Oil prices had surged nearly 9 percent in the previous session due to a surprise drop in U.S. crude stocks, which may indicate a recovery in demand in the top energy consumer.

But data showing euro zone gross domestic product (GDP) fell by a record 1.5 percent in the last quarter of 2008, as exports and household demand collapsed, forced traders to refocus on falling global consumption.

“The economic outlook is still pretty grim and I don’t think these bits of bullish data are enough to counteract this in the short-term,” Christopher Bellew at Bache Commodities said.

U.S. crude slipped $1.51 to $43.87 a barrel by 1224 GMT, after earlier hitting a month high of $45.70, while London Brent crude fell $1.63 to $44.49.

Oil prices gained some support from remarks by China’s Premier Wen Jiabao on Thursday that the No. 2 oil consumer would achieve 8 percent growth this year — a level considered key to maintain employment growth — despite the deepening global recession.

China’s gauge of the health of its manufacturing sector, the purchasing managers’ index (PMI), gained for the third month in a row in February, suggesting the domestic economy, and oil demand, could be recovering.

The U.S. Energy Information Administration said crude stocks declined by 700,000 barrels last week, while gasoline demand rose 2.2 percent from a year ago, as lower prices boosted consumption.

Traders were also eyeing the release of a raft of economic data in the U.S., including jobless benefit claims and January factory orders, for clues on the health of the world’s largest economy.

TO CUT OR NOT TO CUT?

Oil prices have traded in a narrow band near $40 since mid-December, caught between slumping demand and the possibilty of further OPEC output cuts when the group meets on March 15.

“The market is still rangebound as any bullish news has been kept in check by the global economic meltdown,” Bank of Ireland analyst Paul Harris said.

“But the next OPEC meeting is coming into focus, and they will probably have to act to convince the market they are really serious about continuing to restrict production.”

OPEC planned to lower oil output by 4.2 million barrels per day from production levels in September, in a bid to boost falling prices, and a Reuters survey found OPEC members had already met at least 81 percent of their target.

Angola, which currently holds the presidency of the 12-member group, will not advocate further production cuts when the group meets on March 15 in Vienna, OPEC sources said on Wednesday.

But Venezuela, Algeria and Libya have raised the possibility of a further cut.

March 5 (Reuters)

This from Mike Burnick:

Brazil is far and away the global leader in ethanol production technology. In fact, the country began large-scale development of ethanol as an alternative fuel source amid the oil shock of the late 1970’s and early 80’s.

Today, ethanol accounts for 50% of Brazil’s total annual automotive fuel consumption. More than 70% of new cars sold in the country are flex-fuel capable. That means they’re able to run either on gasoline, ethanol, or some combination of the two.

Currently, Brazil is the world’s second-largest ethanol producer, and largest exporter, with total output of about six billion gallons a year.

The country has its sights set on becoming the dominant global exporter of ethanol by 2020. Brazil’s global ethanol exports could total as much as 200 billion gallons a year within that time – that’s over 30-times today’s ethanol production. Talk about a growing industry!

U.S. and Europe Just Can’t Compete with Brazilian Ethanol

Brazil enjoys a big advantage over other nations – as the world’s lowest cost ethanol producer. As shown in the graph above, Brazil can distill bio-fuels from sugar cane at a significant cost advantage to other nations.

Neither U.S. corn-based ethanol, nor wheat-based ethanol from Europe, can come close to matching the Brazilians on a production cost basis.

The sugarcane plant, which flourishes in Brazil’s tropical climate, produces a “yield” of 6,000 liters of ethanol per hectare of land. That’s about twice the yield of corn-based ethanol!

In fact, Brazilian ethanol is about 40% cheaper to make than in the U.S. – and costs less than half the price of European ethanol.

When Trade Tariffs Fall, Brazilian Ethanol Will Flow

Of course Washington, in their infinite wisdom, maintains silly trade tariffs equal to 54-cents a gallon on imported ethanol. This ridiculous trade barrier benefits a relatively small number of U.S. corn farmers at the expense of millions of American drivers.

In spite of this, Brazil’s largest ethanol export market remains the United States. In fact, Brazil shipped us more than 430 million gallons of ethanol last year – up fourfold from 2004! Wholesale gasoline prices in the U.S. are leaping above US$4 a gallon, and will keep spiraling higher as crude oil goes through the roof during what’s shaping up to be a long, hot summer.

