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Oil prices dip again on signs of waning demand
Tuesday August 12, 2008
Crude slips as IEA lowers oil demand forecast for developing nations; dollar keeps recovering


Oil prices fell again Tuesday, dampened by a stronger U.S. dollar and more evidence that developed countries such as the United States are cutting back on their energy use.
Light, sweet crude dipped by $1.44 to settle at $113.01 a barrel on the New York Mercantile Exchange, after falling as low as $112.31, a new three-month low. Oil is now nearly $35 below its July 11 record high of $147.27.


The International Energy Agency lowered its forecast on Tuesday for oil product demand from 30 developed countries, located mostly in Europe and North America, to 48.6 million barrels a day, down 1.3 percent from last year.

The Paris-based energy watchdog's report arrived a day after China said its crude imports in July, while historically strong, were down 7 percent from the same month last year.

The IEA cautioned that it is too early to determine whether the recent fall in oil prices is a longer-term trend. It said demand in developing countries could offset declines in developed nations, and that it sees Chinese oil demand continuing to grow at a robust pace.

And some economists have said that given the pullback in gasoline prices, demand could come back if motorists feel more comfortable with the cost of filling their gas tanks. The average U.S. retail gasoline price was $3.799 a gallon on Tuesday, according to auto club AAA, the Oil Price Information Service and Wright Express. That is down a penny from Monday, and down 31.5 cents from its July 17 record high.

But the energy markets -- which have seen heavy liquidation from large speculative funds since crude hit its record high -- continued to make the bet that energy use is on the wane.

"The market's still heavily focused on demand deterioration," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.

A stronger dollar also weighed on oil prices. The euro traded at $1.4914, about the same as late Monday but at its lowest levels since February. The pound, meanwhile, fell to $1.8988, trading at its lowest levels since November 2006.

"Sometimes the cause and effect is difficult to define. It's a self-perpetuating, vicious circle going on, where oil falls, strengthens the dollar, then the strengthening dollar forces oil down more," Ritterbusch said.

Meanwhile, traders continued to watch the conflict between Russia and Georgia, trying to figure out whether Russia's push into the country will result in a serious oil supply disruption. Russia ordered a halt to military action in Georgia on Tuesday, but Georgia insisted that Russian forces were still bombing and shelling.

BP PLC said Tuesday it shut down the 90,000-barrel-a-day oil pipeline running from Baku on the Caspian Sea to Supsa on Georgia's Black Sea coast earlier. The London-based oil company emphasized, however, that the move was precautionary.

Another larger pipeline operated by BP in the former Soviet Republic is already out of action after a fire last week on its Turkish stretch. A third pipeline in Georgia that BP uses to export oil, but does not operate, remains open.

In other Nymex trading, heating oil fell 4.14 cents to $3.0781 a gallon, while gasoline futures slipped 2.34 cents to $2.8432 a gallon. Natural gas futures slid 1.9 cents to $8.33 per 1,000 cubic feet.

On London's ICE futures exchange, Brent crude for September fell $1.52 to $111.15 a barrel.

CNNMoney.com
Oil prices surge on weak inventory report.
Wednesday August 13, 11:48 am ET


Oil prices soared Wednesday after the government reported a surprisingly sharp decline in the nation's petroleum inventories.
U.S. crude for September delivery rose $1.92 to $114.93 a barrel in electronic trading. Oil had traded up 88 cents to $113.89 a barrel just before the report's release.


The Energy Department said crude stocks fell by 400,000 barrels during the week ended Aug. 8. The report also said gasoline supplies fell by 6.4 million barrels, while distillates, which are used to make diesel fuel, fell by 1.7 million barrels.

Economists polled by Platts, a division of McGraw Hill Cos., had expected the government to report a 500,000 barrel rise in crude stocks, a 2.2 million barrel decline in gasoline stockpiles, and a rise in distillates of 1.9 million barrels.

Concerns that high fuel prices are cutting into demand have sent crude prices sharply lower in recent weeks.

Oil has been trending lower since the end of July and is down about $34, or 23%, from its all-time high.

However, the larger-than-expected decline in supplies suggested that demand may not have been as low as many investors had thought.

Fuel price pinch

The high price of fuel has been taking a toll on U.S. consumers.

The most recent evidence comes in a report on retail sales released Wednesday by the Commerce Department.

The report showed that retail sales had fallen slightly in July, but that sales of gasoline had grown nearly a percent due to higher prices at the pump.

"You strip out the gasoline and there's not much growth in what [consumers] are buying," said Rachel Ziemba, energy analyst at RGE Monitor.

Demand forecast

Many investors also believe the rising price of crude oil and gasoline has begun to cut demand in the United States, the world's largest oil consumer.

Gas prices remain more than a dollar higher than where they were 12 months ago. However, the average price of retail gas in the United States has fallen more than 8% to $3.787 gallon at the pump over the past 27 days, according to motorist group AAA.

Prices have fallen below the psychological barrier of $4 a gallon in all but 8 states, according to AAA data. But that might be causing a slight uptick in demand.

"With the prices being down at the pump, I think people are starting to drive a little bit more," said Mark Waggoner, president of Excel Futures in California.

Georgian conflict

The oil market had largely ignored threats to international supplies as investors were more concerned about demand.

However Tom Orr, head of research for Weeden & Co. said he believes the oil market has been undervalued, and expressed concern about a disruption in supplies due to the conflict between Russia and Georgia that flared up this week.

"It amazes me how little attention crude oil traders have paid to the conflict between Russia and Georgia. A month ago crude would have shot up $5 or maybe even $10 per barrel if it looked like we might lose a million barrels per day of supply," wrote Orr in a research report.

