A new inning begins! After writing a column on oil and energy issues for another publication for almost a decade, destiny brings me back to the Saudi Gazette - the newspaper which gave me the initial break once I moved into Saudi Arabia just after the first Gulf War in 1991. Those were different, and if I may say so, not the best of the days at this newspaper. Saudi Gazette today is very much in the midst of a major overhaul - a complete metamorphosis. A new editor-in-chief has taken over. And within a month of his induction - a revolution seems to be in the making. Things are moving in the right direction - one can't escape noticing - virtually on a daily basis. And hence a few days back, when I was confronted with the idea of beginning to write a regular column on oil and energy issues for Saudi Gazette, I had little leeway to say no. And here I am. Over the years, I have learned, energy is a seductive issue. And addictive too. There is rarely a dull moment. Politics and energy are virtually inseparable. They literally go hand in hand. And this makes the task of understanding and prejudging the moves on the global energy chessboard a daunting, challenging, yet exciting task. And this is exactly what I have been doing – it now seems for ages - and would continue to do so on these pages – as long as permitted. And as I too make this new beginning today, the energy world is faced with major concerns. Markets are losing steam, as eurozone woes dampen spirits. Companies in the troubled eurozone reportedly cut workers in April at the fastest pace over two years and new factory orders fell for the 11th straight month, according to the closely watched Markit Eurozone Manufacturing Purchasing Managers' Index. Spain is already in recession, barely two years after emerging from the last downturn at the start of 2010. And the gross domestic product at the world's largest economy, the US is also slowing down. It slowed down to an annual rate of 2.2 percent in the first three months of 2012, from 3 percent in the fourth quarter of 2011. Employment too dipped, dimming further the outlook for oil demand. US private employers hired fewer workers than expected last month. Also new orders for US factory goods posted their biggest decline in three years, adding to the already existing negative sentiments. And then the concerns about the demand outlook for China, the No. 2 oil consumer behind the United States, are also clouding the overall energy scenario. Worries about supply disruption from Iran have also eased up somewhat. And while demand seems caving in, supply side of the equation remains strong, putting the markets into double squeeze. US crude inventories are already soaring to their highest level in more than 20 years after rising for the sixth straight week last week. The US domestic crude stocks too have ballooned more than 29 million barrels since late March, the biggest six-week increase since February 2009, data from the US Energy Information Administration revealed. And while a meltdown could easily be sensed, the 12-member Organization of the Petroleum Exporting Countries is pumping 32.3 million barrels per day (bpd), some 2.3 million bpd more than its target of 30 million bpd and even higher than a Reuters estimate of OPEC output in April published earlier the week. Iraq also boosted crude oil exports in April to an average of 2.51 million barrels a day, the highest level “in decades.” Crude exports rose 8.3 percent last month from 2.32 million barrels a day in March, Falah al-Amri, the head of the State Oil Marketing Organization said in Baghdad last week. Asim Jihad, an Iraqi Oil Ministry spokesman, said on April 1 that exports in March were at the highest since 1980. Crude oil markets are not oblivious to the ominous signals, and the impact on the global demand - supply balance. Markets today are definitely well oiled and the conditions are simply not conducive to a price rally. Prices have already taken a hit, plunging to its lowest level in nearly six months Friday. For the first time since February, the WTI went below the $100 per barrel mark, down by $4.05, or 4 percent to $98.49. For the week, oil fell more than $6 and is now about $12 below its February high. Prices for international benchmark Brent too have tumbled $15 from their 2012 high of $128.40 a barrel, struck on March 1. June Brent futures fell $2.90 to settle at $113.18 a barrel. Fundamentals are gaining control and in current terms, this is not business as usual. All is definitely not well on the energy scene! __