Naturally, pressure is mounting for Congress to eliminate this silly, protectionist ethanol tariff. When that happens, the floodgates will open wide for much-cheaper Brazilian ethanol to flow freely into U.S. markets.

By leveraging the strength of its vast sugarcane growing region, and building on its already well-established ethanol producing technology, Brazil is perfectly positioned to benefit.

In fact, this emerging market tiger could easily become the Saudi Arabia of ethanol within the next decade. You heard it here first!

Hopefully, American protectionist trade tariffs are lifted soon… and when they are, Brazil’s ethanol expansion would quickly follow.

There’s also another crisis brewing at the moment – that’s becoming more painfully obvious with each passing day: A global energy crisis! In many ways, the two are closely connected…

U.S. corn-based ethanol production is a big reason why corn prices surged 56% higher in the past 12 months alone. About one-third of the entire U.S. corn crop is being diverted from kitchen tables to gas tanks.

As a result, people are rioting in poor countries around the world. They’re taking to the streets in protest over U.S. corn-based ethanol. They complain bitterly that we are trading THEIR food for OUR fuel. But there is a better way…

In fact, there is an “emerging” alternative bio-fuel source that is a lot more efficient than corn-based ethanol, and doesn’t require the same food vs. fuel trade-off.

In fact, Brazil is leading the great fuel revolution – with sugar cane-based ethanol…

Brazil’s Big Ethanol Advantage

Brazil is far and away the global leader in ethanol production technology. In fact, the country began large-scale development of ethanol as an alternative fuel source amid the oil shock of the late 1970’s and early 80’s.

Today, ethanol accounts for 50% of Brazil’s total annual automotive fuel consumption. More than 70% of new cars sold in the country are flex-fuel capable. That means they’re able to run either on gasoline, ethanol, or some combination of the two.

Currently, Brazil is the world’s second-largest ethanol producer, and largest exporter, with total output of about six billion gallons a year.

The country has its sights set on becoming the dominant global exporter of ethanol by 2020. Brazil’s global ethanol exports could total as much as 200 billion gallons a year within that time – that’s over 30-times today’s ethanol production. Talk about a growing industry!

U.S. and Europe Just Can’t Compete with Brazilian Ethanol

Brazil enjoys a big advantage over other nations – as the world’s lowest cost ethanol producer. As shown in the graph above, Brazil can distill bio-fuels from sugar cane at a significant cost advantage to other nations.

Neither U.S. corn-based ethanol, nor wheat-based ethanol from Europe, can come close to matching the Brazilians on a production cost basis.

The sugarcane plant, which flourishes in Brazil’s tropical climate, produces a “yield” of 6,000 liters of ethanol per hectare of land. That’s about twice the yield of corn-based ethanol!

In fact, Brazilian ethanol is about 40% cheaper to make than in the U.S. – and costs less than half the price of European ethanol.

When Trade Tariffs Fall, Brazilian Ethanol Will Flow

Of course Washington, in their infinite wisdom, maintains silly trade tariffs equal to 54-cents a gallon on imported ethanol. This ridiculous trade barrier benefits a relatively small number of U.S. corn farmers at the expense of millions of American drivers.

In spite of this, Brazil’s largest ethanol export market remains the United States. In fact, Brazil shipped us more than 430 million gallons of ethanol last year – up fourfold from 2004! Wholesale gasoline prices in the U.S. are leaping above US$4 a gallon, and will keep spiraling higher as crude oil goes through the roof during what’s shaping up to be a long, hot summer.

Naturally, pressure is mounting for Congress to eliminate this silly, protectionist ethanol tariff. When that happens, the floodgates will open wide for much-cheaper Brazilian ethanol to flow freely into U.S. markets.

By leveraging the strength of its vast sugarcane growing region, and building on its already well-established ethanol producing technology, Brazil is perfectly positioned to benefit.

In fact, this emerging market tiger could easily become the Saudi Arabia of ethanol within the next decade. You heard it here first!

MIKE BURNICK, Senior Editor & Global Markets Analyst

P.S. Want to know more about the great fuel revolution – including the alternatives that may be running your car within the next 10 years? Click here to read my FREE special report to get all the details.

Source: Put This Emerging Market Tiger in Your Tank!