Supply Chain News Bites - Only from SCDigest
 

-June 12, 2007

 
 

Logistics News: Oil Demand Surging at Higher than Expected Pace, Energy Group Says

 
 

Meanwhile, Supply is Constrained; Another Jump in Oil Prices in the Second Half of 2007?

 
 

SCDigest Editorial Staff

 
 

Despite persistently high levels of oil and gasoline prices, world wide demand is surging, the International Energy Agency (IEA) reported this week, while supply, especially from non-OPEC sources, is not keeping pace. The likely impact on supply and demand, and ultimately fuel costs, is troublesome, and transportation and logistics managers should plan accordingly.

The IEA, a research group supported by the US and western European countries to keep tabs on energy markets, said it expects world consumption of oil to rise by $1.7 million barrels per day in 2007, an increase of 2 percent. That increase is about 167,000 barrels per day more than the IEA had predicted earlier. (See Oil Market Report.)

Meanwhile, oil production from non-OPEC countries is expected to rise just 900,000 barrels per day, down from previous projections. The result: a market that has little or no excess capacity, and which is subject to large upward price swings if there is any hiccup in global supply.

“We would very much hope that OPEC production is at its seasonal low at the moment... We definitely do need more crude oil,” an IEA spokesman said.

The report estimated that world oil stocks could drop by 1-1.5 million barrels a day in the third quarter, which it said “would push forward stock cover down towards the low levels seen when prices accelerated higher in 2004. That is, by itself, a concern.”

As a result, the agency believes another round of price increases is likely in the second half of this year. With crude oil hovering around $65 per barrel currently and gasoline prices near $3.00 per gallon, supply chain costs could be whacked again from resulting increases in raw material, transportation and fuel surcharge expense.

 
     
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