Oil Settles Above $72 on Surprise Drop in US Crude Supplies

By: Reuters | 19 Aug 2009 | 02:51 PM ET
Oil prices surged nearly 5 percent to settle above $72 Wednesday after U.S. government data showed a steep drop in crude imports and inventories in top consumer the United States.

U.S. crude stockpiles plunged by 8.4 million barrels in the week to Aug. 14 — against analysts' forecasts for a build — as imports dropped to the lowest level since September 2008 and refiners hiked runs, according to data released by the U.S. Energy Information Administration.

Gasoline inventories also showed a bigger-than-expected drop, while distillate stockpiles showed a surprise drop.

"The data is being viewed as bullish as all stock categories fell more than expected," said Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.

The data helped push U.S. light, sweet crude [US@CL.1 72.23 3.04 (+4.39%)] up $3.23, or 4.67 percent, to settle at $72.42 a barrel. London Brent crude [GB@IB.1 74.37 2.00 (+2.76%)] rose $2.22 to settle at $74.59 a barrel.

"When WTI is so much weaker than Brent, it closes the arbitrage. Even ships that are already loaded up with crude can be rerouted to other markets where prices are looking more attractive," said Addison Armstrong, director of Research for Tradition Energy in Stamford, Connecticut.

Further the American Petroleum Institute (API) said U.S. oil demand in July showed signs of improvement, with demand down 3 percent year-on-year last month compared with an average drop of around 6 percent in the first half of 2009.

"I think these (demand) changes are reflective of an improving economy, but one must be cautious because these changes are versus year ago weak numbers," said API chief economist John Felmy.

Slumping demand due to the global economic crisis sent crude oil prices off record high prices near $150 a barrel hit in July 2008 to below $33 a barrel in December. Expectations for a potential rebound in the economy could increase fuel consumption and have helped lift prices.

Oil prices had fallen earlier on Wednesday, hitting a low of $68.05 after a near 5 percent slump in Chinese shares sent doubts rippling through global markets about the strength of the world economic recovery.

U.S. stocks rose as energy shares jumped following the EIA data, while the dollar fell.

Traders also watched for storms in the Atlantic Basin but there was no immediate threat seen to U.S. oil installations in the Gulf of Mexico.

Powerful Hurricane Bill, a dangerous Category 4 storm with 135 mph (215 kph) winds, raged across the open Atlantic on Wednesday, days from land but on a path that could menace Canada's eastern province next week.

Crude Oil May Climb to $95 in Early 2010: Technical Analysis

By Mark Shenk

Aug. 7 (Bloomberg) -- Crude oil may reach $95 a barrel by early next year after rising to a seven-week high this week, according to technical analysis by Auerbach Grayson.

Oil is set to reach $83 a barrel, which corresponds with the 38.2 percent Fibonacci retracement of the range generated by the September contract’s high of $145.96 on July 14, 2008, and the low of $44.28 touched on Feb. 18. The next target of $95 would be a 50 percent retracement.

“The oil market is in a strong position for a further move to the upside,” Richard Ross, a technical analyst at Auerbach Grayson, a brokerage in New York, said in a telephone interview. “There was a 70 percent pullback from the peak last summer to the trough. A 50 percent retracement brings you right to $95.”

Crude oil for September delivery fell 3 cents to $71.94 a barrel yesterday on the New York Mercantile Exchange. Futures topped $70 on Aug. 3 for the first time since July 1, which was a breakout from a ‘symmetrical triangle formation,’ Ross said.

“We were able to break out on the upside Monday and more significantly, we broke out and held those gains,” Ross said. “This shows the ability of the oil market, along with equities, to shrug off bad news and focus in the good news. This is a good sign for technicians.”

The Fibonacci sequence was identified by Italian mathematician Leonardo Fibonacci in the 13th century. The ratio between the numbers, about 0.618, is known as the golden mean, and is also used by technical analysts to find levels of resistance and support.

Oil Rises Above $71 on US, China Factory Output

By: Reuters | 03 Aug 2009 | 12:06 PM ET
Oil rose more than $1 after hitting a one-month high near $72 Monday as positive manufacturing data in the U.S. and China raised optimism for an economic recovery that could bolster energy demand.

U.S. light, sweet crude [US@CL.1 71.45 2.00 (+2.88%)] rose more than $1 to above $71 a barrel after earlier hitting $71.95, the highest since June 30. London Brent crude [GB@IB.1 73.67 1.97 (+2.75%)] also rose.

The U.S. manufacturing sector continued to shrink in July, but at a slower pace than in June and at a lesser rate than expected, according to figures released by the Institute for Supply management on Monday.

The July index of national factory activity rose to 48.9 from 44.8 in June, the highest reading since August 2008.

In China, a surge in domestic investment spurred factory activity, with Brokerage CLSA's China Purchasing Managers' Index (PMI) rising to a one-year high of 52.8 in July from 51.8 in June.

"The weak dollar and the manufacturing data are big boosts to the energy markets today"' said Phil Flynn, analyst at PFGBest Research, Chicago.

Oil Barrels

Analysts said a weak dollar, which slid to its lowest point this year on Monday against a basket of currencies amid increased risk appetite, would offer support to oil. Global shares were boosted by the news, with Wall Street opening higher and the S&P 500 Index advancing briefly above the 1,000 level to its highest level in 9 months.

European shares hit a new high for 2009, led by banks. The latest gain in oil prices brings oil within sight of the 2009 high of $73.38 set in June, though some see resistance that prices could struggle to rally beyond.

"I feel that the market has gathered so much momentum and crude may be overpriced at this point," Flynn said. On Friday, crude rallied almost 4 percent as data showed the U.S. economy shrank at a smaller-than-expected 1 percent annualized pace in the second quarter, raising hopes the recession was easing.

The market climbed about 2 percent last week — the third straight week of gains — which helped to reverse steep losses in the middle of the month and brought July's monthly decline to a marginal 0.6 percent.

China's crude stockpiles in June, including both state strategic and commercial reserves, declined 2.7 percent from a month earlier, the first fall in four months, China OGP, a newsletter run by Xinhua, reported.

Supply curbs by the Organization of the Petroleum Exporting Countries since last year in response to falling demand have helped crude rally from below $33 in December.

However, output from 11 members from the OPEC rose slightly in July, lowering its compliance rate to its agreed supply curb to 71 percent from 72 percent in June, a Reuters survey showed.

Link to Oil Decline Website

http://www.oildecline.com/

IEA Sees Global Oil Demand Bouncing Back in 2010

Reuters | 10 Jul 2009 | 06:06 AM ET
Global oil demand will bounce back by 1.7 percent, or 1.4 million barrels per day (bpd), year-on-year in 2010, led by rising consumption in emerging economies, the International Energy Agency said on Friday.

Making its first 2010 forecast in a monthly report, the adviser to 28 industrialized countries predicted oil demand next year would reach 85.2 million bpd next year, from 83.8 million bpd this year.

It said the demand outlook for this year was "effectively unchanged" — down 2.9 percent, or 2.5 million bpd compared with last year.

David Fyfe, head of the IEA's oil industry and market division, said the extent of recovery in world oil demand would rest on the performance of the global economy and prices.

"It's highly dependent on economic recovery materializing and the expectation (oil) prices will remain in a relatively moderate range," he said.

He said a small upward revision in the estimate for oil demand this year "should not be interpreted as green shoots."

The 11 members of the Organization of the Petroleum Exporting Countries subject to output curbs pumped 75,000 bpd more in June, compared with the previous month — taking their compliance with promised cuts down to 68 percent from a revised estimate of around 69 percent in May.

The latest Reuters survey pegged OPEC compliance at 72 percent.

Not Much for OPEC

OPEC members have promised to reduce their oil output by 4.2 million bpd from the level they produced last September in response to a sharp decline in oil demand triggered by the global economic downturn.

