geopolitical fears might have on oil
markets, said Lawrence J. Goldstein, president of
PIRA Energy Group in New York.
"But today all uncertainties must be immediately
factored into the price," Goldstein said. "We simply
don't have the cushion anymore."
Sure, there is no literal shortage of oil right now and
prices would likely decline if the threat of sabotage
against Iraqi oil infrastructure waned and the dispute
between the Russian government and oil-giant
Yukos gets resolved in a way that values the
company's assets fairly.
But that would still leave oil markets vulnerable to
other geopolitical flare-ups, analysts said,
explaining why futures are trading above $40
through the end of next summer and many believe
the $50 level will be reached before then.
What changed, experts said, is that private and
state-owned oil companies became cautious about
oversupplying the market after prices collapsed in
the early 1980s. The more circumspect approach
to exploration and production, however, has
allowed the capacity buffer to shrink and put the
industry in a position where it must struggle just
to keep up with rising demand.
"It's a problem that is at least a decade in the
making," Goldstein said. "So it's not going to be
solved in 10 days, 10 weeks or 10 months. It's
going to take years."
Depending on whom you ask, the world has
anywhere from 500,000 to 1.5 million barrels a
day of spare capacity the bulk of it in Saudi
Arabia that could be tapped instantly to offset
a temporary loss of supply.
"This is an exceptionally low ratio for an 81.4
million-barrel-per-day supply system and is well
below the 10-year average of 5.0 million barrels
per day," notes A.G. Edwards senior oil analyst
L. Bruce Lanni.
And it helps to explain why this week's attempt
by Saudi Arabia to calm markets was ineffective.
The Saudis said they were willing to put on the
market an additional 1.3 million barrels per day,
virtually all the country's available production. But
for many experts that served only to highlight the
market's supply limits.
"They are getting very close to capacity levels,"
said Marshall Steeves, an energy analyst at the
New York-based research firm Refco. "If demand
keeps expanding, what are we going to be doing
at end of the year?"
Robert Ebel, director of the energy program at the
Center for Strategic and International Studies in
Washington, attributed the latest price surge to
the fact that "there are a lot more trouble spots
out there than we are normally confronted with,"
including terrorist attacks in May and June
against oil workers in Saudi Arabia.
* Yukos, which pumps roughly 1.7 million barrels
a day, needs to pay the Russian government
$3.4 billion in back taxes. Its woes have prompted
worries that the efficiency of the company could
suffer in the next six months to a year as assets
are sold off and bankruptcy looms.
* In Iraq, output temporarily ceased this week as
loyalists of a radical Shiite cleric threatened to blow
up oil pipelines and port infrastructure. Iraq exports
roughly 1.8 million barrels a day through the
southern port of Basra.
* Add to the mix the persistent fear of political and
labor unrest in Nigeria (2.4 million barrels a day) and
Venezuela (2.2 million barrels a day), and the sheer
complexity of the situation becomes dizzying, even
for veteran energy traders.
Indeed, the list of politically unstable oil-producing
nations has always been long. But what especially
unnerved oil traders in recent months was the speed
with which the world's oil appetite grew, even with
higher prices.
The International Energy Agency, a Paris-based
industry watchdog, said this week that it expects
global demand to rise by 3.2 percent, or 2.5 million
barrels a day, in 2004 more than double its
original estimate.
Some analysts also point to the dwindling levels of
oil kept in storage in the United States as an area
of growing concern. The supply of commercially
available crude on any given day has fallen by
about 15 percent over the past decade in spite of
steadily rising demand.
But others say the situation is nothing to worry
about as advances in information technology and
logistics have enabled the oil industry like much
of the U.S. economy to operate efficiently with
less inventory.
"This is a genuinely tight market," said Leonidas
Drollas, chief economist of the Center for Global
Energy Studies in London, downplaying the role
of hedge funds and other speculative investors in
driving prices higher.
However, over the next 12 months he expects high
prices to cause demand to taper off and production
to increase.
"That's the classic response of the market," Drollas
said. "Prices will weaken."
