On Friday , May 16th the news media carried the story that Saudia Arabia had turned aside a second personal request from President Bush - that the Kingdom raise it's oil production.
Higher oil prices - supported by an expanding world economy will drag natural gas prices higher with it . The combination of higher energy costs along with higher food costs is raising inflation in India and China and that inflation will be exported world wide. Investors can ride that trend with the energy sector and gold - see our AMP portfolio suggestions later in this article.
Oil Price Forecasts Raised
Crude oil traded little changed after UBS AG and Sanford C. Bernstein & Co. raised their 2008 price forecasts to reflect the 30 percent rise in oil since the beginning of the year.
UBS AG, Europe's biggest bank by assets, raised its 2008 price forecast for crude oil in New York by 32 percent to $115 a barrel, while Bernstein revised its estimate from $90 to $100. Saudi Arabian Oil Minister Ali al-Naimi forecast that Asian for oil would continue to grow in the next 20 years, satisfied mostly by Middle East supply.
China - Highest Gasoline Imports in Two Years
Exports suspended on some products to meet domestic demand
China increased gasoline imports to the highest in at least two years and boosted diesel purchases by 17 times from a year earlier last month to ease shortages.
Gasoline imports surged to 139,099 metric tons, the Beijing-based Customs General Administration of China said in an e-mailed statement today. The country didn't import any of the fuel in March. Diesel imports rose to 520,000 tons from 30,000 tons a year earlier and 490,000 tons in March, partly as farmers prepared to plant crops.
Chinese oil companies have increased fuel imports to counter shortages worsened by government caps on gasoline and diesel that discourage refiners from processing crude at a loss. The nation, previously a supplier of gasoline to the region, may become a net importer within months because of local shortages.
China will move from an Exporter to an Importer of Gasoline
``It's very likely that the country will turn out to be a net importer of gasoline when demand peaks in summer,'' said Yao Daming, an oil analyst with Guangdong Oil & Gas Association. ``
Imports could be the most effective way to solve the domestic shortage.'' China remained a net gasoline exporter last month after shipments to overseas buyers exceeded purchases by about 10,000 tons, less than a single cargo. Exports of the fuel jumped 76 percent to 150,000 tons in April, today's customs figures show.
PetroChina Co., the nation's biggest oil producer, has suspended exports of oil products to meet ``robust'' domestic demand.
``All the products that we used to export have been suspended,'' Chairman Jiang Jiemin told reporters in Beijing today. ``Domestic demand for fuels remains strong, and our own refining capacity is not enough to meet the needs.''
OPEC - producing high sulfur oil - that is unsaleable
The Organization of Petroleum Exporting Countries cut its 2008 global oil demand forecast for a second time in three months as producers report difficulties selling ``heavy'' crude grades.
OPEC, which controls more than 40 percent of the world's crude oil supply, forecasts 2008 oil demand will be 86.95 million barrels a day, a 1.2 million barrel a day gain from 2007. The estimate is a ``slight downward revision'' of 20,000 barrels a day from last month's estimate, according to the group's monthly demand report published this week.
Iran may cut production
Iran, OPEC's second=largest producer, may have to cut production of heavy crude oil because it can't find buyers, the country's OPEC governor Hossein Kazempo Ardebili said yesterday. The premium paid by refiners for light, easy-to- refine oil like West Texas Intermediate traded in New York, which reached a record $126.98 a barrel this week, has risen.
The surge ``has not been equal across all crude grades, OPEC said in today's report. ``The disparity can be attributed to a shortage of complex refinery capacity.''
Total OPEC production averaged 31.7 million barrels a day in April, a drop of nearly 400,000 from March on disruptions in Nigeria and Iraq, according to the report, which cited an average of secondary sources, or estimates from analysts and news agencies. A lack of investment in refinery units that make diesel has increased demand for light oils at the expense of heavy grades, OPEC said today.
`Little Option'
The mismatch ``has left refiners with little option but to increase light grade throughputs, resulting in a widening spread between light and heavy crude,'' the report said. The price spread between Iranian heavy crude and West Texas Intermediate, the benchmark light crude in North America, has quadrupled to $10.99 a barrel, compared with a spread of $2.65 a barrel at the same time last year, according to Bloomberg data. OPEC members including Iran and Venezuela have said world markets are well supplied and the group has no plans to review output levels before a scheduled meeting in September.
Where to Invest :
In each sector The Apprentice Millionaire Program Portfolio has a list of favored juniors :
In Oil
Oilexco ( OIL) on London and Toronto - will double it's production by year end.
Bow Valley ( BVX) on Toronto is now producing in the North Sea and is active in exploration.
Sterling Resources ( SLG)on Toronto - an exploration play with high impact drilling in the North Sea and Romania.
In Natural Gas
Birchcliff Energy ( BIR) on Toronto - a growing junior with large land area exposure and an active drilling program .
Accrete Energy ( GZ) the stock has moved up recently but remaind undervalued
compared to its peers. Very successful drill program continues.
Peyto Energy Trust ( PEY.UN) Toronto - a natural gas focused trust , one third hedged and the best management in the patch.
Gold
Yamana ( YRI) on Toronto - a recent merger of three mines via takeover plus five properties in development.
Centamin Egypt ( CEE on Toronto ) slated for production by year end - the price will move as the Company approaches that milestone.
Jack Bass is the editor of the stock market letter The Apprentice Millionaire Program available at www.amprogram.com His latest book is " Building Your AMP Portfolio - Our Best Ideas for 2008 - 09 "
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Peak Oil - has arrived for