Oil prices plunged in a busy trading session on Friday, triggering big losses across the commodities markets, as investors went back to buying into the US dollar.  Crude oil prices did have a partial recovery, with March US Light oil futures contract settling at $71.19 a barrel on the NYMEX, down 2.7%, while in London, Brent crude oil futures for March delivery dropped to close trading at $69.59 per barrel on ther ICE Futures Exchange. (more…)

The world could start to run out of oil in the next ten years, sparking soaring energy prices and a rush for even more polluting fossil fuels, an influential new study by the UK Energy Research Council has warned.The world could start to run out of oil in the next ten years, sparking soaring energy prices and a rush for even more polluting fossil fuels, an influential new study by the UK Energy Research Council has warned.

The exact date of “peak oil” – when the amount of oil being pumped out of the ground every day reaches its highest point before beginning an inexorable decline – has been hotly debated for decades. Environmentalists have tended to warn oil could run out at any moment, while oil companies insist there are plently more oil fields yet to be discovered.

The most recent estimation from the International Energy Agency, that advises Governments around the world, said conventional oil would not peak until after 2030.

However an authoriative new study from the Government-funded UK Energy Research Council called this prediction “at best optimistic and at worst implausible”. The peer-reviewed research looked at 500 studies from around the world and took into account the difficulty of accessing new oil fields as well as growing demand. It predicted oil will begin running out before 2030 and there is a “significant risk” peak oil will be reached before 2020.

“In our view, forecasts which delay a peak in conventional oil production until after 2030 are at best optimistic and at worst implausible. And given the world’s overwhelming dependence on oil and the time required to develop alternatives, 2030 isn’t far away,” said the report’s lead author Steve Sorrell. “The concern is that rising oil prices will encourage the rapid development of carbon-intensive alternatives which will make it difficult or impossible to prevent dangerous climate change.”

Robert Gross, Head of Technology and Policy Assessment at UKERC, said as soon as oil begins to run out it will make energy more expensive, sparking a knock on effect on industry and economies around the world. Petrol prices would rise and long distance travel become more expensive.

“The age of easy and cheap oil is coming to an end,” he said. “It doesn’t suddenly come to an end, obviously it’s a gradual change, but we’re moving away from easy and cheap oil to increasingly difficult and expensive oil.”

At the moment oil is around ($70) per barrel after peaking at around ($147) per barrel in 2008 during the height of the economic crisis.

Dr Gross said the spectre of peak oil should encourage Governments to invest in more energy-efficient vehicles such as electric cars, renewable energy like wind or solar and improving energy efficiency in industry and homes.

But he said there was a risk that instead the world will start to look at even more intensive forms of fossil fuels, therefore producing more carbon emisions and causing “catastrophic climate change”. Alternatives include heating tar sands to produce oil at huge cost both environmentally and financially.

“The danger is high oil prices push us into high carbon resources just as much as they might help push us towards renewables,” he said.

“The challenge for policy makers is to make sure, on a global scale, that that isn’t the response to more difficult and expensive oil.”

The world produces around 85 million barrels of oil every day. It is estimated this could rise to more than 100 million barrels per day before declining.

Oil companies like BP claim billions more barrels are availabe in new oil fields discovered in the Gulf of Mexico.

However Mr Sorrell said these new supplies are extremely difficult to access and will only delay peak oil by a few weeks or even days.

Even if the new fields are exploited, he said the world needs to move away from oil in order to stop global warming.

But Mr Sorrell said the UK Government had no contingency plans for oil peaking before 2020.

“If these problems are ignored and we do not make these changes ahead of time, we are heading for trouble,” he warned.

The IEA is due to release its latest report on peak oil this November, just before the world meets in Copenhagen to decide a new deal on climate change. The report will be a key influence on whether the rich world is willing to agree to set targets to cut greenhouse gas emissions, while also helping poor countries to switch to a low carbon economy.

The Department for Energy and Climate Change is currently considering the UKERC report.

“We are already well aware of the significant challenges for investment in future oil production and that there is a role for Governments to play in reducing demand for fossil fuels,” a spokesman said. “Our climate change, energy efficiency and energy security policies outlined in the UK low carbon transition plan are not only reducing the UK’s carbon emissions, but are consistent with the need to reduce our use of fossil fuels.”