AP

But as oil prices have risen, several OPEC members have begun to produce more oil than their implied output quotas.

Oil prices have been volatile over the last year, peaking at an all-time record of more than $147 per barrel a year ago, plunging to below $40 in December and then recovering to more than $70 in June.

The benchmark U.S. light crude oil [US@CL.1 59.46 -0.95 (-1.57%)] was trading around $60.00 per barrel, down on the day. Earlier, oil hit a session low below $60, and prices rose slightly following the IEA report.

"It is not a report that is going to add to the downside," said Petromatrix analyst Olivier Jakob. "It is slightly positive and won't add to the weak trend of recent days."

The IEA said demand for OPEC crude was expected to remain limited following a 330,000 bpd upward revision to non-OPEC supply, mostly because of higher-than-expected Russian output.

It saw demand for OPEC crude in 2009 at 27.7 million bpd and said it would edge up only slightly to 27.9 million bpd in 2010. This is in line with OPEC's own view.

The producer group said this week that world demand for its oil would not recover to levels seen before the global economic slump until 2013.

"Potentially, there is not an awful lot there for OPEC," said Fyfe.

The IEA said oil inventories had increased worldwide in May, particularly in North America, Europe and the Pacific, taking stocks to the equivalent of 62.5 days of forward cover at the end of May, 7.2 days more than a year ago and up from 62 days at the end of April.

Oil Tops $71 on Nigeria Attacks

By: Reuters | 29 Jun 2009 | 12:23 PM ET
Oil rose about $2 to top $71 a barrel Monday, lifted by word of fresh rebel attacks on oil installations in Nigeria and gains in equity markets.

Nigeria's main militant group said its fighters had attacked an oil facility belonging to Royal Dutch Shell in the Niger Delta on Monday, days after President Umaru Yar'Adua proposed an amnesty.
Further support came as U.S. stocks opened higher on signs of life in the global economy, which kept investors optimistic over the prospect of a recovery.

"Equities are a little bit stronger and that has been helping the market," said Peter Beutel, president of Cameron Hanover in New Canaan, Conn., adding that buying by funds had been strong.

"Anytime that we see the Dow Jones higher, the funds take that as a sign that the economy is going to strengthen and that oil demand will strengthen along with that," he added.

Signs of a turnaround in the global economy have helped lift crude prices up from below $40 a barrel in February. The economic crisis has battered global fuel demand, knocking crude off record highs set above $147 a barrel last year.

The U.S. Energy Information Administration revised up April U.S. oil demand by 1.18 percent from its early estimate of 18.255 million barrels per day, suggesting a potential turnaround in the U.S. economy.

The EIA revision came after a bullish International Energy Agency mid-term oil demand forecast Monday, which said that there was a chance of an extended contraction and that the threat of a supply crunch had only receded, not gone away.

Based on a higher economic growth scenario, the IEA predicted Monday product demand would grow by 0.6 percent, or 540,000 bpd on average, between 2008 and 2014, taking demand from 85.8 million bpd to 89 million bpd.

Number 2 oil consumer China unexpectedly increased gasoline and diesel prices Monday by nearly 9 percent and 10 percent respectively.

Nigeria

Crude was bolstered by militant activity in Nigeria as fighters forced production outages in the West African country.

The Movement for the Emancipation of the Niger Delta (MEND) said its fighters struck the Shell Forcados platform in the Delta state at about 0230 GMT.

There was no immediate independent confirmation but Shell said it shut in some oil production at its western operations in the Delta while it investigated reports of attacks.

"The Nigerian situation is the main factor in the market," said Mike Wittner, global head of oil research at Societe Generale. "The attacks appear to be removing some oil production capacity from the market."

Friday, four militant Nigerian factions said they would accept in principle an amnesty offer from President Umaru Yar'Adua, raising hopes Africa's top oil producer would halt a battle with rebels.

Pipeline bombings, attacks on oil and gas installations and kidnapping of industry workers over the past three years have prevented Nigeria from pumping much above two-thirds of its installed oil output capacity of 3 million barrels per day (bpd).

Algerian Energy and Mines Minister Chakib Khelil said Monday oil demand was still weak due to the weakness of the U.S. and European economies and world oil stocks remained high.

Khelil said an increase in OPEC oil production was hard to envisage, despite rising crude prices.

Oil analysts say OPEC can help tighten the oil market significantly later this year if it continues to implement its promise to cut oil production by 4.2 million bpd from its September output levels.

Oil Rises Above $69 on Nigeria Attack

By: Reuters | 25 Jun 2009 | 10:11 AM ET
Oil rose above $69 a barrel on Thursday after Nigeria's main militant group shut down one of Royal Dutch Shell's pipeline junction points, heightening concerns about supplies from the region.
In the latest in a string of attacks in Nigeria, Africa's biggest oil producer, the Movement for the Emancipation of the Niger Delta (MEND), said it had sabotaged the Billie-Krakama pipeline in Rivers State, which supplies one of the country's main export terminals.

Attacks from MEND have forced foreign oil companies, including U.S. oil major Chevron [CVX 67.11 1.39 (+2.12%)] and Italy's Agip, to shut at least 133,000 barrels per day of oil production in the last month.

Shell said it had shut down one of its pipeline junction points on Thursday but declined to say whether any oil production had been affected.

Analysts said the effect on prices had been subdued with plenty of spare supply capacity available around the world, as the global recession has cut demand for oil.

"The Nigerian attacks have definitely been supportive, but the impact is less in the current economic environment as there's plenty of spare capacity in the oil industry right now," Andrey Kryuchenkov, an analyst at VTB Capital in London, said.

"When we were rallying towards $150 a barrel last summer a small sneeze in Nigeria would send the market rallying at least $2 a barrel. There's less of a geopolitical premium in prices now," Kryuchenkov added.

Falling demand for oil sent oil prices crashing from record highs close to $150 a barrel last July towards $30 a barrel at the turn of the year.

Since mid-April, however, prices have risen sharply on prospects for an economic recovery.

A Reuters poll of industry analysts showed oil prices are expected to average more than $70 a barrel in 2010, compared with the latest forecast average of $56.59 for this year.

Rising Inventories

On Wednesday, U.S. government data showed stockpiles of gasoline in the world's largest energy consumer rose 3.9 million barrels last week, exceeding analysts' predictions.

Stockpiles of distillates — such as diesel and heating oil — have risen to 10-year highs due to the recession. But prices took support from a large drop in stockpiles of crude oil, which declined by 3.8 million barrels last week.

The U.S. economy shrank slightly less in early 2009 than previously thought, the government reported on Thursday, though there was widespread weakness in activity and demand was soft. Gross domestic product dropped 5.5 percent in the first quarter, from 6.3 percent in the last quarter of 2008.

Separately, the Labor Department said the number of workers filing new claims for jobless benefits unexpectedly rose last week by 15,000 to a seasonally adjusted 627,000 — a measure of the strain still faced by hard-pressed consumers.

Oil pulled back slightly falling the jobless claims report, with the dollar strengthening as investors' appetite for risk was curbed.

A stronger dollar makes commodities priced in the greenback more expensive for holders of other currencies.

Why oil is on the rise again

Prices have doubled since February, but that's probably not the end of it. Asia's recovery is igniting demand.

NEW YORK (Fortune) -- Ask a group of oil analysts about the recent surge in crude costs and here's the consensus answer you'll get: Prices have run up too far, too fast and they aren't supported by the fundamentals.

Ask them about where prices will be two years from now, however, and the majority will offer this prediction: A lot higher.

"We're concerned about oil prices rising so rapidly in the near-term," says Hussein Allidina, head of commodities research at Morgan Stanley. "But the bet in the long-term is one way, and that's just up."

Oil shot past $70 a barrel last week, meaning the cost per barrel has doubled since hitting a low in mid-February. And the swiftness of that move has plenty of observers wondering if we're headed toward another period of even more dramatic price gains.

