Boone Pickens says China is building lots and lots of roads

Crude Oil Rises on Signs of Increased Global Fuel Consumption
Feb. 16 (Bloomberg) — Crude oil surged above $48 a barrel in New York, after the Organization of Petroleum Exporting Countries said global oil consumption will increase more than it forecast last month, led by surging demand in China.

World oil demand will rise to 83.78 million barrels a day, according to an OPEC report. Chinese oil use will climb by 500,000 barrels a day, to 7 million a day, because of economic growth of 8 percent. Oil fell earlier on an Energy Department report showing that U.S. crude oil and gasoline stockpiles last week rose more than analysts surveyed by Bloomberg expected.

“The market is very jittery and for good reasons,” Boone Pickens, who oversees more than $1 billion in energy-related investments at his Dallas hedge fund firm, said in an interview in New York. “Worldwide production is 83 million barrels a day and it’s never going any higher than that.”

Crude oil for March delivery rose $1.07, or 2.3 percent, to $48.33 a barrel on the New York Mercantile Exchange, the highest since Jan. 27. Prices last rose above $48 during trading on Feb. 1. Futures are up 40 percent from a year ago.

In London, the April Brent crude-oil futures contract rose 76 cents, or 1.7 percent, to $46.15 a barrel on the International Petroleum Exchange, the highest close since Jan. 27. Environmental protesters entered the exchange and disrupted floor trading today.

“China is now No. 2 in imports, up from No. 3, after passing Japan,” Pickens said. “You will see more and more distance between them” as China’s growth outpaces Japan’s growth.

OPEC last year failed to anticipate a jump in demand from China, and in March lowered production targets to 23.5 million barrels a day. Quota increases in June and August were too late, and oil surged to $55.67 a barrel in October, the highest in two decades of trading in New York.

1 Billion Barrels

If the Chinese “build the highways that are planned, that in itself would be a billion barrels of oil,” Pickens said.

Supplies of crude oil rose 2.1 million barrels to 296.4 million in the week ended Feb. 11, according to the weekly Energy Department report. An increase of 1 million barrels was expected, according to the median of forecasts among 16 analysts surveyed by Bloomberg. Stockpiles rose to the highest in more than seven months, according to figures from the department. Inventories are 10 percent higher than a year ago.

The U.S. consumes about a quarter of the world’s oil with 10 percent of global output going to the production of gasoline for U.S. motorists.

Gasoline Stockpiles

Gasoline stockpiles surged 4.9 million barrels to 221.7 million barrels, the highest since February 1999. It was the third straight week of gains and the largest weekly jump in more than a year. A rise of 350,000 barrels was expected.

Gasoline for March delivery rose 2.64 cents, or 2.1 percent, to $1.2828 a gallon in New York. Prices are 24 percent higher than a year ago.

The Energy Department released its weekly report on U.S. petroleum inventories at 10:30 a.m. in Washington.

Prices surged more than $1 a barrel before the release of the department’s report on headlines of an explosion at a nuclear facility in Iran, OPEC’s second biggest oil producer. Oil fell after the Associated Press, citing Iranian state television, reported that a fuel tank may have dropped from an Iranian plane.

“We rose on the early news from Iran but the market broke on the big gain in gasoline stocks,” said Tom Bentz, an oil broker at BNP Paribas Commodity Futures Inc. in New York. “We then began to creep higher and broke the previous highs. This is still a bull market and it’s a lot easier for oil to go higher than to decline.”

To contact the reporter on this story:
Mark Shenk in New York at mshenk1@bloomberg.net.

To contact the editor responsible for this story:
Robert Dieterich at rdieterich@bloomberg.net.

Last Updated: February 16, 2005 15:53 EST
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