Crude oil rose for a third day after Nigerian militants targeted an Agip pipeline, while speculation grew that fuel demand will increase as the global economy recovers. The Movement for the Emancipation of the Niger Delta, or MEND, said it blew up an Agip link that delivers crude to the Brass export terminal. The index of U.S. leading economic indicators rose for a second month and European Union leaders said the region is on course for a “sustainable” economic recovery. Protests in Iran over the result of last week’s election entered a seventh day. “Missing flows from Nigeria are starting to add,” said Olivier Jakob, managing director of Petromatrix GmbH in Zug, Swizerland. “We will need to keep an Iranian risk premium for the weekend and to it we will add a Nigerian risk premium.” Crude oil for July delivery rose as much as 93 cents, or 1.3 percent, to $72.30 a barrel in electronic trading on the New York Mercantile Exchange, trading for $72.07 at 12:55 p.m. London time. Prices have risen 60 percent this year and reached a seven- month high of $73.23 on June 11. The July contract expires June 22. The more-active August contract was at $72.63 a barrel, up 72 cents. Petroleum products demand in the U.S., the world’s largest energy user, fell 6 percent in the four weeks to June 12 from a year earlier, the Energy Department said June 17.

Crude futures may fall next week on speculation U.S. fuel stockpiles will increase as the recession and rising prices sap consumption, according to a Bloomberg News survey. Fourteen of 32 analysts surveyed, or 44 percent, said futures will decline through June 26. Thirteen respondents, or 41 percent, forecast that the market will be little changed and five said prices will climb. Last week, 49 percent of analysts said oil would increase. In Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, supporters of presidential contender Mir Hossein Mousavi took to the streets to protest against June 12 re-election of President Mahmoud Ahmadinejad.

Brent crude for August settlement was at $71.77 a barrel, up 71 cents, on London’s ICE Futures Europe exchange at 12:53 p.m. London time.

Crude oil prices rose above $71 a barrel yesterday for the first time in seven months and will soon test the $80 a barrel level, industry analysts said yesterday. West Texas Intermediate light crude for July delivery rose to a high of $71.79 a barrel before pulling back slightly to trade up $1.12 at $71.13 on the New York Mercantile Exchange. In London, North Sea Brent crude gained 95 cents to $70.57 a barrel. Analysts said investors were also pouring money into the commodity as a hedge against a recent weakening in the dollar. Gerard Rigby, an energy analyst with Fuel First Consulting, commented: “I wouldn’t be surprised if we’re testing $80 in a week or two. The momentum right now is too strong.” The latest rally came after the US Energy Department predicted that average oil prices could rise to $67 a barrel in the second half of 2009 – about $16 higher than the first six months of the year and significantly stronger than the £55 a barrel it forecast a month ago. The department’s Energy Information Administration also said global consumption of crude, which has fallen by nearly two million barrels of oil a day this year, will begin to rebound in 2010 as the global economy recovers.

With oil prices doubling from below $35 a barrel in March, UK motorists have seen a return of average petrol prices in excess of £1 a litre.  Meanwhile, oil company BP said the world’s proved oil reserves fell in 2008, the first drop in a decade. Proved reserves of 1.258 trillion barrels in 2008 was three billion barrels less than in 2007, the company said.

Goldman Sachs raised its oil price forecast for the end of 2009 to $85 a barrel from $65, anticipating dwindling supply and rising demand this year and next. Its forecast also put prices at $95 by the end of 2010, led by economic recovery in China. Influenced by these predictions, US light crude rose $2.39 to $68.51, while Brent was up $2.52 to $68.40, sparking fears of a further increase in prices at the petrol pump.  The Goldman Sachs research note, by Jeffrey Currie in London and David Greely in New York, said that the recent rally in US crude was likely to be the first stage in a sustained oil price rally.

The bank’s forecast of recovery in economic activity centres on China and other emerging market countries outside the rich West. Goldman Sachs expects Chinese oil demand to decline by 115,000 barrels per day in 2009, but to grow by 343,000 barrels in 2010.

It has ruled out a strong rebound in US oil demand over the next 12 months, as the pace of American economic activity is expected to remain low. Demand in the US is down 7.7 per cent year-on-year and Goldman Sachs expects that it will decline by 980,000 barrels per day in 2009 and by a further 60,000 in 2010.

Key to the anticipated recovery in the oil price will be the willingness of the production cartel Opec, in particular Saudi Arabia, to keep down production and draw inventories back to ten-year average levels, as non-Opec production continues to decline. Goldman Sachs warned that constraints on storage capacity remained a risk.

However, John Hall, an independent energy analyst, accused Goldman Sachs, one of the world’s largest oil traders, of scaremongering. He said that last December the bank had slashed its forecast for crude oil prices to just $45 a barrel for 2009, in a sharp U-turn from its prediction of $200 made just months earlier in May 2008.

Oil prices peaked at $147 a barrel in July 2008 and then fell sharply to less than $35 in December, as the rapidly deepening global economic downturn reduced demand for energy.

