Wednesday, October 03, 2007

Tightening the screw.

CNNMoney: America's top oil suppliers tightening taps on exports: CIBC World Markets.


Six of the largest oil suppliers to the US are poised to cut their global exports by nearly 2 million barrels a day by 2012, ramping up pressure on supply and price, and intensifying the focus on one of the last great deposits open to private investment: Canada's oil sands.

The projected cut, amounting to seven percent by Mexico, Saudi Arabia, Venezuela, Nigeria, Algeria and Russia, reflects the growing struggle in these countries to grow production and manage their own soaring rates of oil consumption, says Jeff Rubin, chief market strategist and chief economist, at CIBC World Markets, who will discuss his latest findings at the firm's Industrials Conference in New York City.

The trend of oil producing countries becoming major oil consumers extends beyond the top US suppliers, says Mr. Rubin. When similar conditions are factored in among the other major oil producers including OPEC, the supply crunch deepens to 3 million barrels a day, or an eight percent cut in global exports. "Soaring domestic demand is cannibalizing export capacity, and will increasingly do so as productions plateaus or declines in many of these countries."

Last year, OPEC members, along with independent producers Russia and Mexico, consumed over 12 million barrels of oil a day, roughly 60 percent more than China and slightly more than all of Western Europe says Mr. Rubin. As a group, they now are second only to the U.S. in terms of market size. Much of the demand in these countries is driven by heavily subsidized prices that keep a barrel of oil down to a cost of between US$10 and US$20. "The cheap supply is fuelling some of the fastest growth in domestic demand anywhere in the world," says Mr. Rubin.