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1. Production and Prices

2. The World Petroleum Conference

3. The IEA's Medium-Term Market Report

4. Energy Briefs

1. Production and Prices

The week started with the oil markets focused on the bombast surrounding the Iranian nuclear situation and a fall in the dollar sending oil to a then all-time intra-day high of $143.67 a barrel. On Tuesday, the IEA's medium-term outlook said world oil demand would rise less than previously forecast, but also said supply would be tighter than anticipated. Wednesdays US stocks report which showed an unexpected 2 million barrel drop in US crude inventories and a smaller than expected increase in the distillate stockpile sent prices to a new intra-day high near $146 a barrel on Thursday. Prices then eased on Friday following an Iranian offer to talk about the latest proposal to settle the nuclear dispute and closed out the week just above $144.

The differential between prices in London and New York has narrowed to a six-month low as demand for gasoline in the US slows and North Sea production falls due to field maintenance. OPEC production was reported as being 300,000 b/d higher in June due to increases in Saudi production. US Gasoline prices continued to rise last week to a nationwide average of nearly $4.11 a gallon.

2. The World Petroleum Conference

Held every three years, the World Petroleum Congress which met in Madrid last week attracted 3,000 delegates from all over the world including OPEC's President Khelil, its Secretary-General El-Badri, the Executive Director of the International Energy Agency Tanaka, the European Commissioner for Energy Piebalgs, several ministers of state, and many senior oil company executives.

The focus of the meeting was naturally on oil prices which set new records nearly every day and reached $146 a barrel on Thursday. Despite numerous expressions of concern about what oil prices will do to the worlds economy, no consensus was reached. Consuming nations spoke of inadequate supplies while producers blamed the falling dollar and speculators. OPECs Secretary General called on the US to stop "harassing" the organization while OPECs President told the US to stabilize the dollar.

3. The IEA's Medium-Term Report

The "surprise" in last weeks IEA report was not that high prices and faltering economies are causing demand to fall, but that the Agency cut its supply forecast for the next 5 years. Global oil demand is now expected to grow by 1.5 million b/d each year for the next five years or 1.6 percent a year as compared to 2.2 percent in the last five-year forecast. On average, new oil projects will slip by 12 months keeping markets tight for the foreseeable future.

Non-OPEC production, including biofuels, will increase 0.5 percent a year to 51.1 million b/d in 2013 from 49.9 million b/d this year. Effective OPEC spare capacity is projected to rise from 2.5 million barrels a day in 2008 to over 4 million a day in 2010 before fading to ``negligible levels'' of around 1 million barrels a day by 2013.