Fighting between Russia and Georgia over the breakaway regions of South Ossetia and Abkhazia continued Wednesday, despite a cease-fire brokered by French President Nicolas Sarkozy. According to reports, Russian troops raided the strategically important city of Gori and pressed on in the direction of Tbilisi, the nation's capital.

Georgia serves as an important hub for transporting oil and natural gas between Europe and Asia. The country's largest oil pipeline had been shut down before the fighting began due to a fire along its Turkish span, and worries about supply disruption failed to significantly rattle investors a day earlier.

Dollar: Mixed view

Also adding to investor concerns was a mixed U.S. dollar.

The dollar sent conflicting signals to investors on Wednesday, turning higher against the 15-nation euro, but falling versus the Japanese yen.

The U.S. currency has been steadily gaining strength amid worries about slowing economic growth outside the United States.

Oil is traded in dollars, so when the dollar strengthens, crude oil becomes relatively more expensive for foreign investors. Oil and other commodities are also commonly used as a hedge against inflation.

Oil touches 3-month low on stronger US dollar
Friday August 15, 2008 
Oil prices touch 3-month low as US dollar strengthens, demand for energy keeps falling

Oil fell to its lowest price in three months Friday, briefly touching the $111 level after the dollar muscled higher and OPEC predicted the world's thirst for fuel next year will fall to its lowest point since 2002.

Light, sweet crude for September delivery fell $1.24 to settle at $113.77 a barrel on the New York Mercantile Exchange after falling to $111.34, its lowest price since May 2 and more than $35 -- or 24 percent -- below its July 11 trading record above $147.

As high energy costs force countries around the globe to cut back on consumption, crude prices have plummeted and are now within striking distance of $100 a barrel, a level first reached Feb. 19.

At the pump, retail gas prices also continued falling, with a gallon of regular shedding about half a penny overnight to a new national average of $3.771, according to auto club AAA, the Oil Price Information Service and Wright Express. Gas peaked at $4.114 on July 17.

Crude fell after the dollar gained strength against the euro on U.S. data showing that industrial output rose more than expected in July. The 15-nation euro has lost some of its luster compared to its American rival amid growing evidence that European economies are slowing. The euro bought $1.4675 in trading Friday, down from $1.4811 late Thursday.

A rising dollar typically pushes oil prices lower as investors who buy crude and other commodities as hedges against inflation start dumping their positions to cut their losses. A stronger greenback also makes dollar-denominated commodities more expensive to overseas buyers, further eroding demand.

"The dollar is on fire again so that's causing people to re-evaluate everything," said Phil Flynn, oil analyst at Alaron Trading Corp. in Chicago. "It means oil prices could fall dramatically. We could see prices get to double digits if this continues."

An OPEC forecast of lower demand also put downward pressure on prices.

In its monthly oil report, the organization forecast world appetite for oil this year overall will fall by 30,000 barrels a day. While forecasting demand growing by a daily 1 million barrels a day this year, and another 900,000 barrels in 2009, the report noted that world demand growth next year will also be "the lowest since 2002," with demand growth from the major industrialized countries actually declining.

"They're basically saying we could have an oil glut because demand is slowing," Flynn said. "It's obvious that high prices do slow down demand and the market works."

The OPEC report came two days after the U.S. Department of Energy highlighted the ongoing drop in U.S. demand for energy as Americans struggle with high costs for gasoline, food and other goods.

Oil's steady decline has continued despite the simmering weeklong conflict between Russia and Georgia over two breakaway provinces. Western leaders worked Friday to persuade Russia to pull troops out of Georgia, but regional tensions soared after a top Russian general warned that Poland could face attack over its missile defense deal with the United States.

British oil company BP PLC said Thursday it has resumed pumping gas into the Baku-Tbilisi-Erzurum pipeline that runs through Georgia, but two oil pipelines remained closed. BP's Baku-Supsa oil pipeline was shut as a precaution, and the larger Baku-Tbilisi-Ceyhan line, a key supplier to Western countries, remains shut after a fire earlier this month on the Turkish section of the line.

Analysts noted that the conflict in Georgia, while likely not driven primarily by energy concerns, highlights Moscow's influence over oil and natural gas reserves in the region. Russia exports more oil than any country except Saudi Arabia, and is the world's leading producer of natural gas.

Only weeks ago, such a clash would likely have sent oil prices soaring. But the market has largely ignored the fighting in Georgia because traders have already priced in the geopolitical risk, analysts say. Crude's monthlong nosedive has also made it harder for bullish traders to spark a rally, despite a possible threat to oil installations.

Also weighing on prices Friday was the expiration of September oil contract options at the end of the day, a trading cycle that often increases volatility.

In other Nymex trading, heating oil futures rose 2 cents to settle at $3.1191 a gallon, while gasoline prices slipped 5.18 cents to settle at $2.8602 a gallon. Natural gas futures fell 4.4 cents to settle at $8.092 per 1,000 cubic feet.

In London, September Brent crude fell $1.13 to settle at $112.55 a barrel.

Oil prices fall over $6 on stronger dollar
Friday August 22, 2008
Oil prices plunge $6 a barrel after dollar strengthens, Russia begins Georgia pullback


Oil prices tumbled more than $6 a barrel Friday -- the biggest one-day percentage plunge in nearly four years -- after a rebounding dollar and a Russian troop pullback in Georgia sparked another frenzied sell-off.


Crude's nosedive wiped out all the gains from the previous day's big rally and reaffirmed the belief that high energy prices and a softening global economy are still cutting into consumer demand for fossil fuels in the U.S. and overseas.