Mr Hall said: “Goldman’s numbers are all over the place. You need to consider the fact that the world is awash with oil on land and sea. And if the recession is really over, tell that to General Motors and LDV.”

Referring to Goldman Sachs’ forecast of a spike to $95 by the end of 2010, he asked: “Who would pay those prices? I don’t think that the Chinese would go that far.”

Mr Hall said he expected a correction in the oil price in the not too distant future: “It could hover where it is now and then come down.”

Last week Opec held production levels, saying that weak demand was “likely to remain for some time”.

Luke Bosdet, a spokesman for the AA, which represents 13 million motorists in the UK, said that at 100.6p per litre, prices at the petrol pump were already 10p up on March, adding £5 to the cost of a full tank.

Oil surged past $65 a barrel on Thursday to a fresh six-month high after OPEC decided to keep output unchanged and government data showed a steep drop in U.S. crude inventories. U.S. crude oil for July delivery settled up $1.63 to $65.08 a barrel, the highest settlement since November 5, after hitting an intraday high of $65.44. London Brent crude rose $1.89 to settle at $64.39 a barrel. U.S. crude stocks fell by 5.4 million barrels in the week to May 22, the U.S. Energy Administration said, above analyst expectations for a 700,000-barrel decline, as refiners ramped up output ahead of the summer. Analysts said while the data showed gasoline demand still trailing year-ago levels, it was looking stronger during the seven days leading into the May 23-25 Memorial Day holiday weekend, which traditionally kicks off summer holiday travel. “What we are seeing here is the demand side start to improve,” said analyst Phil Flynn at Alaron Trading in Chicago.

“Gasoline demand over the Memorial Day weekend is a critical point in judging the health of the U.S. economy. I don’t think the increased demand over the holiday was a fluke.”

OPEC Secretary-General Abudullah al-Badri told Reuters Financial Television that U.S. demand was showing signs of recovering after the economic crisis battered global consumption and sent crude prices off record highs near $150 a barrel struck in July.

OPEC ministers meeting in Vienna opted to leave target output levels unchanged as they bet a strengthening economy and signs of rising demand would support prices.

Some members of the 12-member producer group voiced concern that high global inventories could weigh on prices, but Saudi Arabian Oil Minister Ali al-Naimi said demand was rising and would drain away excess supplies.

“The price is good. The market is in good shape. Recovery is under way. What else could we want?” he said.

Despite OPEC’s optimism about demand, revised EIA estimates for U.S. oil consumption in March showed demand down more than 5 percent from year-ago levels to the lowest level for the month in 12 years.

U.S. stocks gained on Thursday as the rise in oil prices boosted energy shares and overshadowed mixed economic data. .N

New orders for long-lasting U.S. manufactured goods saw their biggest gain in 16 months in April and fewer workers filed for new jobless benefits last week.

Oil climbed above $US60 a barrel in New York, as glutted US crude stockpiles receded and petrol markets firmed up.  Brent crude on the ICE Futures exchange settled at $US60.59 a barrel, up $US1.67. Oil rose after a weekly report on US stockpiles that analysts called a mixed bag. The Energy Information Administration reported crude inventories fell by 2.1 million barrels to 368.5 million barrels in the week ended May 15, triple the decline analysts expected. Yet US oil demand hardly improved, and remained 7.6 per cent weaker than a year ago, when Americans were already consuming less.

As next Monday’s Memorial Day holiday approaches, signalling the unofficial start of the US northern summer driving season, petrol demand gained 3.6 per cent last week, while stockpiles sank 4.3 million barrels to below-average levels, the EIA said.

Crude first cleared the $US60 hurdle in 2005, when the world economy and demand were growing and supplies were struggling to keep pace. Today, demand is shrinking for the first time in decades, leaving many baffled by the rally.

Harry Tchilinguirian, senior oil analyst at BNP Paribas Commodity Derivatives, called it “remarkable” that “under current economic conditions and high crude oil inventories we see oil return to $US60 a barrel.”

Crude is trading for less than half of year-ago levels, as demand has softened with the economic crisis. Expectations that consumers may once again want more oil when the recession bottoms have partly fuelled the rally, with traders watching the stock market for economic telltales.

Concerns about the reliability of supply have also begun to creep into the market, highlighted by an escalating conflict between rebels and securities forces in Nigeria’s oil-rich southern region this week.

Adding jitters to the market, major oil exporter Iran appears to have successfully test-fired a ballistic missile, a US official confirmed. Iranian President Mahmoud Ahmadinejad announced earlier that the country had tested a new two-stage, medium-range missile.