Among the oil insiders worried about such a scenario is Royal Dutch Shell CEO Jeroen van der Veer, a 38-year veteran of the energy giant, who is scheduled to retire June 30. "If the oil prices stay volatile I'm afraid there will be too much slowdown in investment," he said at an energy conference in Abu Dhabi in early June, according to Reuters, while reiterating that Shell would follow through on its spending plans for this year. "I think too low capacity means the next price spike is to come."

The last spike, of course, was a year ago at this time, when oil zoomed all the way up to $147 per barrel and Congress began holding hearings to discuss whether speculators were manipulating prices. Then a market correction that began in the middle of last summer was accelerated by the global financial crisis. Oil plunged to multi-year lows, with the price of benchmark West Texas Intermediate crude dropping under $35 in December and again in February.

To understand the odds of oil moving back above $100, it helps to first examine the reasons that the price has rebounded so strongly in recent weeks.

Much of the recent rally actually has nothing to do with the oil market's current supply-and-demand situation. The latest estimate from the International Energy Agency (IEA) projects that worldwide oil use will be almost 2.5 million barrels a day lower on average this year than in 2008. And despite the fact that OPEC has been cutting back on production since last September to boost prices, oil inventories around the world are still high compared to historical levels.

"Considering that supply seems ample and demand is weak, the fact that oil is going up looks kind of weird," says Adam Sieminski, chief energy economist at Deutsche Bank. "But those factors are being overwhelmed by a huge sigh of relief that we're not going to have the Great Depression. A lot of money is coming out of mattresses."

That inflow is lifting stocks and commodities alike. Research by Morgan Stanley found the correlation between crude oil prices and equities has recently been at a record high -- with both rising strongly on the hope that the economic cycle has already bottomed.

"Historically, equities have been a leading indicator of economic growth and commodities have been a coincident indicator," says Morgan Stanley's Allidina. "Right now you're seeing commodities and equities move up together as money comes back in at the same time."

Just as important, Morgan Stanley found that the inverse correlation between a weakening U.S. dollar and rising crude prices was also closing in on a record high. Because oil is priced in dollars, when the value of the dollar falls it makes oil cheaper in other currencies -- simultaneously boosting consumption outside the U.S. and motivating non-U.S. producers to raise prices to make up for the purchasing power they've lost in the currency conversion.

Concerns about the ballooning deficit in the U.S. have caused investors to begin fleeing the dollar. The U.S. dollar index, which measures the value of the greenback against six major world currencies, has dropped 9% since the beginning of March. As it falls, oil prices are rising. If it falls further, they'll rise higher.

But just how high oil prices go from here -- and how fast they get there -- will ultimately depend on the ability of producers to meet future demand. And any robust rebound in consumption is sure to put a strain on global supply.

The investment cutbacks warned about by Shell's Van der Veer only make that more likely. In its World Energy Outlook 2008, released last November, the IEA warned that production declines from existing supplies would keep the market tight and called for $26 trillion in new infrastructure spending worldwide over the next two decades. Right now, the opposite is happening. In May, the IEA said it expected a 21% drop in oil and gas investment budgets globally in 2009 compared to 2008, or nearly $100 billion less. A cautious OPEC has said that a lot of its member countries' new drilling projects remain on hold.

Meanwhile, there are signs that a demand recovery could be on the way in Asia. China's crude consumption averaged 7.6 million barrels per day in April, according to Allidina, the highest level on record, amid reports that the government was stockpiling commodities. Goldman Sachs was confident enough of a demand rebound to come out in early June with a price target of $85 a barrel for West Texas Intermediate crude by the end of 2009 and $95 by the end of 2010.

Deutsche Bank's Sieminski agrees that prices are going higher over time. "Our forecast has been that oil will be at $100 in 2015 and it could happen faster if the economy recovers," he says. Because oil is generally considered an "inelastic" commodity -- meaning it takes a big increase in price to produce a small change in demand -- the chances of a spike increase once supplies get tight.

"If you get close to the balance, prices can go haywire very quickly and there's very little that can be done about it," says Sieminski. "Something happens on the margin to put pressure on the market and instead of the price adjustment being gradual it's a step change. Last time gasoline had to go to $4 a gallon and crude had to go to $150 a barrel to rebalance things. And that's how we could get there again."

Let's hope we don't get there for a while. To top of page

Oil Rises Above $72 on Weaker Dollar, US Data

Reuters | 16 Jun 2009 | 10:40 AM ET
Oil rose $2 to above $72 a barrel on Tuesday as the dollar slid and U.S housing data showed a jump in new construction starts and permits.
"The housing data was quite good, but stock markets are not shooting away just yet," said trader Robert Montefusco at Sucden Financial. "The dollar is still the main crux of it."

The dollar fell broadly as higher European shares piqued appetite for currencies seen as higher risk, and lost more ground after the U.S. housing data.

A weaker dollar can strengthen commodity markets by improving the purchasing power of buyers using other currencies.

The Commerce Department said on Tuesday U.S. housing starts jumped 17.2 percent to a seasonally adjusted annual rate of 532,000 units, from April's revised 454,000 units, and new building permits rose 4 percent, the biggest advance since June last year.

Iran Priced In

Iran's top legislative body ruled out annulling a disputed presidential election that has prompted the biggest street demonstrations since the 1979 Islamic revolution, but said it was prepared for a partial recount.

The world's fifth-biggest oil exporter has seen three days of the largest and most violent anti-government protests in three decades, though no disruption to Iran's 2.1 million barrels-per-day exports have been felt.

"We've seen a downward spiral over the years in light of sanctions in Iran's ability to bring projects online...it's a slow trend that had pretty much been continuously priced in," said Samuel Ciszuk, analyst at IHS Global Insight in London.

Expectations of an economic recovery drove crude prices to a near eight-month high above $73 a barrel last week.

Traders will look out for weekly U.S. government inventory data on Wednesday, which is expected to show a 1.8-million barrel fall in crude oil stockpiles, a 600,000-barrel rise in gasoline stockpiles and 900,000-barrel rise in distillate stockpiles, based on a preliminary Reuters poll.

The American Petroleum Institute (API) will issue its report later in the day.

With oil rising almost $20 since the end of April, there were concerns that speculation in the market had pushed oil prices up too high, too fast.

OPEC Secretary-General Abdullah al-Badri said too quick a rise in oil prices could harm a global economic recovery, though a price of $80 a barrel would not stem growth.

The head of the International Monetary Fund, Dominique Strauss-Kahn, also sounded a cautious note, saying on Monday the worst of the global crisis was not yet over.

Oil Above $72 As Traders Eye Economic Recovery

Jun. 12, 2009
(AP) Oil prices hovered above $72 a barrel Friday in Asia near an 8-month high as investors eyed signs a global recession may be easing.

Benchmark crude for July delivery fell 31 cents to $72.37 a barrel by midday Singapore time in electronic trading on the New York Mercantile Exchange. On Thursday, it rose $1.35 to settle at $72.68, the highest since October.

An improving crude demand outlook helped bolster prices. On Thursday, the International Energy Agency in Paris said in its monthly survey that global oil demand would fall by 2.9 percent this year, better than its May forecast of a 3 percent annual fall.

It was the organization's first upward estimate of demand in 10 months.

"Oil prices are discounting positive economic growth by around the end of the third quarter," said Christoffer Molke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "If that doesn't happen, prices at this level are overbought."

Prices have more than doubled since March as investor optimism grew that the worst of a severe U.S. recession was over.

The Labor Department on Thursday reported that the number of newly laid-off Americans filing for jobless benefits fell last week by 24,000 to 601,000 _ better than economists had forecast.

Meanwhile, the Commerce Department said retail sales rose 0.5 percent in May, interrupting two months of decreases and marking the largest gain since January.

"I think we're going for a test of $75," Molke-Leth said. "Every time you see a little pull back you have funds ready to step in."

