‘A lot of OPEC countries are cheating’

Uncovering early stage opportunities in the junior resource sector is no problem for Marin Katusa, senior editor of Casey Research’s Energy Division. Using a combination of boots on the ground and a diagnostic resource market tool that he created, Marin can easily analyze and compare hundreds of investment variables to determine the best investments and most promising private placement offerings. In this exclusive interview with The Energy Report, Marin shares his macro view on the energy sector, trends he anticipates in 2009 and major market forces that will drive energy in 2009 and 2010.
The Energy Report: Marin, can you give us your macro view on what’s happening in the energy sector and what trends we’ll see for 2009?

Marin Katusa: I definitely think a continuation from 2008 will happen, where we’ll have downward economic pressure on the prices on stocks and energy commodities. We’ll have the double negative effect for oil and gas with lower demand and global economic recession.

The problem with the OPEC countries is the compliance factor. A lot of them are cheating—like Venezuela, for example. They’ve increased their budget for 2009 by 22%, so they need $60 oil to break even. Now you have to ask yourself, are they going to be compliant? Probably not. They’re going to have to make up the decrease in oil price with volume. The one interesting fact is that they are increasing the supply to the large offshore tankers. They’re filling them up and they’re waiting. So there’s a lot of supply just sitting there and the market is aware of this.

It’s different than what Putin is claiming in Europe right now, where he can control compliance because he shuts off the taps for the pipeline. So there will be a difference; you will see large differentials in the European energy markets with the natural gas and Brent Crude prices—it’s never been this high of a differential. Even the natural gas in Europe is much more expensive than in North America. So that’s going to be a continuation of 2008, where we’re going to see downward pressure on the energy commodity prices.

Commodity Online