Light, sweet crude for October delivery fell $6.59, or 5.43 percent, to settle at $114.59 a barrel on the New York Mercantile Exchange.

It was crude's largest single-day price drop percentage-wise since Dec. 27, 2004, when prices dropped 6.47 percent. In dollar terms, it was oil's steepest one-day slide since Jan. 17, 1991, just after the start of the Gulf War. Crude prices had risen for three straight days, including an almost $6 rally on Thursday.

"This is extreme volatility," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill. "The fact that we erased all of yesterday's gains so fast suggests that we're still in a bear market. There's just not much demand out there."

At the pump, a gallon of regular fell another penny overnight to a new national average of $3.692, according to auto club AAA, the Oil Price Information Service and Wright Express. Prices had peaked at $4.114 a gallon on July 17, but have come down as high energy costs force Americans cut back on their driving.

Crude's violent fall accelerated throughout the day on renewed bullishness in the U.S. dollar and an apparent easing of geopolitical tensions. Speaking at an economic conference Friday, Federal Reserve Chairman Ben Bernanke said he would "act as necessary" to control inflation -- comments which sent the greenback higher compared to rival currencies.

A falling dollar encourages selling from investors who bought crude oil and other commodities as a hedge against inflation and weakness in the U.S. currency. The euro fell to $1.4806 in early New York trading Friday from $1.4772 late in New York the night before.

"The dollar got pounded yesterday and everybody rushed to buy commodities as a safe haven. Now the dollar is strengthening so everybody's dumping commodities again," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.

On Thursday, worries about Russian hostilities helped push crude prices up $5.62 to $121.18, crude's highest settlement price in over two weeks.

"Obviously, yesterday's rally was overcooked and we're simply taking back some of that speculative risk premium we injected into the market," said Ritterbusch.

Russian troops began withdrawing from key Georgian positions on Friday, the day the pullback was to be completed under a U.S.-backed cease-fire. Still, there were conflicting statements about the extent of Russia's withdrawal.

Russia's defense minister said Friday the pullback from most Georgian territories to pro-Moscow separatist regions was complete, but U.S. State Department spokesman Robert Wood said that establishing buffer zones was "definitely not part of the agreement."

Oil traders were still eyeing the conflict amid concerns that another flare-up of violence could sever key oil shipments bound for Western countries. Russia is the world's second largest oil exporter, providing a quarter of EU countries' crude supplies and half of their natural gas.

"It's still speculative whether Russia will use oil as a weapon to punish the West," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "But it has certainly focused the market on that geopolitical threat."

The United States and Poland signed a deal Wednesday to place a U.S. missile defense base just 115 miles from Russia's westernmost border, a provocative move that was immediately denounced by Moscow.

Russia's Foreign Ministry warned that Moscow's response to further development of the missile defense shield would go beyond diplomacy.

U.S. Secretary of State Condoleezza Rice has dismissed any suggestion that the missile defense interceptors to be based in Poland constitute a threat to Russia. Washington insists the base is intended only as a defense against long-distance missiles from Iran.

London-based BP PLC last week shut down its Baku-Supsa oil pipeline -- which runs through the center of Georgia from Baku in Azerbaijan to Supsa on Georgia's Black Sea coast -- because of security concerns.

The line, which has a 150,000-barrel-a-day capacity, had recently been pumping around 90,000 barrels a day, according to a BP spokeswoman.

The British oil company also said that testing was to begin Wednesday on the closed Baku-Tbilisi-Ceyhan oil pipeline -- which runs through Georgia as well -- ahead of a move to restart full operations as early as next week.

That line, owned by a consortium of energy companies led by BP, has been closed for more than two weeks after a fire on its Turkish stretch. Kurdish rebels have taken responsibility for that blaze.

In other Nymex trading, heating oil fell 16.95 cents to settle at $3.1311 a gallon, while gasoline futures fell 17.66 cents to settle at $2.8686 a gallon. Natural gas futures fell 40.9 cents to settle at $7.843 per 1,000 cubic feet.

In London, October Brent crude fell $6.24 to settle at $113.92 a barrel.

Gas prices up as Gustav threatens Gulf refineries
Friday August 29, 5:30 pm ET
Gas prices move higher as Gustav spins toward Gulf refineries; crude rebounds


Retail gas prices swung higher Friday -- the first increase in 43 days -- as analysts warned that a direct hit on U.S. energy infrastructure by Hurricane Gustav could send pump prices hurtling toward $5 a gallon.


Meanwhile, oil prices ended the day slightly lower, falling for a second straight session. But prices fluctuated sharply as some traders feared supply disruptions and others bet the government will release supplies from the Strategic Petroleum Reserve if Gustav wreaks havoc in the Gulf of Mexico area -- home to a quarter of U.S. crude supplies and 40 percent of refining capacity.

Gustav, which regained hurricane strength Friday, was spinning away from Jamaica on a course toward Gulf Coast states including Louisiana -- three years to the day since Hurricane Katrina slammed into the state and tore up oil rigs and refineries.

Fears of another monster storm have sent wholesale gasoline prices shooting up in the Gulf region, forcing filling stations to pass on the costs by raising pump prices ahead of Labor Day weekend.

A gallon of regular gasoline jumped about a penny overnight to a national average of $3.669, according to auto club AAA, the Oil Price Information Service and Wright Express.

That's the first increase since prices peaked at an average $4.114 a gallon on July 17, an all-time high.

Jeff Rubin, chief economist at investment bank CIBC World Markets, said that record could be shattered if Gustav seriously disrupts offshore energy production.

In 2005, pump prices jumped from slightly more than $2 a gallon to above $3 after Katrina and Hurricane Rita destroyed more than 100 oil platforms and damaged several refineries.

