As the Financial Times has noted, while all the world watched Copenhagen, a rather more ultimately significant event took place in Turkmenistan.

. . . as all eyes were set on Copenhagen, a 4,350-mile gas pipeline was opened by Hu Jintao, the Chinese president, in a tectonic shift that western eyes can ill-afford to ignore. The pipeline starts at the Samandepe gas field in Turkmenistan, crosses Uzbekistan and Kazakhstan and ends in north-west China. With little publicity and at the turn of a wheel, Russia’s post-Soviet dominance of gas export routes from central Asia has been undermined. Likewise, the European Union’s chances of winning Turkmen supplies for its Nabucco pipeline project now seem severely diminished.

The new route solves a problem for both parties. China needed a reliable source of natural gas, with pipelines being better than tankers, and Turkmenistan needed a customer who would not be as predatory and fickle as Russia has been. Both are thus satisfied.

The present contango in oil prices bears all the hallmarks of an oil market where supplies are well above present fundamental physical consumption.

The recent large inventory build of petroleum, under a steep contango which now is flattening, within the big oil consumers (like the OECD countries and China) have left some with the expectation that major economies soon will begin to grow again, and that the contango now signals increased oil demand and higher oil prices in the future.

My analysis indicates that in recent months, as much as 2 -3 Mb/d of global petroleum supply has been used to build inventories. This is about to come to an end, because available storage is getting closer and closer to full and contango has begun to flatten. When additions to storage cease, the resulting drop in demand can be expected to lead to substantial downward pressure on oil prices.

The chart above shows one component of inventories--US inventories. The chart indicates that US oil inventories (green) have been increasing since after the September 2008 hurricanes, and, in fact, started increasing as early as May 2008. Brent oil prices (red) decreased between June and December, but recently have been slightly increasing.

Below the fold I give a summary of US, OECD and China petroleum inventories, inclusive of oil stored on tankers, and indicate what I expect will happen to near term oil prices.

It seems as though I have inhabited two different worlds in the past 24 hours. I went from the relatively small (500 folk) meeting in Sacramento where Peak Oil is viewed as imminent, to the halls of the Convention Center in Las Vegas, where the Quadrennial MinExpo is showcasing the latest machines to over 41,000 folk involved in the Mining Industry. It overflows that very large (600,000 sq. ft) building and extends out into the parking lot. Here, with an industry in considerable profit, the displays were large and much more optimistic than I have seen them in previous years. The two meetings were, however, joined by a common complaint that the human resource, the engineers and scientists needed by both communities, are in critically short supply.

Wandering the booths, with only one day to catch all the new and different products, I did come across a couple of items that are, I believe, worth a brief comment before I write a concluding post to wrap ASPO-USA 4. In that post, I will give some of my own interpretation of the conference.