Recession, oil gloom but a bottom for credit, perhaps…

Posted by robin in Financial Articles Market Commentary Friday November 7, 2008 6:17 pm

In the swathe of bad news swamping us, a couple of items pop out from today’s Times.

The IMF has downgraded next year’s global growth forecast from the one it made only a month ago! An acknowledgement of how far and how fast the global economy has changed.

Don’t expect 3%, expect 2.2% they say. Anything below 2.5% is considered a recession, so recession it is for el mundo next year. Presumably the MPC knew this ahead of time when they decided on their jumbo 1.5% rate cut yesterday.

Further gloom was in store from the International Energy Agency, which reminds us that while the oil price is in abeyance as global growth turns negative, the longer term story remains the same. The black goo is running out but our love for it does not. The increasingly acute supply/demand imbalance suggests when the green shoots of economic growth reappear the price of crude is likely to be shooting up alongside it. We could by looking at $200 by 2030. Central bankers will be delighted!

Their 2008 World Energy Outlook forecasts a 45% increase in global energy demand by 2030. But while demand is healthy, supply is looking distinctly sickly and needs attention. It will struggle to keep up as existing production declines (by more than 9% a year from leading fields according to a leaked FT report). Unconventionals will have to plug the gap - eg Canadian Tar Sands, natural gas to liquid. - to fatten the aggregate oil pipe from 84m bpd to 106m by 2030.

“The world was not yet facing an outright shortage but more a lack of investment.” $26trn needs to be spent in the next couple of decades to ensure the pumps don’t run dry and the crude price doesn’t fly into orbit.

Where’s a bulge bracket bank gagging to lend when you need one, eh?

Elsewhere, we find a ray of good news. Razor sharp US private equity house Blackstone, which floated right at the top - two months before the credit crunch - is calling the bottom of the credit markets. They believe liquidity is returning.

For the record, the shares were worth $35 after they ’soared’ on their first days’ trading back in June 2007. Yesterday, they closed at a poxy $7.55, almost 80% down from their debut. Maybe, just maybe, now’s the time to buy in as the fund goes bargain hunting for crippled businesses at knockdown prices…

  

9% oil production decline…or not?

Posted by robin in Financial Articles Market Commentary Wednesday October 29, 2008 12:27 pm

Did the FT screw up?

A furious International Energy Agency certainly thinks so.

Output fom the world’s leading oilfields is falling faster than expected says the FT citing the IEA’s latest World Energy Outlook report. 

The natural annual rate of decline is a whopping 9.1%.

Well the warning signs have been around for quite a while now, most succinctly in my book from Texas oil man Matt Simmons, so anyone taking an interest can’t be too surprised.

But just a sec…

The IEA website press area issued a furious rebuttal titled:

“IEA Statement on Unauthorised Press Coverage of World Energy Outlook 2009″.

It reads: 

“The Financial Times carried a cover page article this morning and a second article on page 4 allegedly reporting on the findings of the forthcoming WEO 2008. This article was drafted without any consultation with the IEA. It appears to be based on an early version of a draft from several months ago that was subsequently revised and updated. The numbers in the article can be misleading and should not be quoted or considered to be official IEA results. We are dismayed that such a comprehensive and important IEA report was made public without our input and verification.

“The IEA will present the final and accurate results of the World Energy Outlook 2008 officially as planned at a press conference in London on 12 November. At that time, we will be happy to discuss the results and their implications for the global energy and climate in full detail.”

Did the news right or wrong move the oil price? Well it’s up over $2 according to Bloomberg.

As to the real story -”the final and accurate results” - we’ll have to wait for the energy research boffins to set the record straight and see what that does for the oil price.