"The price consequences could be even worse this time," Rubin said in a report, noting that oil and gasoline inventories are lower than when Katrina and Rita hit. "Any replays of the 2005 storm season could see gasoline prices soar to $5 per gallon."

Gustav was moving northwest of Jamaica toward the Cayman Islands after triggering floods and killing 59 people in Haiti and eight more in the Dominican Republic.

Light, sweet crude for October delivery fell 13 cents to settle $115.46 a barrel on the New York Mercantile Exchange, after earlier rising as high as $118.76. On Thursday, prices fell $2.56 at $115.59 a barrel, the first time this week it closed lower.

Analysts attributed the volatility to doubts over whether Gustav will affect offshore energy production, as well as speculation that the Energy Department will tap the Strategic Petroleum Reserve should the storm threatens supplies.

"Until this hurricane hits, the trend has to be higher toward the $120 level," said Jonathan Kornafel, Asia director for brokerage Hudson Capital Energy in Singapore. "If this turns out to be a nonevent, the market could really come roaring back down."

As Gustav advanced, oil companies were pulling employees off installations.

Royal Dutch Shell PLC has evacuated nearly 670 workers. BP PLC was also removing personnel from the region, while Exxon Mobil said it was bracing its structures for heavy wind and rain.

Transocean Inc., the world's largest offshore drilling contractor, said Friday it had evacuated about 400 workers from 11 offshore drilling rigs in the Gulf. Transocean still has 1,150 workers in the region.

Weather research firm Planalytics predicted as much as 80 percent of the Gulf's oil and gas production could be shut down as a precaution if Gustav enters the region as a major storm.

Forecasters said Gustav might slip between Mexico's Yucatan Peninsula and the western tip of Cuba on Sunday, then march toward a Tuesday collision with the U.S. Gulf Coast -- anywhere from south Texas to the Florida panhandle.

"It seems there will be at the very least a slight hit to production," Kornafel said. "But everything is up in the air until Monday or Tuesday."

Gustav is the first storm of the 2008 Atlantic hurricane season to pose a serious threat to offshore oil and gas installations in the Gulf.

Some analysts, however, noted that lower appetite for oil products in the United States could well dampen Gustav's effect on the Gulf area's oil output.

"U.S. oil demand is currently 1.6 million barrels a day lower than when Katrina struck," said Olivier Jakob of Petromatrix in Switzerland. "There is today more U.S. refining capacity offline for economic reasons than can be destroyed by Gustav."

In other Nymex trading, heating oil lost 0.07 cent to settle at $3.1819 a gallon, while gasoline fell 1.15 cents to settle at $3.0099 a gallon. Natural gas fell 10.7 cents to settle at $7.943 per 1,000 cubic feet.

In London, October Brent crude fell 12 cents to settle at $114.05 a barrel.

Oil prices end higher as stock market rallies
Thursday September 18, 2008
After hitting $100 a barrel, oil holds some gains and ends higher as stock market rebounds


Oil prices rose modestly but closed well off their session highs Thursday as a late-day stock market rally soothed investors' concerns about the economy and demand for energy. Earlier, the contract topped $100 a barrel as investors uneasy about the worsening financial crisis flocked to commodities as a safe haven.


Light, sweet crude for October delivery added 72 cents to settle at $97.88 a barrel on the New York Mercantile Exchange. The contract had reached as high as $102.24 as worries intensified about the stability of the U.S. financial system and as investors fled the equities market in favor of commodities.

"Oil's torn. It doesn't know if it's a financial indicator or a commodity," said Phil Flynn, an energy analyst at Alaron Trading Corp. in Chicago. "It rallied with gold and silver early on and then later, with the stock market."

Crude seesawed through the day, reflecting a financial system in crisis.

Investors first sought commodities including oil as a hedge against the economic fallout from the financial crisis; they sent the October contract soaring $4 and past $100. The market was reacting in part to moves by the Federal Reserve and other foreign central banks to pump as much as $180 billion into global money markets in an effort to boost liquidity.

The emergency measure follows a week of chaos on Wall Street that saw the demise of Lehman Brothers Holdings Inc., the forced takeover of Merrill Lynch and Co., and the unprecedented government bailout of American International Group Inc.

But traders then recoiled when they realized that a financial meltdown and weak global economy would further erode already flagging demand for energy.

Then, late in the day, the stock market surged on a CNBC report that the federal government was considering the creation of an entity that would hold the bad debt that has crippled U.S. financial institutions. The report sent the Dow Jones industrials soaring more than 400 points, which in turn raised oil traders' hopes that the financial crisis won't do more serious damage to the economy and demand for oil.

Crude prices have steadily fallen since reaching a record $147.27 a barrel on July 11. Last Friday, oil fell below $100 for the first time since April.

Oil had jumped Wednesday as investors fled equities to crude, gold and other commodities as a short-term safe haven amid global market unrest.

Stepped-up attacks by Nigerian militants against the country's oil infrastructure helped support oil prices. In a fifth day of violence, Nigeria's main militant group said Wednesday that it had destroyed an oil-pumping station and a pipeline crossing southern Nigeria in a rare daylight attack.

A spokesman for Nigeria's state oil company said Wednesday that militant attacks are now cutting the country's daily oil production by about 1 million barrels a day, 40 percent of what the country produced before the militant campaign began three years ago.

"In the last few days, militant attacks in Nigeria have been stirring up again, but that's on the back burner right now," said Victor Shum, an energy analyst with consultancy Gertz & Purvin in Singapore. "I see downward pressure on oil in the near-term, with the key support level at $90."