Investors have also bought crude as a hedge against a weakening U.S. dollar and the possibility of inflation down the road. The euro was steady at $1.4102 on Friday.

"Fear of inflation is supporting the whole commodity complex, particularly oil," Molke-Leth said. "The record fiscal and monetary stimulus will have inflationary implications."

In other Nymex trading, gasoline for July delivery fell 0.64 cent to $2.06 a gallon and heating oil dropped 0.63 cent to $1.85. Natural gas for July delivery slid 3.7 cents to $3.90 per 1,000 cubic feet.

In London, Brent prices fell 28 cents to $71.51 a barrel on the ICE Futures exchange.

Oil Prices Rise Above $69 as Dollar Eases

Reuters | 09 Jun 2009 | 08:50 AM ET

Oil snapped a two-day slide on Tuesday, climbing above $69 as the U.S. dollar retreated.

Oil prices have more than doubled since February, rising with equities and helped by currency movements as a weaker dollar makes dollar-denominated commodities cheaper.

The S&P 500 index has risen by 39 percent from a one-year low on March 9, and increased appetite for risk has diminished demand for the dollar as a relatively safe haven.

"The currency market has been driving the oil market since the middle of May. Traders are looking more at the dollar than at equity markets now," said Tetsu Emori, fund manager at Tokyo-based Astmax.

Rising expectations of global economic recovery, which could spur fuel demand, have boosted buying across a range of markets, and oil price forecasters have become more bullish, predicting swollen fuel inventories will drop in the coming months.

Societe Generale on Tuesday raised its year-end crude oil price forecasts for 2009 by $8.50 to $65 a barrel in the third quarter and lifted its fourth-quarter forecast by $11.50 to $72.50, citing higher expected U.S. five-year inflation in a research note.

"Historically the relationship between oil and inflation expectations is much stronger than oil and the dollar," said Mike Wittner, global head of oil research at Societe Generale. "Oil prices are being driven lately more by non-fundamentals than fundamentals, and this (five-year inflationary) non-fundamental factor looks like it's going to be with us for a while."

Dollar Steady

The dollar paused from its latest gains while investors questioned whether there was a strong enough chance that a likely U.S. interest rate rise later this year would justify pushing the currency higher.

Traders said economic indicators and upcoming auctions for U.S. debt could underscore this shift in market sentiment.

"All eyes have been on stock markets and currency markets lately," said Tony Machacek, a broker at Bache Commodities. "The auctions today could have a significant shift in the trend of the dollar, and I wouldn't be surprised by a spill-over into oil values."

Nobuo Tanaka, executive director of the International Energy Agency, told Reuters on Monday the agency expects oil stocks in developed OECD economies to fall to 57 days by year-end from 63 days now if OPEC keeps output at current levels and demand recovers.

Later on Tuesday, the market could take direction from weekly U.S. inventory data from industry group the American Petroleum Institute, which is scheduled for release at 4:30 pm New York time.

It will be followed by U.S. Energy Information Administration data on Wednesday.

Analysts polled by Reuters said they expected crude stocks to have fallen by 400,000 barrels last week, while distillate and gasoline stockpiles could have risen by 1.2 and 1.3 million barrels respectively.

Last week, U.S. crude oil stockpiles rose by a more-than-expected 2.9 million barrels.

Oil Settles Just Below $69 on Recovery Hopes

Reuters | 04 Jun 2009 | 03:34 PM ET
Oil prices hit a seven-month high Thursday after U.S. data showed a drop in jobless claims, boosting expectations of an economic recovery that could revive ailing energy demand.

U.S. light, sweet crude [US@CL.1 68.69 2.57 (+3.89%)] for July delivery rose $2.69 to settle at $68.81 a barrel after peaking at $69.60 earlier in the day — the highest level since early November. London Brent crude [GB@IB.1 68.55 2.67 (+4.05%)] gained $2.83 to $68.71.

"There is a hell of a lot of momentum in these markets right now," said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn.

U.S. investment bank Goldman Sachs said a potential economic rebound alongside production cuts by the OPEC cartel could propel crude to $85 a barrel by the end of the year and to $95 a barrel by the end of 2010.

Oil's gains Thursday came after a U.S. report showing the number of U.S. workers filing new claims for jobless benefits fell for a third straight week, indicating some loss of force in the pace of the job market's deterioration.

The data contributed to a rally on Wall Street of about 1 percent.

"As has been the case lately, constructive economic data has been used as an indicator that the economy will improve and that oil demand will follow," said Peter Beutel, president of trading consultants Cameron Hanover in New Canaan, Conn.

Some analysts cautioned, however, that a staggering rebound in oil prices from lows near $30 a barrel this winter might be overdone given continued soft demand and high stockpiles. Oil had closed more than $2 a barrel lower Wednesday, after the U.S. Energy Information Administration reported U.S. crude inventories rose 2.9 million barrels.

Inventories of crude oil have swelled since the start of the economic crisis last autumn as global energy demand dipped for the first time in a quarter century. Aside from brimming onshore storage levels, some 100 million barrels of crude oil have been stowed away on vessels at sea, French oil major Total's head of strategy and planning told the Reuters Global Energy Summit Thursday.

Experts have said high oil inventories at sea could quickly flood the market once profits from holding onto the crude fall below the cost of storage. Concerns over weak demand and rising inventories have led producer group OPEC to agree to 4.2 million barrels per day worth of crude oil output cuts since September.

Saudi Oil Minister Ali al-Naimi has said OPEC would wait until crude inventories fall to around 53 days of forward cover — nearly 10 days below current levels — before considering raising output again.

Oil Rises Toward $68 on Higher Stocks, Lower Dollar

By: Reuters | 01 Jun 2009 | 09:21 AM ET
Oil rose more than 2 percent to a seven-month high on Monday, extending its biggest monthly gain in a decade due to rallying stock markets and sustained expectations for a global economic recovery.
U.S. stocks rose, following gains in Europe and Asia driven by data showing China's manufacturing continued to expand moderately in May. The dollar weakened, boosting investor demand for oil and commodities.

The dollar weakened, boosting investor demand for oil and commodities.

"It's the dollar and equities," said Christopher Bellew, a broker at Bache Commodities. "It's maybe not so surprising if there is a chance of seeing some economic recovery and increased demand for oil."

U.S. light sweet crude [US@CL.1 67.79 1.48 (+2.23%)] was higher, having climbed as high as $68.29.

London Brent crude [GB@IB.1 67.1 1.58 (+2.41%)] rose.

The market is still down sharply from a record high over $147 reached last year.

China's manufacturing sector continued to expand moderately in May as new export orders improved, two surveys showed on Monday, adding to tentative signs the world's third-largest economy was stabilizing.

Oil rallied by 30 percent in May to its highest since early last November, giving OPEC enough hope about the outlook that it agreed to maintain production at last week's meeting.

Inventories

At the same time, OPEC is unlikely to move quickly to curtail the rally.

At the weekend Saudi Oil Minister Ali al-Naimi said OPEC would wait until crude inventories fall to around 53 days of forward cover before considering raising output, nearly 10 days below current levels.

Despite oil's rally, many analysts have said the underlying fundamentals remain bearish.

This is now starting to change, with U.S. crude stockpiles falling last week and gasoline inventories dropping for the fifth week.

Reflecting increased expectations that prices will rise, speculators have expanded their net length in NYMEX crude contracts to over 40,000 lots, the highest since February.

Oil as well as base metals investors are now factoring in economic revival and "probably a fairly decent 'V'," said Commonwealth Bank of Australia commodity strategist David Moore.

"There is a risk that if economic data does not continue to support this view of the world that markets become disappointed with the pace of economic recovery, leading to price setbacks," he said.

Also, there is a risk of tempered demand growth as higher prices are passed on in some of the world's fastest-growing oil markets.

Beijing from Monday raised retail diesel and gasoline prices by 6-7 percent, the second and biggest rise this year.

