MNeagle
14th May 2010, 07:26 AM
May 14 (Bloomberg) -- Billionaire Mukesh Ambani, who runs the world’s largest refining complex, said the petroleum industry must be ready for oil prices to rebound to $100 a barrel or more on growing consumption in Asia.
“We have to again be actively prepared to see a three- digit oil price†amid sluggish refining growth and higher marginal cost of production at new fields, Ambani, chairman of Reliance Industries Ltd., said in a speech at a conference in Mumbai today, adding, “$80 to $100 is the norm.â€
Crude oil for delivery in December 2018, the contract dated furthest into the future, rose to a four-month high of $100.38 on May 3 in New York on concern that the BP Plc oil spill would halt future U.S. offshore drilling. Open interest in December $100 calls, bets that prices will breach that level, reached 84,309 contracts yesterday, making it the most widely held option.
“Ambani is right on with his message,†said Victor Shum, a senior principal at U.S. energy consultants Purvin & Gertz Inc. in Singapore. “Crude oil prices are more likely to continue to go up rather than down. I would even venture to say they’re likely to range between $70 and $100 to the end of the year.â€
Oil prices peaked at a record $147.27 a barrel on July 11, 2008, before plummeting to $32.40 on Dec. 19 that same year as the world’s worst recession since World War II slashed demand. Global oil demand is forecast to increase 2 percent this year amid growth in emerging markets, stemming two years of declines, according to the International Energy Agency in Paris.
China, India Demand
China and India, the world’s two fastest-growing major economies, are leading a recovery and their appetite for oil is expected to outpace the world average by more than three times to 2030, according to the IEA.
Bank of America Merrill Lynch May 11 repeated its forecast that crude prices will exceed $100 a barrel next year as a result of growing demand in emerging economies, and the potential for lower interest rates among those nations.
Reliance’s refining complex in Jamnagar refines 1.24 million barrels a day of crude oil into fuels like gasoline, diesel and chemicals used to make plastics, dyes and other products. The company said last month the complex in the western state of Gujarat ran at 108 percent of planned capacity.
“Everyone is worried about excess capacity in our industry†and they underestimate growing consumption in India and China, said Ambani, Asia’s richest man. Demand in India for petroleum-based chemicals is growing as fast as 25 percent and similar trends are seen in China, he said.
Super-Size Projects
Rising crude prices will force the industry to become more competitive by building more efficient, “super-size†plants that integrate oil refining and petrochemical manufacturing to take advantage of scale, Ambani said.
“New assets must factor the shift in demand to Asia,†said Ambani. “In a globalized environment, this would necessitate super-size projects. We can, therefore, expect in our industry that projects of $5 and $10 billion range will become a routine norm.â€
Oil for June delivery was at $72.95 on the New York Mercantile Exchange at 11:35 a.m. London time, putting its decline this week at 2.9 percent. The benchmark contract last closed above the $100 mark on Sept. 30, 2008.
Oil may rise next week on speculation the dollar will drop against the euro as the European Union’s bailout of almost $1 trillion comes into effect, a Bloomberg News survey showed. The Organization of Petroleum Exporting Countries raised estimates for global oil demand in 2010 on optimistic outlook for economic growth in China.
Reliance Industries posted a 30 percent increase in profit for the three months ended March 31.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPQRi6XwG7q4&pos=7
“We have to again be actively prepared to see a three- digit oil price†amid sluggish refining growth and higher marginal cost of production at new fields, Ambani, chairman of Reliance Industries Ltd., said in a speech at a conference in Mumbai today, adding, “$80 to $100 is the norm.â€
Crude oil for delivery in December 2018, the contract dated furthest into the future, rose to a four-month high of $100.38 on May 3 in New York on concern that the BP Plc oil spill would halt future U.S. offshore drilling. Open interest in December $100 calls, bets that prices will breach that level, reached 84,309 contracts yesterday, making it the most widely held option.
“Ambani is right on with his message,†said Victor Shum, a senior principal at U.S. energy consultants Purvin & Gertz Inc. in Singapore. “Crude oil prices are more likely to continue to go up rather than down. I would even venture to say they’re likely to range between $70 and $100 to the end of the year.â€
Oil prices peaked at a record $147.27 a barrel on July 11, 2008, before plummeting to $32.40 on Dec. 19 that same year as the world’s worst recession since World War II slashed demand. Global oil demand is forecast to increase 2 percent this year amid growth in emerging markets, stemming two years of declines, according to the International Energy Agency in Paris.
China, India Demand
China and India, the world’s two fastest-growing major economies, are leading a recovery and their appetite for oil is expected to outpace the world average by more than three times to 2030, according to the IEA.
Bank of America Merrill Lynch May 11 repeated its forecast that crude prices will exceed $100 a barrel next year as a result of growing demand in emerging economies, and the potential for lower interest rates among those nations.
Reliance’s refining complex in Jamnagar refines 1.24 million barrels a day of crude oil into fuels like gasoline, diesel and chemicals used to make plastics, dyes and other products. The company said last month the complex in the western state of Gujarat ran at 108 percent of planned capacity.
“Everyone is worried about excess capacity in our industry†and they underestimate growing consumption in India and China, said Ambani, Asia’s richest man. Demand in India for petroleum-based chemicals is growing as fast as 25 percent and similar trends are seen in China, he said.
Super-Size Projects
Rising crude prices will force the industry to become more competitive by building more efficient, “super-size†plants that integrate oil refining and petrochemical manufacturing to take advantage of scale, Ambani said.
“New assets must factor the shift in demand to Asia,†said Ambani. “In a globalized environment, this would necessitate super-size projects. We can, therefore, expect in our industry that projects of $5 and $10 billion range will become a routine norm.â€
Oil for June delivery was at $72.95 on the New York Mercantile Exchange at 11:35 a.m. London time, putting its decline this week at 2.9 percent. The benchmark contract last closed above the $100 mark on Sept. 30, 2008.
Oil may rise next week on speculation the dollar will drop against the euro as the European Union’s bailout of almost $1 trillion comes into effect, a Bloomberg News survey showed. The Organization of Petroleum Exporting Countries raised estimates for global oil demand in 2010 on optimistic outlook for economic growth in China.
Reliance Industries posted a 30 percent increase in profit for the three months ended March 31.
http://www.bloomberg.com/apps/news?pid=20601087&sid=aPQRi6XwG7q4&pos=7