Meanwhile, the U.S. government reported Wednesday a bigger-than-expected drop in crude supplies, reflecting the shutdown of virtually all Gulf Coast oil production because of Hurricane Ike and Hurricane Gustav.

The Energy Information Administration said U.S. crude stocks fell by 6.3 million barrels for the week ending Sept. 12, much bigger than the 3.7 million barrel drop expected by analysts surveyed by the energy research firm Platts.

Also on Thursday, the House approved measures to curb speculation in oil and other commodity markets by hedge funds and large institutional traders. However, the White House said President Bush likely would veto the bill if it gets to his desk.

In other Nymex trading, heating oil futures fell nearly 4.23 cents to settle at $2.7824 a gallon, while gasoline prices added nearly 2 cents to finish at $2.4824 a gallon. Natural gas for October delivery slipped nearly 3 cents to close at $7.621 per 1,000 cubic feet.

In London, November Brent crude added 35 cents to end at $95.19 a barrel on the ICE Futures exchange.

OPEC makes deepest oil cut ever to rescue prices
Wednesday December 17, 2008, 11:54 am EST


ORAN, Algeria (Reuters) - OPEC oil ministers agreed their deepest oil cut ever on Wednesday, slashing 2.2 million barrels per day from oil markets in a race to balance supply with rapidly crumbling demand for fuel.

The 12 members of the Organization of the Petroleum Exporting Countries were also aiming to build a floor under prices that have dropped more than $100 from a July peak above $147 a barrel.

The cut, effective from January 1, comes on top of existing reductions of 2 million bpd agreed by OPEC at its last two meetings. It lowers the group's supply target to 24.845 million bpd.

"I hope we surprised you -- if not, we have to do something about it, said OPEC President Chakib Khelil, host of the conference.

Oil fell more than $3 toward $40 following the deal, after weekly U.S. data showed inventories in the world's biggest consumer continued to swell.

A deepening recession has battered world demand and fuel inventories are bulging worldwide. Prices already have plunged by two-thirds since the summer and analysts say the oil market is under the sway of world financial turmoil.

"The world economy is driving the price more than anything OPEC can do at this stage," said Gary Ross, CEO of consultancy PIRA Energy. "It will be hard for the cuts to have any traction with regard to price in a deteriorating economic environment."

OPEC's president said the group would do its utmost to ensure new restraints were strictly enforced.

"I can tell you it's going to be implemented and it's going to be implemented very well because we do not have a choice," said Khelil, also Algeria's energy minister.

"If not, the situation is going to get worse."

Saudi Arabia, the world's biggest oil exporter, has led by example -- reducing supplies to customers even before a cut has been agreed to help push prices back toward the $75 level Saudi King Abdullah has identified as "fair."

"The purpose of the cut is to bring the market into balance and avoid the gyrations of the price," said Saudi Oil Minister Ali al-Naimi. "The cut may lead to higher prices or may not."

The cut, the third this year, brings a total reduction in OPEC supply to 4.2 million bpd, nearly a five percent cut in world oil supplies. OPEC is due to meet again on Mar 15.

FEELING THE PAIN

Oil below $50 is uncomfortable for all producing nations, but especially for OPEC members Venezuela and Iran which are dependent on higher prices to fund ambitious domestic programs.

It is hoped that a sharp supply cut will set oil on the path toward $75.

"You must understand the purpose of the $75 price is for a much more noble cause," the Saudi Oil Minister said. "You need every producer to produce and marginal producers cannot produce at $40 a barrel."

"Therefore we believe that $75 is probably more conducive to marginal producers to continue so we don't have a shortage in the market and we avoid the future sky-rocketing of prices."

Analysts said a limited recovery in prices would put a bit more strain on a recessionary global economy, but it may help pull the world back from the brink of deflation -- a growing source of concern.

The influential Saudi Oil Minister clearly outlined the kingdom's route to lower production.

It is pumping 8.2 million bpd against 9.7 million bpd in August. Saudi Arabia's implied output target is about 8.477 million bpd under existing OPEC curbs.

To have a lasting price impact, any OPEC deal must to be strictly observed.

According to independent observers cited in OPEC's monthly report on Tuesday, the group's compliance in November to existing cuts was only just over 50 percent.

Analysts said deeper cuts would further test discipline in the group. That restraint would be needed to slim down growing world oil stocks.

OPEC has encouraged other producers to cut back too. Russia and Azerbaijan are attending the Oran meeting as observers and have said they could rein in exports in future, but stopped short of am immediate pledge.

Leading a high level delegation, Russia's Deputy Prime Minister Igor Sechin said in a speech to OPEC that Moscow did not plan to join in coordinated output cuts and did not want to join the group.

(Additional reporting by Simon Webb, Katya Golubkova and Alex Lawler in Oran, Randy Fabi in Abuja, writing by Peg Mackey, editing by William Hardy)

CNNMoney.com
Oil off its highs on supply report
Wednesday February 4, 10:53 am ET
By Julianne Pepitone, CNNMoney.com contributing writer


Oil prices remained higher Wednesday, but off their peaks, after the nation's oil supply rose more than expected.
U.S. light crude for March delivery was up 25 cents to $41.03 a barrel. Oil traded up 77 cents just prior to the report's release.


The troubled economy has sunk demand, which in turn has caused a large buildup in crude supplies. Oil prices have plummeted from a record high of $147.27 a barrel last summer.

In its weekly inventory report, the Energy Information Administration said crude stocks rose 7.2 million barrels in the week ended Jan. 30. Analysts were looking for an increase of 2.9 million barrels of crude oil, according to a consensus estimate of industry analysts surveyed by Platts, a global energy information provider.