Oil Rises to Six-Month High as OPEC Predicts Demand Recovery

May 28 (Bloomberg) -- Crude oil rose above $64 a barrel for the first time in six months after OPEC decided today to leave production quotas unchanged on speculation demand will rise as the global economy recovers.

Saudi Arabian Oil Minister Ali al-Naimi said that the group opted not to alter its output targets because “prices are good, the market is in good shape.” Oil should stay in a $60 to $70 range for the rest of the year, OPEC Secretary General Abdalla el-Badri said. The gain accelerated after a report showed that U.S. oil supplies fell the most since September.

“The outcome, no change in OPEC quotas, was expected, but the surprise was Saudi Arabia being very explicit about a price objective for the first time since the price band mechanism in the early part of this decade,” said Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York.

Crude oil for July delivery rose $1.11, or 1.8 percent, to $64.56 a barrel at 11:16 a.m. on the New York Mercantile Exchange. Futures reached $64.99, the highest since Nov. 10. Prices are up 45 percent this year.

The Organization of Petroleum Exporting Countries sought to maintain a benchmark price, comprised of seven oil grades, between $22 and $28 a barrel beginning in 2000. The group abandoned the price band in January 2005.

“They have now set economic parameters within which the market will now function, on the upside at least,” Eagles said.

Saudi Arabia’s al-Naimi forecast that oil may rise to $75 a barrel by this year’s third or fourth quarter. The group’s next meeting will be on Sept. 9, he said.

Maintain Discipline

“I don’t think there was any way they could justify cutting again at $60-plus crude,” said Mike Wittner, head of oil research at Societe Generale SA in London. “If they can maintain discipline and limit the production creep that comes with higher prices, stocks should start to come down.”

Other OPEC ministers said the group will work toward finishing previously announced reductions. OPEC has yet to complete output cuts totaling 4.2 million barrels a day that members agreed to late last year.

The production ceiling is 24.845 million barrels a day for 11 of its members. They pumped 25.812 million barrels a day in April, a May 13 report from the group showed. Iraq has no quota.

“Given the recent rally to above $60 a barrel and a global economy in recession, it would not have been possible to justify further cuts,” said Harry Tchilinguirian, senior oil market analyst at BNP Paribas SA in London.

Prices also increased after a government report showed a larger-than-expected gain in orders for U.S. durable goods, adding to evidence that that recession is easing. The 1.9 percent increase reported by the Commerce Department today in Washington was the largest since December 2007. Economists forecast a 0.5 percent gain in a Bloomberg News survey.

U.S. Inventories

U.S. crude oil inventories declined 5.41 million barrels to 363.1 million last week, according to the Energy Department. It was the biggest drop since September, when platforms, ports and refineries along the Gulf of Mexico were shut because of hurricanes. A 150,000-barrel decline was forecast, according to the median of 12 analyst responses in a Bloomberg News survey.

The Energy Department released its supply report today at 11 a.m. in Washington, a day late because of the Memorial Day holiday.

The American Petroleum Institute said yesterday that U.S. oil supplies dropped 2.82 million barrels to 364.7 million in the week ended May 22.

API collects stockpile information on a voluntary basis from operators of refineries, bulk terminals and pipelines. The government requires that reports be filed with the Energy Department for its weekly survey.

Brent crude for July settlement gained $1.53, or 2.5 percent, to $64.03 a barrel on London’s ICE Futures Europe exchange. Futures touched $64.17, the highest since Nov. 5.

Oil at $62; could hit $75 says Saudi Minister

Crude oil futures hold near 6-month high after the Saudi Oil Minister says it could hit $75, ahead of OPEC's meeting.
By Catherine Clifford, CNNMoney.com staff writer
NEW YORK (CNNMoney.com) -- Oil hovered on either side of $63 a barrel Wednesday ahead of the OPEC meeting and after the Saudi Oil Minister said the global economy can handle oil prices between $75 and $80.

Light sweet crude for July delivery traded up 10 cents to $62.55 a barrel, after reaching as high as $63.45 earlier in the session.

Oil settled at $62.45 a barrel Tuesday, which was the highest settle price since Nov. 5, and Tuesday's close was the fourth day in a row that oil has settled above $60.

Wednesday, the Saudi Oil Minister, Ali al-Naimi, said that the global economy was capable of managing with oil as high as $75 to $80 a barrel, according to reports from Reuters.

Oil has been very volatile in the past year. Oil prices topped out at $147 a barrel last summer before plunging below $34 a barrel in December. Then oil doubled back to pop up over $60 a barrel since the start of the year.

"The price rise is a function of optimism that better things are coming in the future," Naimi told reporters in Vienna, according to reports from Reuters. "We see offshoots of recovery." Comments from the head of oil juggernaut Saudi Arabia tend to drive the price of oil.

Al-Naimi hinted at higher prices in the future, but for now, the Organization of Petroleum Exporting Countries was expected to leave production quotas unchanged. The cartel - whose members produce about 40% of the world's crude - meet Thursday in Vienna to discuss production levels. When they cut production levels, that props up oil prices by reducing supply.

Starting late last year, OPEC announced reductions of 4.2 million barrels a day, and member nations have largely been complying with the production cut backs.

But with oil prices already on the rise and a tender global economy looking to stage a recovery, OPEC would be hard pressed to rationalize further production cuts.

Also Thursday, the government's weekly supply report is scheduled to be released, giving a snapshot of the levels of oil in the U.S. Typically, the Energy Information Administration's weekly supply report is posted Wednesday morning, but due to the Memorial Day holiday, the report comes out a day later this week.

Gas prices: As crude prices have crept up, so have gas prices. The pain at the pump has been getting steadily more severe for the last month. Retail gas prices have climbed for 29 consecutive days.

The national average price for a gallon of regular unleaded gasoline increased to $2.434, up 9 tenths of a cent from the previous day's price of $2.425 according to a daily survey by motorist group AAA.

In the last 29 days the average price of gas has jumped 38.6 cents or 18.8%. The average price of a gallon of gas is down $1.68 or 40.8% from the record high price of $4.114 that AAA reported on July 17, 2008. To top of page

Oil to ‘Correct’ Drop, Target $77: Technical Analysis

By Christian Schmollinger
May 26 (Bloomberg) -- Crude oil in New York may rise to $77 a barrel over the next several months as futures contracts “correct” the decline from a record $147.27 in July, according to technical analysis from MF Global.

Oil may first climb to $71.75 a barrel, the level reached on Nov. 4, P. A. Rajan, a Singapore-based technical analyst at MF Global, said in a telephone interview yesterday. Crude could reach $77, near the level equal to the so-called Fibonacci retracement of 38.2 percent of oil’s decline from the July record, or $76.28 a barrel.

The gain is part of a so-called correction, or the reverse of a climb or decline, under an Elliot Wave pattern. The wave principle is a theory developed by accountant Ralph Nelson Elliott during the Great Depression. He concluded that market swings, or waves, follow a predictable, five-stage structure of three steps forward, two steps back.

“This oil rally is a correction for the 2008 sell-off,” Rajan said. “We could be in the start of a multi month rally. It’s a larger wave corrective uptrend.”

Oil futures in New York plunged 77 percent from $147.27 a barrel to $33.87 on Dec. 19, the lowest settlement since Feb. 10, 2004. Since then, prices have climbed 80 percent to $61.02. Crude for July delivery was trading down 37 cents, or 0.6 percent, at $61.30 a barrel at 8:17 a.m. in Singapore.

Rajan ascertained the $77 a barrel level based on the ratio between numbers in the Fibonacci sequence. Sometimes known as the golden mean, the ratio is used to find support or resistance as prices retrace rallies or declines between previous highs and lows.

Market Tips: Oil is the New Gold

By: CNBC.com | 22 May 2009 | 07:31 AM ET
Global stocks seesawed Friday, but oil prices were on the increase. This week the energy stock reached fresh six-month highs. Experts tell CNBC oil is becoming the new gold.

