OPEC ministers say oil output will not increase, citing a weak global economy:

OPEC decided Friday against pumping more oil in a rebuff to the United States and a possible prelude to cuts as early as next month should the wounded U.S. economy sap demand for crude.

The decision arrived despite U.S. urgings - backed by other major consumers - for more oil on the market to cool prices and relieve inflationary pressures that have contributed to fears of a global economic downturn.

…

“In view of the current situation, coupled with the projected economic slowdown … current OPEC production is sufficient to meet expected demand for the first quarter of the year,” read a statement from OPEC following a meeting of its ministers.

That left questions open about the second quarter - from April to June. While ministers avoided discussion of what OPEC would do during the next meeting on March 5, underlying sentiment for reducing output was apparent.

Wow, it’s almost as if they’re just looking for a reason to take oil off the market.

Barclays Raises 2008 Crude Oil Price Forecast by 12%:

Barclays Capital, the U.K. bank’s investment banking unit, raised its forecast for the average price of crude oil in 2008 by 12 percent because of increasing Chinese demand and an improving U.S. economy.

The price of West Texas Intermediate, the physical grade for oil futures traded on the New York Mercantile Exchange, will average $97.70 a barrel this year, Barclays analysts including Paul Horsnell said in a report dated yesterday. That’s higher than their earlier prediction of $87.40. Brent crude in London, will average $96.40 during 2008, up from $85.80.

For the record, the current 2008 price projection from the US Dept. of Energy (as shown in the 2/2008 Short Term Energy Outlook) is a paltry $86.46, and today oil hit $102.97. says NYMEX.

It will be interesting to see what the DOE does with its price projections in the next few months as they update the STEO.

Drought in China leaves millions thirsty:

While parts of China have been rocked by record snowfalls, a drought in northern China has left more than two million people without sufficient drinking water, a state news agency says.

The drought has led to loss of arable land, livestock and drinking water, according to the State Flood Control and Drought Relief Headquarters, the official Xinhua News Agency said.

China’s south and central areas has been hit by China’s worse snow storms in more than 50 years, but in the north 2.43 million people have been left without sufficient drinking water and 11.1 million hectares of arable land and 1.89 million livestock have been affected, Xinhua said.

“The north is suffering from a water shortage as the region’s rain and snow declined by 70 percent this winter,” Xinhua quoted Zhang Zhitong, vice director of the general office of the headquarters, as saying.

Levels of groundwater have dropped in the north China plain, with 120,000 wells in Hebei and Shanxi provinces unable to pump water, Xinhua said.

Again, global warming triggers climate change that goes far beyond and arrives far sooner than several feet of water on the streets of major cities around the world. Just as the oil crunch arrives in the form of prices ramping up over years and not instant, massive shortages, so to will global warming continue to make its presence felt long before any Irwin Allen-like disaster movie scenario.

Emerson hints oil would be back on table if U.S. reopens NAFTA:

Trade Minister David Emerson suggested the United States has a sweet deal over access to Canada’s oil under the North American Free Trade Agreement, saying the two Democratic presidential candidates calling for renegotiations may not know just how good the U.S. has it under the deal.

Emerson said Wednesday that reopening the three-country trade deal would not be a one way street and that Canada also has its list of concessions it would seek if the continental pact was renegotiated.

“There’s no doubt if NAFTA were to be reopened we would want to have our list of priorities,” Emerson said.

“Knowledgeable observers would have to take note of the fact that we are the largest supplier of energy to the U.S. and NAFTA has been the foundation for integrating the North American energy market. When people get below the rhetoric and pick away at the details, they are going to find it’s not such a slam dunk proposition.”

The trade minister’s comments came after Democratic presidential rivals Hillary Clinton and Barack Obama said during a debate Tuesday night that if they become president, they will pull out of NAFTA unless changes are made to the trade deal.

…

Emerson did not say Canada would insist on putting access to Canadian oil back on the table, but that provision in the deal has been a major concern to Canadian critics who argue that Canada would not be able to claim preferential treatment in a crisis.

Under the trade agreement, Canada is prohibited from cutting off oil exportss to the United States if there is a worldwide shortage or supply disruption unless supplies are also rationed to Canadian consumers by the same amount.

Oops.

An Energized Giant:

Venezuelan President Hugo Chavez, boisterous and riding high just one year ago in his quest to spread a “socialist revolution” throughout Latin America, has quieted as that effort has ground to a halt. In December, Chavez’s bid to change his country’s constitution was voted down. An ongoing oil nationalization dispute with ExxonMobil, which threatens to freeze billions of assets in Venezuela’s state-owned oil company, has raised questions about the sustainability of the country’s oil output. Most recently, major oil and gas discoveries off the Brazilian coast promise to substantially shift the balance of power in Latin America, chipping away at Venezuela’s energy hegemony.

Initial euphoria over the magnitude of the oil discovery, located in the offshore Tupi field, led Brazilian President Luiz Inácio Lula da Silva to announce his intention to join OPEC, the Organization of the Petroleum Exporting Countries. Petrobras, the country’s state-run oil company, estimated the field had about 8 billion recoverable barrels of oil, and the broader area surrounding the field might hold as much as 100 billion barrels. The Tupi field probably won’t be productive for at least another five years, and it will be difficult and costly to develop, but the Economist Intelligence Unit says there are indications that the possible reserves might be even larger than the government estimates. In a region that is energy-starved—Argentina and Chile are both struggling with energy crises—Brazil’s finds will give it significant leverage. According to the U.S. Energy Information Administration, Brazil had the second-largest crude reserves in the region prior to the Tupi discovery.

Remember the acronym BRIC: Brazil, Russia, India, China.

And as for the question of whether this oil find is a game changer–you folks know the drill (no pun intended). It’s not the size of the barrel in the ground, but the size of the pipe you can connect to it. One hundred billion barrels of oil is undeniably a lot, enough to feed current world demand for about three years, but if you can only produce it at, say, two or three million barrels/day (which could very well be the upper limit, given the extreme difficulty and cost involved in pulling oil out of an off shore well at that depth), then it’s more an emergency lifeline than a way to keep the good times rolling.

Of course, even if Brazil can find a way to extract that oil at a high rate they might well choose not to. What do you think the price of oil will be in five years? What do you think the outlook for oil will be in 2013 (a year or two after many people are predicting the world production will peak)? Even without OPEC membership, Brazil could very well decide that selling only a couple of million barrels per day at very high prices is just peachy.