Oil Prices Gone Crazy Ready To Strike Romania

The oil price climbed to 44.23 dollars per barrel yesterday, which is the highest level for the past 21 years.

"This is madness," said the OPEC president, Purnomo Yusgiantoro, while the domestic market is keeping its eyes on the moves of OMV, the de facto owner of the recently privatized Romanian oil company, Petrom.

The sky-rise prices of oil on international markets did not send its ripple effects on the Romanian domestic market yet. Still, analysts are concerned, since domestic producers were claiming for two months now that they cannot shoulder any longer the "unbearable pressure" of oil prices on the international market.

Yusgiantoro stated yesterday that the OPEC member countries do not have extra oil reserves that they could immediately tap into to supply the market in order to bring down the price. OPEC countries supply 40% of the world oil market.
"This is madness. The supply cannot be raised," said Yusgiantoro, and the Algerian oil minister, Chakib Khelil, concluded that "OPEC is powerless."

The oil price went up 49% this year in the United States, because of fears - now confirmed - that the supply will not be able to meet the demand, given also the developments in Iraq and in the Russian oil group, Yukos.

The opening of the market yesterday, in Jakarta, showed that futures on the US reference price were 44.23 dollars per barrel, while for the Brent oil the price was 40.18 dollars per barrel.
One ton of oil is made of 7.1 to 8.3 barrels, pending on its Brent or Ural type.
The Ural oil type is on average 3 to 4 dollars cheaper.

Two months ago, analysts interviewed by Jurnalul National put at 113,000 dollars the loss of an average gas station. Then, the Brent oil was 37 dollars a barrel.
Now big oil producers admit they are overwhelmed.

The Romanian Ministry for Economy and Commerce estimates the country will import 57% of its oil demands. Romania extracts 5.7 million tons from its own reserves.
The Romanian oil has characteristics closer to the Brent oil. The cheapest Brent on international markets costs 258 dollars per ton.

Two months ago the Petrom officials stated that the Romanian oil cost 7,100,000 a ton (207.4 dollars at today’s exchange rate).
As Petrom has the biggest share on the domestic market, with 30% to 40%, all other oil companies are keeping their eyes on its moves.

Petrom competitor, MOL, imports the crude oil and most of the gasoline. "One can assume that recent developments would bring Romania closer to the status of a working market economy, where price changes would be synchronized with those on world markets, including those for gasoline," said Karoly Robak, executive general director for MOL Romania.
Shell Romania will continue its process of adaptation to the local market. "We are waiting to see how the privatization of Petrom will come out and how the infrastructure will develop before drafting a development strategy," said Shell representatives.

OMV and Lukoil depend on processing the crude. OMV imports from Austria 7% of the gasoline it sells in Romania, and the rest it buys from Rompetrol. This time Lukoil is lagging behind schedule with opening the oil refinery at Teleajen.
"For gasoline prices to stay as they are in Romania, the world price of the crude should come under 27 dollars per barrel for the Ural type oil, and fewer than 30 dollars per barrel for the Brent type oil," said Dan Ionescu, general director with the Rompetrol group.
The difference in world oil prices would result in tensions on the price of gasoline of some 50 million dollars. Rompetrol already hiked the bulk price with 28 dollars per ton of gasoline.

Before OMV bought Petrom, the Austrian company said oil refineries are unable to ask prices that would cover production costs. Since the Petrom privatization took place the Austrians did not comment the gasoline prices anymore.
The most worrying though is the pessimism displayed by analysts, who forsee no drop in the oil price.