The Fundamentals of Oil

The recent rise in crude oil prices seems to be independent of the fundamentals of the market, says Azlin Ahmad, editor at Argus Media Singapore.

Oil — The New "Gold"?

Oil is becoming the new "gold", remarks Paul Schulte, MD of Nomura International.

Link Between Dollar & Gold

The inverse relationship between the dollar and gold is returning, notes Sunil Kashyap, MD of Scotia Capital. He discusses gold's safe haven appeal.

Investor Spring Cleaning - A CNBC Special Report

This is Not a "Bimbo Rally"

This rally is absolutely, positively, unquestionably, fundamental, it is not due to some sort of moronic liquidity, believes Paul Schulte, MD of Nomura International.

No Sharp Selloff

A market pullback will be smaller than expected as many see this as a buying opportunity, says Andrew Sullivan, sales trader at MainFirst Securities.

Invest Selectively

Selective investment and a stable portfolio are key to investing, suggests Sean Fenton, director at Tribeca Investment Partners.

Bet on Alternative Investments

As the market is behaving like a "pendulum", Christian Nolting, regional head of portfolio management at Deutsche Bank Private Wealth Management recommends balancing one's portfolio by ramping up alternative investments and bonds. He shares his strategy in this installment of 'Protect Your Wealth'.

Fracing Trucks and Pulling Unit on the Franklin County Project (1)

Fracing Trucks and Pulling Unit on the Franklin County Project

Oil Rises Toward $62 as US Crude Supply Falls

By: Reuters | 20 May 2009 | 10:47 AM ET
The price of a barrel of oil rose toward $62 Wednesday following official government data that showed a wider-than-expected fall in crude stockpiles last week.

U.S. light, sweet crude [US@CL.1 61.47 1.37 (+2.28%)] rose, and London Brent crude [GB@IB.1 60.14 1.22 (+2.07%)] traded higher.

US commercial crude oil inventories fell 2.1 million barrels for the week ended May 15, compared to the previous week, according to the Energy Information Administration. That's wider than the 0.2-million-barrel draw expected by analysts surveyed by Reuters.

Total motor gasoline inventories fell 4.3 million barrels, compared to the 1.2 million barrel fall expected by analysts. And distillate fuel inventories rose 0.6 million barrels, while analysts had expected an increase of 1 million barrels.

Fire struck gasoline making units at two U.S. refineries this week, triggering a roughly 8 percent spike in U.S. gasoline futures that will likely filter through to retail pumps just as the summer driving season begins.

"It's all on the back of those refinery glitches and some Nigerian scuffle," said Rob Montefusco, an oil trader at Sucden Financial in London.

"All the economic data out this morning has been terrible, but if you strip it back, it's RBOB-led," Montefusco said.

Reformulated gasoline blendstock for oxygen blending, or RBOB, was trading at $1.8480 a gallon, up 2.39 percent on the day and its highest level since October 16, 2008.

Unrest in OPEC member Nigeria, Africa's top oil and gas exporter, also drove up prices this week.

Security forces clashed with militants on Tuesday near an oil flow station operated by Chevron in the western Niger Delta.

Italy's biggest oil and gas company ENI SpA on Wednesday declared force majeure for its Brass River export terminal in Nigeria, adding its output affected so far was 9,000 barrels per day.

Falling Stockpiles

Oil prices have been on an upward trend since mid-April on equity-led rallies. They have recovered from below $33 in December after a plunge from record highs above $147 in July.

On Tuesday after oil markets closed industry group the American Petroleum Institute (API) released data showing U.S. crude stocks fell by a much larger than expected 4.5 million barrels in the week to May 15.

Commodities markets have closely tracked the stock market in recent months as dealers seek signs of economic health.

Tokyo's Nikkei average was up 0.6 percent at the close, shrugging off data that showed Japan suffered a record contraction in the first quarter.

Oil data out of Tokyo, centre of the world's No. 2 economy, also showed gasoline inventories at their lowest level since September 2007 and kerosene stocks declining to a near three-year low in part due to strong sales.

The Algerian oil minister said the Organization of Petroleum Exporting Countries (OPEC), which has agreed to cut 4.2 million bpd of output since September to prop up prices, has no reason to cut output more when it next meets on May 28.

"If the price stays at this level ... I don't think there will be any reason to cut," said Algerian Energy and Mines Minister Chakib Khelil in Buenos Aires.

Oil hovers above $59 on signs recession easing

By PABLO GORONDI Associated Press Writer
Oil prices traded around $59 a barrel on Tuesday as investors booked profits on early gains, when sentiment was buoyed by a global stock rally and signs the U.S. recession is easing. Continued unrest in Nigeria's oil-rich south and a fire at a U.S. oil refinery also supported prices.

Benchmark crude for June delivery was up 2 cents to $59.05 a barrel by mid-afternoon in Europe in electronic trading on the New York Mercantile Exchange. Earlier in the session, prices peaked at $60.48. On Monday, the contract jumped $2.69 to settle at $59.03.

In London, Brent prices fell 14 cents to $58.33 a barrel on the ICE Futures exchange.

Investors on Monday cheered better-than-expected profit reports from home improvement chains Home Depot and Lowe's, an uptick in homebuilder sentiment and positive comments from analysts about U.S. banks - all of which suggested the U.S. economy is gradually emerging from a severe recession. The Dow Jones industrial average jumped 2.9 percent.

On Tuesday, stock indexes rose strongly in Asia and were generally up 1-2 percent in Europe.

While most analysts expect oil prices to increase over the next year as global economic growth recovers, some suspect the recent surge from below $35 a barrel in March may have gone too far, too fast.

"The move from $40 to $60 has happened faster than we thought it would," said Bob Doll, vice chairman of BlackRock, which manages $1.3 trillion of assets. "But a year from now oil prices should be modestly higher than where we are today."

The jump in prices for gasoline and other oil products shouldn't choke off a fledgling recovery in consumer demand since the fall from $147 a barrel in July helped free up extra spending cash, Doll said.

"We've got our eye on it, but we're not overly concerned," he said. "Oil versus a year ago is still down a whole bunch."

Vienna's JBC Energy said the unrest in Nigeria, where the Movement for the Emancipation of the Niger Delta (MEND) militant group threatened to cut off oil tankers' access to key export channels, was still a risk factor for oil prices.

"This would severely reduce the ability for companies to import or export crude oil and petroleum products," JBC said about Africa's biggest crude exporter.

Meanwhile, a fire at Sunoco Inc.'s Marcus Hook refinery in Pennsylvania - ranked 39th by total production out of the 150 U.S. operating refineries - was contained Monday, but the news helped boost gasoline futures.

In other Nymex trading, gasoline for June delivery rose 1.11 cents to $1.7692 a gallon and heating oil gained 1.32 cents to $1.4889 a gallon. Natural gas for June delivery fell 0.9 of a cent to $4.13 per 1,000 cubic feet.

Oil Rises on Nigerian Militant Threats, Sunoco Refinery Fire

May 18 (Bloomberg) -- Crude oil rose above $58 a barrel after a Nigerian militant group threatened to block waterways used for energy exports and as an explosion and fire at a Sunoco Inc. refinery “impacted” operations in the U.S. Northeast.

The Movement for the Emancipation of the Niger Delta said in an e-mailed statement that ships moving through the southern part of the nation would be traveling at their own risk. Sunoco, the largest refiner in the Northeast, said the incident at the Marcus Hook plant, located on the border of Pennsylvania and Delaware, took place late yesterday.

“The situation in Nigeria is becoming increasingly unsettled,” said John Kilduff, senior vice president of energy at MF Global in New York. “The problems at the Sunoco refinery, which is a major supplier of gasoline to New York Harbor, are also giving the market a boost.”