Crude oil inventories were above the upper limit of the average range for this time of year, the report said.

The Organization of Petroleum Exporting Countries, whose members produce about 40% of the world's crude, has been pressured to put a floor under prices as stockpiles grow.

OPEC pumped an estimated 26.23 million barrels per day in January, down from 27.24 million the previous month, according to a Reuters oil company survey released Tuesday.

OPEC's recent cuts, which were announced in December, come on top of a previously announced cut of 2 million barrels per day in 2008. The moves aim to bring parity to the current oversupply and ailing demand.

The EIA report also said stockpiles of gasoline rose by 300,000 barrels last week, with the total supply being in the upper half of the average range. Analysts were looking for an increase of 1.3 million barrels.

Distillates, used to make heating oil and diesel fuel, decreased by 1.4 million barrels. Analysts were looking for a decrease of 1.2 million barrels. The total supply was above the upper limit of the average range for this time of year.

Oil prices fall further on economic gloom
Wednesday February 18, 2009, 4:39 pm EST


NEW YORK (Reuters) - Oil prices fell nearly 1 percent to below $35 a barrel on Wednesday as dealers bet that slumping fuel demand in top consumer the United States has forced crude inventories to an 11-year high.

U.S. crude for March delivery slipped 31 cents to settle at $34.62 a barrel, while U.S. crude for April delivery fell $1.13 to $37.41 and London Brent for April delivery fell $1.48 to $39.55.

The losses came as dealers anticipated a government report on Thursday would show crude stockpiles in the United States rose last week by 3 million barrels to the highest since May 1998.

Oil stocks in the world's largest energy consumer have already risen by 20 percent since September as the economic downturn has crushed business and consumer demand, helping pull oil prices more than $110 off their peaks last summer.

The American Petroleum Institute said on Wednesday crude stocks rose last week by 1.6 million barrels. The EIA report is widely seen as more accurate than the API's because U.S. energy firms are required to participate.

Oil's losses tracked a decline in the U.S. stock market after data showed U.S. housing starts and building permits dropped to record lows in January, signaling a potential deepening of the recession.

The White House on Wednesday unveiled a $275 billion plan aimed at stemming foreclosures in the slumping housing sector.

Weakness in the global economy and sliding demand for energy have rung alarm bells for the Organization of the Petroleum Exporting Countries, which has been seeking to cut 4.2 million bpd of output since September to prop up oil prices.

Several OPEC members have signaled the cartel could deepen its cuts when it next meets March 15 in Vienna.

U.S. Energy Secretary Stephen Chu said he would not weigh in on whether OPEC should cut production, saying such consultation was "not in my domain."

The comment marked a shift from previous U.S. energy secretaries who met regularly with the energy ministers of OPEC's member nations, discussed the oil market and expressed both privately and publicly the U.S. position on OPEC production levels.

Oil falls below $35 on more bad economic news
Oil prices fall below $35 ahead of report expected to show growing crude inventories
John Porretto, AP Energy Writer
Wednesday February 18, 2009, 4:20 pm EST


HOUSTON (AP) -- Benchmark oil prices fell below $35 a barrel Wednesday as another dose of bad economic news only raised concerns about the global downturn's impact on energy demand.


Economic expectations for the U.S. were sharply downgraded by the Federal Reserve, which predicted that more people will lose jobs and the economy will contract.

Light, sweet crude for March delivery fell 31 cents to settle at $34.62 a barrel on the New York Mercantile Exchange. The March contract expires on Friday, and most of the trading was for the April contract.

Benchmark crude for April delivery fell $1.13 to settle at $37.41.

There is little faith in the energy markets that the $787 billion stimulus bill signed this week will lead to a quick turnaround.

There's just "a deafening lack of any fresh foundation for economic growth," the energy consultancy Cameron Hanover said in a note to clients Wednesday.

"Many traders had hoped and expected progress on the stimulus bill would somehow solve the economy's worst woes and fears," the note said. "At this stage, it does not seem to have done that."

The Federal Reserve on Wednesday projected the unemployment rate will rise to between 8.5 and 8.8 percent this year. The old forecasts, issued in mid-November, predicted the jobless rate would rise to between 7.1 and 7.6 percent.

The Fed also believes the economy will contract this year between 0.5 and 1.3 percent. The old forecast said the economy could shrink by 0.2 percent or expand by 1.1 percent.

It also said production at the nation's factories, mines and utilities fell 1.8 percent last month, the third straight month for a decline. That means a huge cut back in energy demand.

Factories and utilities consume an enormous amount of natural gas. Natural gas prices this week fell to their lowest levels since September 2006.

Another report from the Commerce Department said construction of new homes and apartments plunged 16.8 percent in January from the previous month, to a seasonally adjusted annual rate of 466,000 units, a record low. Builders are slashing home construction as skyrocketing home foreclosures dump more empty properties on an already glutted market.

In an effort to prop up the economy, the White House on Wednesday said the government will spend $75 billion to help prevent millions of Americans from losing their homes.

But energy demand has already plummeted and U.S. stockpiles of crude are hitting record levels.

Analysts expect crude stocks to grow by another 3.5 million barrels when the Energy Department releases oil inventory data for the week ended Feb. 13, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

After building to a record of nearly 35 million barrels, oil inventories at Cushing, Oklahoma -- the delivery point for Nymex crude oil futures contracts -- could climb further, Platts said.

Analysts also expect refiners to cut back even more as they try to match the steep decline in gasoline demand in recent months.

The American Petroleum Institute said Wednesday overall demand for oil, as measured by domestic deliveries, was down in January from a year ago, though U.S. gasoline demand registered its first monthly increase in more than a year. U.S. gasoline demand rose 1.7 percent last month from a year ago, according to the monthly report from API, the oil and gas industry's trade organization.

