Oil bubble will burst soon, says Lehman report

Mumbai: The oil boom is on its last leg and may last a few months before a clutch of new refineries start operations amid slackening economic growth across the world, consultancy firm and investment bank Lehman Brothers has predicted in a report.

The report said supply is in fact outpacing demand growth even as inventories have been building up for quite some time now. This announcement must surely come as a huge relief for consumers reeling under high oil prices for some time now.

Tellingly, this news comes only two days after Thomas Boone Pickens, an American billionaire who made a fortune in oil speculation, predicted that oil could reach the $150 mark soon. Justifying his stance, he had said that the current global oil supply of 85 mbpd was well short of the requirement of 87 mbpd. "When you have 85 billion to cover 87 billion, the price has to go up," he said.

''Inventories have been building since the beginning of the year. We have pretty significant projects starting soon in Saudi Arabia, and large off-shore fields in Nigeria,'' said Michael Waldron, the US bank's oil analyst.

Saudi Arabia has started production at its 500,000 barrels per day Khursaniya field while the new 1.2 million barrels per day (mbpd) Khurais field will start next year, the report pointed out.
Saudi Arabia plans to spend $90 billion in oil exploration and production over the next five years, lifting capacity to 12.5 mbpd by the end of 2009 while a clutch of new refineries will add almost eight mbpd of new capacity by 2010,  the report pointed out..

Reliance Petroleum's 600,000 bpd refinery at Jamnagar in India also featured in the report. The facility is to be tested by trial runs in July and expected to be commissioned in September.(See: Reliance plans trial runs at Jamnagar refinery in July)