Crude oil for June delivery rose $1.61, or 2.9 percent, to $57.95 a barrel at 9:54 a.m. on the New York Mercantile Exchange. The contract climbed as much as $2.04, or 3.6 percent, to $58.38. Futures are up 30 percent this year.

The June Nymex oil contract expires tomorrow. The more- actively-traded July contract rose $1.66, or 2.9 percent, to $58.66 a barrel.

Gasoline for June delivery rose 5.01 cents, or 3 percent, to $1.7307 a gallon in New York. Futures touched $1.7485, the highest since Oct. 21.

Energy futures also climbed after U.S. equities increased on better-than-forecast earnings by Lowe’s Cos. and analysts recommended Bank of America Corp. The Standard & Poor’s 500 Index rose 1.3 percent to 893.99. The Dow Jones Industrial Average increased 1.3 percent to 8,376.80.

Niger Delta Unrest

Fighting in Nigeria has escalated since May 13 when the Nigerian militants said they responded to an army offensive by attacking military positions and hijacking a tanker.

MEND claimed responsibility yesterday for rupturing two pipelines supplying oil and natural gas from a Chevron Corp. facility to domestic refineries and power stations. The rebel group has threatened to blockade waterways in the southern region used for oil and gas exports.

Nigeria produces low-sulfur, or sweet, crude oil, prized by U.S. refiners because of the proportion of high-value gasoline and diesel it yields.

Angola, Africa’s second-biggest oil producer after Nigeria, will cut daily shipments, excluding the Gimboa grade, by 6.8 percent in July. BP Plc, Total SA, Chevron Corp., Exxon Mobil Corp. and other companies are scheduled to load an average of 1.7 million barrels a day in July, compared with June’s 1.83 million, according to loading programs released through today.

Marcus Hook

There were no injuries at Marcus Hook and all personnel have been accounted for, Thomas Golembeski, a company spokesman, said in an e-mail. The refinery can process 175,000 barrels of oil a day, according to data compiled by Bloomberg.

“The fire, which is located at the ethylene unit, is contained and under control,” said Golembeski. “The cause of the fire is being investigated. Right now, our main focus is on protecting the health and safety of our employees as well as the surrounding community.”

Ethylene is a petrochemical product that is used as a building block for plastics. It is derived from naphtha and liquid petroleum gas.

Sunoco will be “optimizing operations at Philadelphia and Eagle Point” refineries to make “every effort to meet customer demand,” said Golembeski.

The Philadelphia refinery has a capacity of 330,000 barrels a day and the Eagle Point plant in New Jersey can process 150,000 barrels of oil a day.

Brent crude for July settlement rose $1.84, or 3.3 percent, to $57.82 a barrel on London’s ICE Futures Europe exchange.

Oil steadies below $59/bbl, eyes equities, dollar

15 May 2009, 0935 hrs IST, REUTERS
SINGAPORE: Oil prices paused below $59 on Friday as investors weighed stronger equities
, a steady dollar and a gloomy demand forecast by the
International Energy Agency.

Crude prices were just a notch higher from last week's close, after moving in lockstep with the stock market and rising against a bearish report by the IEA a day earlier.

US crude for June delivery inched up 9 cents to $58.71 a barrel at 0246 GMT, while London Brent for July delivery rose 12 cents to $58.71 in its first session of trade as the new front-month contract.

"Equities and currency are most important. The $60 price level is also very important," Tetsu Emori, a fund manager at Tokyo-based Astmax Co Ltd, said.

US oil prices breached $60 a barrel during intraday trading on Tuesday but settled below $59 after the US Department of Energy slashed its 2009 oil demand forecast.

Oil prices have been tracking equities markets in recent months as traders look to stocks for signs of an economic recovery that could lift ailing world fuel demand.

Tokyo's Nikkei average was up 1.66 percent by the midday trading break after Wall Street closed firmer on Thursday, while the dollar was steady against a basket of major currencies.

Paris-based IEA, an adviser to 28 industrialized nations on energy policy, forecast a day earlier that world oil demand this year would fall the most since 1981.

IEA said the rise in oil prices to a six-month high above $60 this week was due to sentiment rather than fundamentals.

The US Energy Information Administration and OPEC also cut their forecasts for energy demand in recent days.

The Organization of the Petroleum Exporting Countries (OPEC), which has announced 4.2 million bpd of production cuts since September in a bid to tighten the market, also pumped more oil last month than in March, the IEA said.

OPEC members' compliance with production quotas fell to 78 percent in April from 83 percent a month earlier.

Traders will take cues from more economic indicators out of the United States due later in the day, as well as renewed unrest in Nigeria, Africa's biggest oil producer.

Nigerian militants have hijacked two cargo ships in the Niger Delta and given oil companies until Saturday to evacuate staff, warning they would attack helicopters and planes after the deadline, after heavy clashes with the military.

Economic data expected later include US April consumer price index, the Reuters/University of Michigan survey of May consumer sentiment, the US ECRI weekly index of economic activity, as well as euro zone flash first-quarter GDP.

The Rig

Oil rises towards $60 on US stockdraw, eyes recovery

13 May 2009, 0937 hrs IST, REUTERS
SINGAPORE: Oil extended gains towards $60 a barrel on Wednesday, after hitting a six-month high the previous day, as US weekly inventory data
showed a drawdown versus forecasts for a stock build, boosting hopes for demand recovery in the world's top energy user.

Oil was also buoyed by a weaker US dollar, which slid to a four-month low against a basket of currencies as growing optimism about the global economy boosted investors' risk appetite and curbed demand for the greenback as a safe haven. The market will await the US Energy Information Administration's
(EIA) weekly report at 1430 GMT to confirm the surprise fall in crude stocks.

April retail sales data and March business inventory figures due later in the day would provide more clues on the health of the US economy. By 0240 GMT, US crude for June delivery was up 95 cents at $59.80 a barrel. It settled 35 cents higher at $58.85 a barrel on Tuesday, off an earlier peak of $60.08, its highest level since November. London Brent crude rose $1.10 to $59.04.

"Sentiment has been pretty bullish for the better part of the last month or two, and we believe crude will find $60 as the floor and trend higher in the next few weeks," said Peter McGuire, managing director of Commodity Warrants Australia. "Also, we're moving into the period of higher demand in the northern hemisphere and hurricane season, which could affect supplies from the US Gulf, so we expect a range of $61-$62 pretty soon."

The American Petroleum Institute (API) said on Tuesday that US crude inventories fell 3.1 million barrels to 370.7 million barrels last week, against a forecast of a 1.4 million barrel increase in a Reuters poll of analysts. Possibly hinting that consumer confidence is returning, US April retail sales, out at 1230 GMT, are expected to remain unchanged from from a 1.2 per cent decline in March, a Reuters poll of economists showed.

Excluding automobiles, sales are seen up 0.2 per cent compared with a 0.9 per cent slide the prior month. Oil has plunged from a record high above $147 a barrel hit last July, but a rally in stock markets over the last few months has helped lift crude up almost 80 per cent from a January low of $32.70 a barrel.

The Organization of Petroleum Exporting Countries (OPEC) is unlikely to cut its oil output target at its meeting later this month, a source close to the group's president and a second OPEC delegate said on Tuesday. The producer cartel is also due to release its monthly report later at 1000 GMT.

Kansas Work

Oil Rises Above $60 to a 6-Month High as Chinese Imports Surge

May 12 (Bloomberg) -- Oil rose above $60 a barrel for the first time in six months after China, the world’s second biggest energy-consuming country, increased crude imports by 14 percent in April.

Deliveries reached 16.17 million metric tons last month, or 3.9 million barrels a day, a statement on the Chinese customs department’s Web site showed today. The dollar fell to the lowest level against the euro since March on signs the worst of the recession may be over. A weaker U.S. currency bolsters demand for commodities as an alternative investment.

“The Chinese numbers are pretty stunning,” said Bill O’Grady, chief markets strategist at Confluence Investment Management in St. Louis. “The Chinese are looking at prices now as a good value and they are worried about all of the dollar assets they have. They are buying everything, any raw material they can get their hands on.”

