Prices and production
Oil prices remain wedded to the equity markets, plunging by $4.45 a barrel on Monday and then rebounding a bit on Tuesday and Wednesday to settle just below $49. Demand for oil continues to drop with the EIA reporting that consumption over the last four weeks is 6.5 percent lower than last year. Distillate and jet fuel demand are down nearly 10 percent. With refining and crude imports up by about 500,000 b/d last week, it is not surprising that total US petroleum inventories increased by 11.3 million barrels last week.
Brokers and speculators continue to stash crude and products away on ships anchored around the world. France’s Total oil company told Reuters that there are now about 100 million barrels stored aboard tankers.
With inventories building and oil prices slipping back towards the mid-$40s, the Iranian and Algerian oil ministers are again talking about production cuts at the next OPEC meeting.
Although Russian oil production has been slipping recently, Moscow says March production was up 0.4 percent to 9.76 million b/d. Russia’s Energy Ministry expects this increase to continue for the rest of the year with output for 2009 being up as much as 2 percent. This news is unlikely to please OPEC, who thought the Russians had agreed to start cutting production.
Mexican production in the 1st quarter was down by 8.4 percent to 2.67 million b/d. Pemex is still forecasting that production in 2009 will be 2.72 million b/d; but considering the rate at which production from Cantarell is dropping, this forecast is likely to be revised downwards several times before the year ends.
General Motors
Skepticism is increasing that GM and the government will be able to pull off a “quick rinse” bankruptcy and return to producing cars in a few weeks as a slimmed down, efficient entity. There seems to be little progress in negotiations with the bondholders, unions, dealers, and parts manufacturers. The company is out of money and can only survive on federal loans.
On Wednesday GM’s CFO announced that the company will not be paying $1 billion of bond interest due on June 1st, indicating that the company will have either converted the bonds into equity shares or will be in bankruptcy by that date. Despite the optimistic talk, many experts continue to say that it will take years to resolve the issues surrounding the bankruptcy of an organization the size and complexity of GM.