Yet deliveries of distillate fuel oil, which includes diesel fuel, fell 3.5 percent, and jet fuel deliveries slipped nearly 9 percent.

"All told, weak demand across the board has given us the lowest deliveries for January in seven years," said API statistics manager Ron Planting.

Beyond worries about the U.S. economy, Vienna's JBC Energy noted in its newsletter that "a slump in European stock indices and U.S. automakers' demand for extra government funds added to the negative sentiment in the market."

General Motors Corp. and Chrysler LLC asked the government Tuesday for an additional $14 billion in aid. GM presented a survival plan that also calls for cutting a total of 47,000 jobs globally and Chrysler said it will cut 3,000 more jobs.

GM, the world's largest automaker, said it could run out of money by March without new funds.

"That's 47,000 more people who will be driving less," said Gerard Rigby, an energy analyst with Fuel First Consulting in Sydney. "It's mind-blowing. It makes you wonder whether these companies should survive."

In other Nymex trading, gasoline futures slipped 5.66 cents to settle at $1.0652 a gallon. Heating oil fell 4 cents to settle at $1.1469 a gallon, while natural gas for March delivery slid about a penny to settle at $4.203 per 1,000 cubic feet.

In London, the March Brent contract fell $1.48 to settle at $39.55 on the ICE Futures exchange.

Oil falls below $38 as economic outlook worsens
Friday February 20, 2009, 8:19 am EST


LONDON (Reuters) - Oil fell more than $2 a barrel to below $38 on Friday, retreating as the global economic outlook deteriorated, dragging stock markets down across the world.

Oil prices rallied strongly on Thursday, jumping 14 percent after data showing an unexpected draw in U.S. crude stocks. But worries over the health of oil demand have resurfaced, with sentiment dented by sharp falls in equity markets.

European shares tumbled to a six-year low as investors fretted about capital increases and bank nationalization on the back of a deepening economic downturn. The broad Topix index of Japanese shares closed at its lowest level in about 25 years.

Worries over the fragility of the global economy boosted gold, which saw a rush to safety take bullion up more than 1 percent to its highest since March last year.

U.S. crude futures for March delivery, which expire on Friday, were down $2.04 at $37.44 a barrel by 8:12 a.m. EDT, after posting the biggest settlement gain since December 31 in the previous session.

April delivery fell $1.75 to $38.42, while Brent for April delivery dropped $1.58 to $40.41 a barrel.

"The overall driving trend will be the economy as the market remains demand-focused," said Harry Tchilinguirian, commodities analyst at BNP Paribas in London. "We expect this to be the case for the entire first half of the year."

BLEAKEST DIAGNOSIS EVER

Most pressure was on the expiring March U.S. crude contract, which has been weighed down by very high crude inventories at Cushing, Oklahoma, the delivery point for NYMEX futures.

Brent and later U.S. crude futures months were more stable.

"Brent bounced back above $40 yesterday," said Christopher Bellew, broker at Bache Commodities. "In spite of economic gloom and bearish data, Brent is holding its sideways range."

In its monthly report on Friday, the Bank of Japan reiterated that economic conditions were deteriorating rapidly -- its bleakest diagnosis ever -- and would likely continue to worsen for the time being.

Japan has been hit particularly hard by the global slump, triggered by the U.S. housing market meltdown, due to its heavy dependence on exports and chronically weak domestic consumption.

Crude inventories in the United States, the world's top consumer, fell slightly last week on lower imports and higher demand, the U.S. Energy Information Administration said, snapping seven straight weeks of builds against market expectations.

The bullish oil data countered pessimism in the U.S. stock market, where the Dow industrials index closed at its lowest in more than six years on a gloomy jobs report and fears that banks could be nationalized.

Crude prices have fallen more than $100 a barrel from the peaks hit last July as the worsening economic crisis has bitten into oil demand, prompting the Organization of the Petroleum Exporting Countries (OPEC) to agree to deep output cuts.

In the latest indication that OPEC members are complying with the agreed cuts, Kuwait notified at least two buyers in Asia that it will keep curbs of 5 percent below contracted volumes for April-June term crude oil supplies, steady from March, trade sources said.

U.S. economic reports due out later in the day include the consumer price index and real earnings for January, as well as the Economic Cycle Research Institute's (ECRI) weekly index of economic activity.

Oil falls slightly as stockpiles weigh
Wednesday April 15, 2009, 3:54 pm EDT


NEW YORK (Reuters) - Oil prices fell marginally on Wednesday as government data showed U.S. crude stocks last week were at the highest level since September 1990.

The Energy Information Administration's weekly inventory report showed a 5.6-million-barrel rise in U.S. crude stocks, to 366.7 million barrels, beating analysts' expectations of a 1.9-million-barrel build.

U.S. crude for May delivery settled down 16 cents at $49.25 a barrel after a day of see-saw trading. ICE Brent crude settled down 17 cents at $51.79.

"Another week, another bearish inventory report. It has been negative week after week and yet the market hasn't collapsed," said Tom Bentz, senior commodity analyst at BNP Paribas Commodity Futures Inc in New York.

"It's defying fundamental logic, focusing instead on the dollar, the strength in the stock market and inflation fears -- that's what's keeping the oil price up."

The bearish inventory data outweighed a modest rise on the stock market, with the Dow Jones industrial average staying positive on Wednesday.

Oil prices have tumbled nearly $100 per barrel since last July, as the global recession dented oil demand, but they have recovered in recent months from a low of $32.40 in December.

