Thursday, April 30, 2009
Oil prices inch higher
NEW YORK (CNNMoney.com) -- Oil prices edged higher Thursday as investors focused on signs the U.S. economy, the world's largest consumer of crude, is on the mend.
Light, sweet crude for June delivery was up 23 cents to $51.20 a barrel on the New York Mercantile Exchange. Oil surged more than 2% in the previous session.
The advance comes as stock prices rose sharply around the world. On Wall Street, the Dow Jones industrial average was up more than 1% in morning trading.
Many oil traders view the stock market as a proxy for the overall economy and a barometer of future energy demand. As a result, oil prices often rise and fall in tandem with the major stock indexes.
Stocks rallied in response to a slightly more upbeat economic outlook from the Federal Reserve. Signs that consumer spending rebounded in the first quarter even as the economy contracted also boosted optimism.
Still, the price of oil has hovered near $50 a barrel in recent sessions, down nearly $100 from last summer's all-time high, as global energy demand remains weak and inventory levels continue to rise.
On Wednesday, the government said U.S. crude supplies grew by 4.1 million barrels last week. Analysts were expecting an increase of 1.8 million barrels.
In addition to rising supplies, investors are concerned that a potential swine flu pandemic will destabilize the already fragile global economy.
"We have had a number of contradictory signals recently, any of which could have been enough to generate massive buying or selling and a decisive escape from the mud-bound trenches that prices seem to be stuck in," said Peter Beutel, an analyst at Cameron Hanover, in a research note. 
Wednesday, April 29, 2009
Oil higher as gasoline supply shrinks
NEW YORK (CNNMoney.com) -- Oil prices rose Wednesday after a government report said supplies of gasoline fell unexpectedly.
At 10:40 a.m. ET, crude prices rose $1.25, or 2.5%, to trade at $51.17 a barrel. Prices were up $1.02 to $50.94 just prior to the report's release.
In its weekly inventory report, the Energy Information Administration said stockpiles of gasoline fell by 4.1 million barrels in the week ended April 24.
Analysts were looking for an increase of 900,000 barrels, according to a consensus estimate compiled by Platts, an energy information provider.
The EIA report also said oil supplies rose by 4.1 million barrels, while analysts were expecting an increase of 1.8 million barrels.
The price of oil is far off its record high of $147.27 a barrel in July. Consumers have scaled back their use of energy amid uncertainty about when the recession will ease. That in turn has caused a glut in supply.
As of last Wednesday, U.S. crude supplies were at a 31-month high of 1.074 billion barrels, according to Platts. The high supply has kept the price of crude hovering around the $50-a-barrel mark in recent months.
That's too low, according to the secretary general of the Organization of Petroleum Exporting Countries, whose members produce 40% of the world's crude.
Earlier this week, Abdalla Salem al-Badri said $50 per barrel is too low for producers to invest in production. He said non-member countries, including Russia, should be cutting output to help put a floor under prices.
Gasoline prices: The national average price for a gallon of regular unleaded gasoline snapped four straight days of decline, rising to $2.05 from the previous day's $2.048, according to survey results released Wednesday by motorist group AAA.
The EIA report also said distillates, which are used to make heating oil and diesel fuel, rose by 1.8 million barrels. Analysts expected an increase of 1.3 million barrels.
Tuesday, April 28, 2009
2008 oil recap and what is next...
by Steve Austin - 2009/01/05It took only 5 months for the price of oil to plummet from $150 to under $40 in the second part of the year. Meanwhile oil consumption did not even decrease 10%, so what is the real cause of this collapse you may ask?
Hedge funds. Let me explain.
During the first part of 2008, Western economies were already slowing down noticeably and hedge funds gradually pulled trillions of dollars out of the market and parked them in energy ETFs. At the time Chindia's insatiable thirst for oil and the "decoupling" of east/west economies had many believe commodities were a "sure thing", a sound enough tangible insurance to protect overinflated assets scavenged from made-up bubbles. On top of that, by using leverage, profits were multiplied as oil went up, not a bad deal in a recession.
But when the banking industry collapsed, hedge funds had to raise cash by "deleveraging", liquidating their leveraged energy ETF positions sending the price of oil tumbling. Anecdotally shorting of banking ETFs was suspended by the US Securities Commission during that time but not shorting of energy prices, and the leverage mania soon found an escape route in utrashort oil ETFs, compounding the speed of this downward spiral. By December 2008 the oil price had collapsed 75% and frankly, who would complain about cheap gas these days?
As we enter 2009 the oil landscape has reversed dramatically from a year ago. The price of oil is lower than production costs and new exploration projects are being cancelled. China flush with cash is currently buying all the oil it can get its hands on to pump into its strategic reserves. Once arrogant OPEC countries are willing to sell oil at any price to fund government programs and prevent political instability.
One constant however is the depletion of major oil fields, worse than predicted at 9.1% year over year as we close 2008. It's a matter of when not if the economy recovers and when it does, expect a strong bounce back in the price of oil.
Monday, April 27, 2009
OPEC chief says oil prices are too low
ALGIERS, Algeria (Reuters) -- An oil price of $50 per barrel is too low for OPEC producers to invest in production and non-member countries, including Russia, should cut output to help boost prices, OPEC's secretary general said Sunday.
Asked at a news conference during a visit to Algeria about the prospect of further output cuts at OPEC's next meeting on May 28, Abdalla Salem al-Badri said: "It depends on the economic situation, but if we face any problem OPEC will not hesitate to take any further decision to stabilize the market."
He said there were still 722,000 barrels of oil on the market which needed to be removed if the Organization of Petroleum Exporting Countries (OPEC) -- whose members pump more than a third of the world's oil -- is to reach full compliance with output cuts agreed at a previous meeting.
However, he said OPEC was not happy with the current oil price, which closed at about $51 per barrel in trading in New York on Friday, almost two-thirds down on the level crude was trading at about nine months ago.
"We (OPEC) are not satisfied with the current price ... A price at $50 is insufficient for oil investment. I think more than $70 would boost investment," al-Badri said.
He said the fall in oil prices has had a "big impact" on OPEC members' investments in sustaining production levels, with 35 out of a total of 165 projects put on hold until 2013.
Russia, the second-biggest oil exporter after Saudi Arabia, is not an OPEC member and has resisted calls from the organization to join in the cuts.
The OPEC secretary general said he hoped non-OPEC producers will reduce their output to help stabilize the market.
"We urge Russia to contribute to bringing prices to an acceptable level," al-Badri said.
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