Spiga

Oil Facts Vs. Fiction.

Recently, the Organization of Petroleum Exporting Countries cut its forecastfor growth in demand in the third and fourth quarters of 2005 by 600,000barrels per day...the International Energy Agency lowered its fourth-quarterdemand for OPEC oil by 700,000 barrels per day...and Morgan Stanley economistshave flat out called oil a "bubble."Sounds bearish for oil prices, right?
Not so fast
. What we can observe happening in the oil markets is actually very bullish for oil prices.For example, bookings of supertankers for oil exports from the Middle Eastsoared to the highest monthly level this year in July - and shipping costs doubled along the way, according to Bloomberg. Oil production in Norway -usually the No. 3 global exporter, behind Saudi Arabia and Russia - has hit an11-year-low...and China's oil-thirsty economy is humming along at 9.5% growth,shrugging off any and all efforts to slow it down.These don't sound like the ingredients for lower demand or too much supply forme.What's more, speaking of OPEC, the Saudis also recently told the world'sleading industrial powers that OPEC will not be able to meet Western oil demand in 10-15 years. This was the first time - ever - that OPEC has made such anannouncement.
Over the last three years, China has accounted for over a third of the global increase in oil demand. As GDP increases, so does a country's oil use. And Chinese President Hu Jintao says China aims to quadruple its GDP, to $4trillion, by 2020.Already, China's and India's economies are roaring, and their energy use is ramping up, as their citizens are making the switch from bicycles to scootersto cars. Last year, more than 1 million cars were sold in India. Car salesthere are roaring along at a 20% growth, and sales are expected to surge foranother 10 years. Meanwhile, China is seeing auto sales grow by 16% a year,with 2.79 million cars and light trucks sold in the first half of this yearalone. Newly mobile consumers in both countries will need oil and gas - andlots of it.

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