Daily Sources 3/11

1. Eurointelligence reports that EU finance ministers rejected proposals to soften the requirements for joining the monetary union.

2. Simone Meier at Bloomberg reports that German manufacturing orders fell at annual rate of 38% in January.

3. Andrew Batson at the Wall Street Journal reports that China's customs agency said today that exports fell by 25.7% from a year earlier. Winnie Lee at Platts reports that the preliminary report from the customs office has China importing 11.73 million metric tonnes (~3.06 mb/d) of crude in February. That is slightly up (1.3%) from the 3.02 mb/d (12.82 million metric tonnes) imported in January.

"The country paid $3.65 billion for its crude imports requirement last month, compared with $9.39 billion in February 2008. This was equivalent to an average $42.32/barrel Chinese oil companies paid for its crude imports on a C+F basis in February, $47.11/b or 52.7% less than $89.43/b a year ago."

China exported 610,000 metric tonnes of crude (~159 kb/d) in February, up 50% from 450,000 metric tonnes in January (~106 kb/d). China exported no crude in February 2008. Bloomberg reported that Chinese urban fixed-asset investment climbed by an annual rate of 26.5% in January and February combined to 1.03 trillion yuan (~$150 billion). "The government plans to gradually cut all export taxes to zero to support overseas shipments, Commerce Minister Chen Deming said this week."

4. Reuters reports that Iranian oil minister Gholamhossein Nozari told Fars news that OPEC would readily accept Russia as a member should it choose to apply:

"The ground is ready in OPEC to accept Russia as a new member, but, of course, countries request membership by evaluating and considering their own interests. ... Our message is that non-OPEC (countries) should join OPEC (in helping the market) and we emphasise that a price lower than the current one does not have a justification at all and it stops development. ... It is not logical that OPEC cuts its exports and non-OPEC (countries) pursue their interests."

Nozari alluded to a "solution" that OPEC would utilize at its next meeting last week--see Daily Sources 3/3 #7. In late February, Russian foreign minister Sergei Lavrov said that it was critical to stabilize the market for oil, and that thus Russia's "interests are fully identical in this sphere" with those of OPEC--see Daily Sources 2/23 #8. Clearly, a decision by Moscow to join OPEC would be a tectonic change in the Russian interests calculus and a set back to the US national interest.

Platts reports that Saudi-owned pan-Arab newspaper al-Hayat reported on March 9 that Riyadh had indicated to the OPEC president that it wanted to see better compliance before agreeing to further cuts. Al-Hayat's unnamed source further said that the March 15 meeting would focus on compliance with the current production allocation as opposed to further cuts. Tehran is probably the largest quota cheater in the cartel at this stage.

5. Pamela Constable at the Washington Post reports on the escalating political conflict in Pakistan between President Asif Ali Zardari and opposition leader of the Pakistan Muslim League-Nawaz Nawaz Sharif. Sharif has been speaking to huge crowds across the country urging them to join the lawyers' march protesting the continuing delay in reappointing Iftikhar Chaudhry this week, saying at one point,

"We can change history in seven days. ... The future of Pakistan is bleak, and the constitution is being violated. The whole country is in the process of disintegration."

Now the government has decided to put the kibosh on the lawyers' march, citing Sharif's comments and warning him that further remarks like that would be regarded as sedition. Police have begun arresting and making warning calls to opposition leaders. Well worth reading in full--the site includes a few photos.

6. The EIA reported that crude oil stocks grew by 700,000 barrels to 351.3 million barrels for the week ended March 6. According to a Bloomberg survey, Wall Street analysts had expected a build of 250,000 barrels. The number is well above the historical five year average range for this time of year, but still below the peak seen in 2007. Gasoline stocks, on the other hand, fell by 3 million barrels and is more or less in the middle of the historical range. Analysts had expected a 1 million barrel draw. Distillate stocks--by which the EIA mostly means heating oil and diesel--were up by 2.1 million barrels and are not only well above the historical range for this time of year but counter-cyclical. Analysts had expected a 200,000 barrel build. The EIA also released its Short Term Energy Outlook yesterday. The Oil & Gas Journal reported that the:

"EIA now expects US real gross domestic product (GDP) to decline 2.8% in 2009, leading to a reduction in energy consumption for all major fuels. EIA forecasts that an economic rebound will begin in 2010, with 1.9% year-over-year growth in US real GDP.

Average annual world oil consumption is projected to decline almost 1.4 million b/d in 2009, with consumption in Organization for Economic Cooperation and Development countries falling 1.6 mb/d. This expected decline is 200 lb/d larger than in last month's STEO, reflecting lower expectations of global economic activity this year.

EIA assumes that worldwide GDP growth will decline 0.8% this year, followed by growth of 2.6% in 2010, compared with last month's assumption of a 0.1% decline this year and 3% growth next year.

EIA forecasts that the global economic slowdown will cut the price of West Texas Intermediate crude by more than half from last year's $100/b average. EIA expects WTI to average $42/b in 2009, and $53/b in 2010. These price forecasts are slightly lower than in the previous STEO."

Meanwhile, Robert Perkins at Platts reports that Paris-based IEA senior energy analyst Amos Bromhead told journalists that the financial crisis has shelved spending on 2 mb/d of planned oil production capacity increases, or about $110 billion of planned investment. The DC-based EIA forecast that OPEC would have between 4 and 5 million barrels of surplus capacity in 2009 and 2010.