Crude oil for June delivery rose $1.27, or 2.2 percent, to $59.77 a barrel at 9:01 a.m. on the New York Mercantile Exchange. Futures touched $60.08, the highest since Nov. 11.

China will increase imports of commodities including oil and boost inventories of strategic raw materials as prices are at their lowest in seven years, the nation’s economic planner said in March.

The dollar declined 0.6 percent to $1.366 per euro, from $1.3582 yesterday. It touched $1.3707, the weakest level since March 23.

Oil prices are up 34 percent this year, supported by record production cuts announced by the Organization of Petroleum Exporting Countries. OPEC ministers are scheduled to discuss output levels at a May 28 gathering in Vienna.

‘Too Early’

“It’s too early to say” what decision the group will make at its next meeting, Qatari Oil Minister Abdullah bin Hamad Al- Attiyah said at the opening of the South Hook liquefied natural gas terminal in Wales.

U.S. crude stockpiles remain at the highest since 1990 and probably gained 1 million barrels last week, according to the median of 13 responses in a Bloomberg News survey. Supplies rose to 375.3 million barrels in the week ended May 1, the highest since September 1990, the Energy Department said.

Brent crude oil for June settlement rose $1.13, or 2 percent, to $58.61 a barrel on London’s ICE Futures Europe exchange. The contract climbed as much as $1.43, or 2.5 percent, to $58.91, the highest since Nov. 10.

Oil steady at $58

By Fayen Wong
Reuters
First Posted 10:10:00 05/11/2009
PERTH--Oil steadied at near a 6-month high of above $58 a barrel on Monday, keeping most of the previous session's gains, on hopes that energy demand would rebound alongside a global economy recovery.

Oil rose more than 3 percent on Friday to touch a near six-month high as economic data showed fewer-than-expected jobs were lost in April and stress test results lifted some uncertainty over the health of major American banks.

US crude slipped 18 cents to $58.45 a barrel by 0045 GMT. The contract rose $1.92 to settle at $58.63 on Friday.

London Brent crude fell 10 cents to $58.04.

"Oil prices are driven by perceptions that the economic outlook is less pessimistic that previously thought. But the growth numbers we could be seeing from developed economies may not justify such price levels," said David Moore, a commodities strategist at Commonwealth Bank of Australia.

Traders will be eyeing China's economic data, including the consumer price index and producer price index, due out later on Monday to gauge how the world's third-largest economy is faring, analysts said.

Oil, which has plummeted from a record of over $147 a barrel in July, has risen over the past three months on hopes that the economic recession may be easing.

A strong rally in equities markets, which saw the Nasdaq cap its longest stretch of weekly gains in a decade on Friday, has also helped oil prices gain over 14 percent so far this month and 10 percent last week.

The US economy is expected to begin growing in the second half of this year, while the jobless rate is expected to peak in the first quarter of 2010, according to a survey of top forecasters released on Sunday.

US employers cut 539,000 jobs last month, the fewest since October, signaling the economy's steep decline might be easing and giving the stock market a boost.

"The steady upward trend in oil's trading range and the current dynamic is likely to be sufficient to stay OPEC's hand at the next meeting," Barclays Capital said in a research note on Friday.

Oil Settles Above $58 on Hopes for Economic Revival

Reuters
| 08 May 2009 | 03:27 PM ET

Oil settled above $58 barrel on Friday after positive data on the U.S. economy.

U.S. light, sweet crude traded up $1.92 to settle at $58.63 a barrel.

London Brent crude also traded higher.

"We believe that crude prices are being driven higher by a combination of rising expectations for a faster economic recovery, increased fund flows into commodities and higher utilization at U.S. refineries," said Adam Sieminski at Deutsche Bank in a research note.

The pace of job losses slowed in April in the United States, according to government data, providing further evidence to support the view that the economic climate might be improving.

Wall Street opened higher after the results of stress tests on U.S. banks showed no unexpected weaknesses.

Oil has gained more than 70 percent from a low of $33.55 in February, rallying with equity markets on hopes of economic recovery and also in response to oil supply cuts by the Organization of the Petroleum Exporting Countries.

Macro-economic data on major economies has begun to look less gloomy. U.S. retailers on Thursday posted better-than-expected monthly sales results for a second straight month in April.

German exports posted their first rise in 6 months in March, according to the country's Federal Statistics Office on Friday.

"The risk for investors is that some markets have got ahead of themselves and could be vulnerable should the flow of positive economic data start to deteriorate," Barclays Capital said in a research note.

The bank noted that data on oil demand remains mixed and the market's inventory overhang is still huge.

"If the recent bout of positive sentiment subsides, prices might well go through a phase of consolidation in the mid-50s," it said.

Life After the Oil Crash (click here for link)

Oil Rises Above $57 After Hitting 2009 High

Reuters | 07 May 2009
Oil rose above $57 a barrel on Thursday, having earlier hit a fresh 2009 high, as signs of economic improvement in the United States boosted expectations of future increases in demand for oil products.

However, a dip on U.S. stock markets saw oil prices pare gains.

U.S. light, sweet crude rose more than $1 to trade above $57 a barrel, off an earlier peak of $58.57, oil's highest level since Nov. 17, 2008. London Brent crude also traded higher.

Labor Department data on Thursday showed the number of U.S. workers filing new claims for jobless aid unexpectedly fell by 34,000 last week, adding to scattered indications that the severity of the recession may be easing.

These numbers preceded key U.S. non-farm payroll numbers due to be released on Friday.

Stress Test

The market was also watching for the results of the U.S. government stress tests on the ability of banks to weather a deep recession, to be released at 5pm EST.

Expectations for rising oil demand as summer approaches were fuelled by leaks of the test results that suggested most banks were healthier than earlier thought.

U.S. crude inventories rose again, but by a lower-than-expected 600,000 barrels against forecasts for a 2.2 million barrels build, while U.S. gasoline stocks fell last week by 200,000 barrels to 212.4 million, the Energy Information Administration said on Wednesday.

Saudi Arabia, the world's top oil supplier, said it would not raise supplies for the time being as it attempts to shore up prices.

The kingdom is pumping below 8 million barrels per day (bpd) and is unlikely to increase that production as world supply continues to outpace demand, Saudi Aramco Chief Executive Khalid al-Falih said on Wednesday.

Oil Shortage likely from 2010

Posted by Oilism.com on February 20th, 2009
From next year a lack of oil arise as the world economy recovers from the current deep recession.

This is said by the chief executive of the International Energy Agency (IEA) Nobuo Tanaka, he states that oil producers are investing too little in new projects with current market circumstances.

”The demand for oil is very low because of the extremely poor economic conditions. But if the recovery quick, likely first signals occur after 2010, we face a serious supply problem, if the investments do not increase’’said Tanaka.
Oil Projects

The members of oil cartel OPEC said earlier this month that they are disappointed, because of demand for oil thirty-five of all new oil projects are set on the long term.

Tanaka expects oil demand will grow next year by 1 percent, thanks to the recovery of growth in emerging economies like China and India. This year, the need for oil by the global recession is likely(for sure) lower than a year earlier.
Production

The chief executive of French oil group Total, Christophe De Margerie, warned Monday in the British newspaper Financial Times that oil producers already are near their production levels. Worldwide, the crude oil production is never higher than 89 million barrels per day. These are four million barrels per day less than he previously thought. The current demand for oil is about 84 million barrels per day. The IEA expects that the long term oil need for 2030 will certainly have grown to 100 million barrels per day.
Tension

According to De Margerie, the companies limited by the high cost of new projects, for example, in Canada and the continued political tensions in Iran and Iraq.

The current low oil revenues, according to him not only at the expense of new projects. They shall also ensure that existing projects are more likely to be stopped because it is too expensive they are longer in operation.