A few of the highlights from today's report from the International Energy Agency, which is seen as one of the key factors behind Tuesday's sharp drop in crude prices. At one point, the light sweet crude contract on NYMEX sunk to $90.13, flirting with the $90 mark just four trading days after everyone braced for $100.
--Demand in OECD nations, which consist primarily of developed economies such as Europe, the US, Australia and Japan, is going to be down for the second year in a row in 2007, to 49.23 million b/d for the year, from 49.32 million b/d in 2006 and 49.67 million b/d a year earlier. Of course, the IEA long has been criticized for underestimating demand. But the market's decline seemed to indicate that traders didn't question the agency's conclusion.
--Overall, the IEA revised downward global petroleum demand growth for the fourth quarter by 500,000 b/d while slashing 2008 estimates by 300,000 b/d.
--World demand is going to rise 2.3% next year, according to the IEA, propelled by Chinese growth of 5.7%, Middle East demand growth of 4.4%, and a 1.2% increase in the OECD. It's ironic that the agency would predict such a big jump in demand for the OECD in 2008 after what it thinks are two consecutive years of slightly declining demand. Next year will have the housing market fallout and high prices as factors all or most of the year (presumably), yet demand is seen growing by a solid amount even after two years of decline. The rationale for such a move can be summed up in this sentence from the agency's monthly report: "While there are clear signs that the rise in prices since the second quarter of this year has pressured gasoline and diesel demand growth in the OECD, it is too soon to believe that significant structural changes have taken place."
--Some breathing room can be seen in the fact that the IEA's call on OPEC for the year is marginally below the IEA's estimate of the group's actual production in October, which it said rose to 31.17 million b/d from 30.76 million b/d in September. But that's a full-year figure, and the gap between the two can fluctuate wildly over the 12 months.
--The world ended the third quarter with stocks of 52.8 days of forward demand, in line with five-year average levels. But the fourth quarter is believed to be seeing a hefty draw on inventories, so it's clearly a figure to watch in the next report.
I think, in 2008, the demand will decline again, just think this: with price higher, demand lower, not proportionality, but is a reality. And as we see, the price of the crude is higher every year, at least the last ones, and won't be the exception the 2008, hope so I'm wrong.
The Pantry reported a mere 1 percent rise in gasoline volume on comparable store sales for FY 2007, and just 0.3 percent for the fourth quarter.
If you are turning out the lights, the party may not be over!
Too many people predicted $100 crude to darken the room now!