A rally in equity markets this month, in the hope that the world economic outlook might be brightening, has helped boost oil prices, despite its weak supply-demand fundamentals.

"We still expect the U.S. stock market to be the intermediate price driver for most commodity complexes over the next few weeks," Edward Meir of MF Global said in a research note.

However, ExxonMobil Corp Chief Executive Rex Tillerson said on Wednesday in an interview with Reuters that high inventory levels will affect oil prices even when the U.S. economy rebounds.

He added that crude oil price should remain range-bound for a while as high inventory levels and concerns about the world economy outweigh attempts by OPEC to curb supply.

OPEC had announced production cuts of up to 4.2 million barrels a day since September in an attempt to stem the slide in oil prices.

The Organization of the Petroleum Exporting Countries said Wednesday that world oil demand would fall by 1.37 million barrels per day in 2009, up from its previous forecast for a fall of 1.01 million bpd.

"In the coming months, the market is expected to remain under pressure from uncertainties in the economic outlook, demand deterioration and the substantial supply overhang," OPEC said.

Both the International Energy Agency and the U.S. government agency EIA have also just reduced their global demand forecasts.

In its monthly outlook released on Tuesday, the EIA cut its 2009 world oil demand forecast by 180,000 barrels per day to just over 84 million bpd.

Gloomy economic indicators remained on Wednesday, with Federal Reserve Data showing U.S. industrial output shrank more than expected in March.

Crude Oil
West Texas Crude also made a false breakout, below support at $47, before reversing to test resistance at $50. Penetration of resistance would warn of a bear trap — confirmed if crude recovers above $55. Reversal below $47, on the other hand, would confirm a down-swing to test primary support at $35.

Crude Oil...
West Texas Crude formed a flag continuation pattern. Upward breakout would offer a target of $70, calculated as 50 + [55 - 35]. Downward breakout, while less likely, would test primary support at $35.

Oil prices jump to high for the year
Crude prices surge as EIA reports lower-than-expected jump in crude storage levels
On Wednesday May 6, 2009, 3:37 pm EDT


SIOUX FALLS, S.D. (AP) -- Oil prices surged to a 2009 high Wednesday after a government report showed that unused crude being placed in storage slowed a bit last week.

Benchmark crude for June delivery rose 4.6 percent, or $2.50, to settle at $56.34 a barrel on the New York Mercantile Exchange. It was the highest close since mid-November.

Demand for energy during the recession has been decimated, leaving storage facilities more bloated than in any year since Iraq's invasion of Kuwait in 1990.

Prices for crude and gasoline have plunged as a result, providing a break for everyone from industrial companies to consumers, though that must be taken in the context of shuttered factories and layoffs.

In that same context, however, government data that in a normal year might send energy prices falling, actually sent them up across the board Wednesday.

Prices for oil, natural gas, heating oil and gasoline all rose on data showing levels of crude in storage continues to rise. What sent prices sharply higher, however, is that levels did not rise more than they did.

Crude levels for the week ended May 1 rose by 600,000 barrels to 375.3 million barrels, the Energy Department's Energy Information Administration said in its weekly report. Analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., had expected a build up of 2.2 million barrels.

An overnight report from the American Petroleum Institute even showed a 1-million-barrel slip in crude oil stocks and a 2.9-million-barrel drop in gas supplies.

In a market environment where everyone is looking for scraps of good news, it provided a shot of optimism that the economy may be on the mend.

"A sign that demand is improving perhaps? Or maybe those refiners are still indifferent to increasing supply," Phil Flynn, an analyst at Alaron Trading Corp., wrote in a morning note. "It was probably a little of both."

Meanwhile, the national retail average price for a gallon jumped more than 3 cents overnight to $2.11 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. That is about 7 cents a gallon below what it was a month ago, but $1.50 below its year-ago price.

The EIA in its report said gasoline in storage slipped by 200,000 barrels, even though demand continues to fall. That is partly because refineries have pulled back on production as they try to match falling demand, but there is also evidence that the refineries that make gasoline are beginning to ramp up.

While demand for gas fell 1 percent over the four weeks ending May 1 with U.S. consumers still rattled, refineries increased capacity by more than 3 percent.

There is little to suggest demand for energy is picking up, but Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, said there is more optimism about the general economy.

"We could see a little more vacation driving than we anticipated," Ritterbusch said. "That's being offset by the fact that refinery runs are coming back to meet any unexpected needs."

There have been other hints in recent days that recession may be loosening its grip.

The ADP National Employment Report, an unofficial gauge of the labor market, said Wednesday that private sector employment fell by 491,000 last month. In the context of today's economy, that was taken as good news. It was much better than the 708,000 jobs lost in March.

On Tuesday, Fed Chairman Ben Bernanke gave his most optimistic prediction yet about the end of the U.S. recession, saying he expects the economy to start growing again this year.

U.S. bank stress test results set for release on Thursday and April unemployment figures due out Friday should provide more insight into the state of the economy and the odds that energy prices will rise.

Oil has traded near $50 a barrel for more than a month after dropping from a record $147 last July and rising from below $35 in February.

In other Nymex trading, gasoline for June delivery rose 5.58 cents to settle at $1.628 a gallon and heating oil gained about 4.5 cents to settle at $1.4713 a gallon. Natural gas for June delivery jumped 27.2 cents to settle at $3.887 per 1,000 cubic feet.

In London, Brent prices rose $2.03 to settle at $56.15 a barrel on the ICE Futures exchange.

Associated Press Writers Pablo Gorondi in Budapest, Hungary, Alex Kennedy in Singapore, Pan Pylas in London and Ernest Scheyder in New York contributed to this report.