Peter Tertzakian on Tag OilCRUDE OIL
$79.72 +1.02
TAG OIL
(V-TAO)
$3.21 -0.03
As we mentioned earlier, it’s an almost perfect day world-
wide for the economy and it’s a time that Peter Tertzakian,
Chief Energy Economist at Arc Financial does a look/see at
the oil and gas sector.
He has quite a profile as the author of several books on
energy, but yesterday on a piece he writes, “Back to A Thou-
sand Barrels a Second...After over 18 months of crisis and
recession, world oil consumption has recovered back to
where it was at its pre-crash peak. Numbers published for
December 2009, and January 2010 show that demand for the
wonder-fuel once again touched 86.4 MB/d, or A Thousand
Barrels a Second. It’s a milestone rate-of-consumption that’s
tough to fathom, but can be envisioned by imagining an Olym-
pic sized swimming pool being drained every 15 seconds.
Admittedly, a metaphor from the winter Olympics would be
more appropriate, but frozen liquids don’t flow.”
Tertzakian continues, “A quick conclusion stemming from
this recovery in global oil demand is that one of the primary
pillars supporting positive price momentum is back in place.
That’s true, but consumption is only one pillar. The next indi-
cator that has to start aligning into place is a gradual decline
in OPEC spare capacity. It’s a likely trend; analysis shows
that the current 6.5 MMB/d capacity surplus, twice what it was
18 months ago, should start retreating again by year-end, po-
tentially by up to 8%.”
He continues, “The third pillar of oil price strength, produc-
tion declines among non-OPEC producers, is going to take a
little longer. Nevertheless, two out of three supporting factors
should be enough to gradually reinforce prices by the latter
half of this year.”
He continues, “While the barrels appear to be lining up for
higher prices, it’s too early for Canadian oil producers to pop
open the bubbly. That’s because the character of global oil
consumption, and the dynamics of oil supply, have shifted
over the past year and a half.”
Tertzakian also points to China noting, “China’s year-over-
year oil use continues to lead the emerging world’s uptrend.
Recent numbers continue to validate that world oil consump-
tion is going to grow by another 1.15 MMB/d in 2010. Impor-
tantly, none of the increment will come from North America,
the European Union or Japan.”
Meanwhile, for those looking for ultra-high risk, hopefully
high impact drilling plays, we featured recently, a pick by
Clive Stockdale, the analyst that some time ago got us into
Ultra Petroleum, one of the biggest plays we probably ever
been involved in. He now says Tag Oil is one to watch and
they have a new slide show out.