----------------------------------------------------
To subscribe to GATA's dispatches, send an e-mail to:
gata-subscribe@yahoogroups.com
To unsubscribe, send an e-mail to:
gata-unsubscribe@yahoogroups.com
----------------------------------------------------
RECOMMENDED INTERNET SITES
FOR DAILY MONITORING OF GOLD
AND PRECIOUS METALS
NEWS AND ANALYSIS
Free sites:
http://www.cbs.marketwatch.com
http://www.capitalupdates.com/
http://www.silver-investor.com
http://www.thebulliondesk.com/
http://www.goldismoney.info/index.html
http://www.minersmanual.com/minernews.html
http://www.a1-guide-to-gold-investments.com/euro-vs-dollar.html
http://www.investmentrarities.com
http://www.kuik.com/KH/KH.html
(Korelin Business Report -- audio)
http://www.plata.com.mx/plata/home.htm
(In Spanish)
http://www.plata.com.mx/plata/plata/english.htm
(In English)
Subscription site:
http://www.lemetropolecafe.com/
Eagle Ranch discussion site:
http://os2eagle.net/checksum.htm
Ted Butler silver commentary archive:
http://www.investmentrarities.com/
----------------------------------------------------
COIN AND PRECIOUS METALS DEALERS
WHO HAVE SUPPORTED GATA
AND BEEN RECOMMENDED
BY OUR MEMBERS
Blanchard & Co. Inc.
909 Poydras St., Suite 1900
New Orleans, Louisiana 70112
888-413-4653
http://www.blanchardonline.com
Centennial Precious Metals
3033 East 1st Ave., Suite 403
Denver, Colorado 80206
www.USAGold.com
Michael Kosares, Proprietor
US (800) 869-5115
Canada 1-800-294-9462
European Union 00-800-2760-2760
Australia 0011-800-2760-2760
cpm@usagold.com
Colorado Gold
222 South 5th St.
Montrose, Colorado 81401
www.ColoradoGold.com
Don Stott, Proprietor
1-888-786-8822
Gold@gwe.net
El Dorado Discount Gold
Box 11296
Glendale, Arizona 85316
http://www.eldoradogold.net
Harvey Gordin, President
Office: 623-434-3322
Mobile: 602-228-8203
harvey@eldoradogold.net
Investment Rarities Inc.
7850 Metro Parkway
Minneapolis, Minnesota 55425
http://www.gloomdoom.com
Greg Westgaard, Sales Manager
1-800-328-1860, Ext. 8889
gwestgaard@investmentrarities.com
Kitco
178 West Service Road
Champlain, N.Y. 12919
Toll Free:1-877-775-4826
Fax: 518-298-3457
and
620 Cathcart, Suite 900
Montreal, Quebec H3B 1M1
Canada
Toll-free:1-800-363-7053
Fax: 514-875-6484
http://www.kitco.com
Lee Certified Coins
P.O. Box 1045
454 Daniel Webster Highway
Merrimack, New Hampshire 03054
www.certifiedcoins.com
Ed Lee, Proprietor
1-800-835-6000
leecoins@aol.com
Miles Franklin Ltd.
3015 Ottawa Ave. South
St. Louis Park, Minn. 55416
1-800-822-8080 / 952-929-1129
fax: 952-925-0143
http://www.milesfranklin.com
Contacts: David Schectman,
Andy Schectman, and Bob Sichel
Missouri Coin Co.
11742 Manchester Road
St. Louis, MO 63131-4614
info@mocoin.com
314-965-9797
1-800-280-9797
http://www.mocoin.com
Resource Consultants Inc.
6139 South Rural Road
Suite 103
Tempe, Arizona 85283-2929
Pat Gorman, Proprietor
1-800-494-4149, 480-820-5877
Metalguys@aol.com
Swiss America Trading Corp.
15018 North Tatum Blvd.
Phoenix, Arizona 85032
http://www.swissamerica.com
Dr. Fred I. Goldstein, Senior Broker
1-800-BUY-COIN
FiGoldstein@swissamerica.com
----------------------------------------------------
HOW TO HELP GATA
If you benefit from GATA's dispatches, please
consider making a financial contribution to
GATA. We welcome contributions as follows.
By check:
Gold Anti-Trust Action Committee Inc.
c/o Chris Powell, Secretary/Treasurer
7 Villa Louisa Road
Manchester, CT 06043-7541
USA
By credit card (MasterCard, Visa, and
Discover) over the Internet:
http://www.gata.org/creditcard.html
By GoldMoney:
http://www.GoldMoney.com
Gold Anti-Trust Action Committee Inc.
Holding number 50-08-58-L
Donors of $750 or more will, upon request,
be sent a print of Alain Despert's colorful
painting symbolizing our cause, titled "GATA."
GATA is a civil rights and educational
organization under the U.S. Internal Revenue
Code and contributions to it are tax-deductible
in the United States.
