Posted on 05/21/2004 10:53:18 AM PDT by Wolfstar
LONDON (Reuters) - World oil prices fell from 21-year highs on Friday as Saudi Arabia proposed hiking crude output by over two million barrels per day and said it had already substantially boosted supplies in a bid to cool markets.
Traders said oil markets were nervous ahead of an informal weekend meeting of OPEC (news - web sites) ministers and this had helped briefly to push U.S. prices below $40 a barrel for the first time in days.
U.S. light crude fell 75 cents to $40.10 a barrel, just over a dollar shy of a 21-year peak struck last Friday. London Brent crude futures lost 47 cents to $36.79.
Saudi Arabia, OPEC's largest producer and the only one with substantial spare production capacity, proposed that the cartel boost its oil output by more than two million bpd.
"The recent increase in oil demand and supply projections for the coming months point to an increase in required production from OPEC by an excess of two million bpd," Saudi Oil Minister Ali al-Naimi said in a statement.
Naimi said Saudi Arabia had already allocated its customers more than nine million bpd crude for June. This is far in excess of the kingdom's official quota of 7.63 million bpd.
An OPEC delegate also soothed fears that the cartel, which is pumping well in excess of quotas, has little spare capacity, saying Saudi Arabia could produce 10.5 million bpd if needed.
But OPEC ministers as well as analysts say the cartel will probably have limited power this time to influence prices because the spike is not due to a shortage of crude supply.
Consultancy Petrologistics said on Friday OPEC was already pumping 2.8 million bpd above quota in May, with little impact on the oil price. Besides, most OPEC crude is of the heavy, sour variety, while refineries require light gasoline-rich grades.
"I don't think that control is in OPEC's hands," UAE Oil Minister Obaid al-Nasseri said. "There are many factors behind these prices."
John Waterlow, analyst at WoodMacKenzie in Edinburgh said speculative buying, fear of supply disruptions in the Middle East and shortages of gasoline were helping drive prices.
"An unequivocal signal from OPEC could help calm the markets a bit but there are all sorts of other issues influencing the price this time," Waterlow said.
"We also have to bear in mind that the peak season for gasoline demand in the United States is yet to come and there is no sign of any immediate relief to that problem," he added.
DECISION ON EXTRA SUPPLIES ONLY IN JUNE
OPEC delegates said any formal decision on hiking crude supply would be taken at the cartel's official June 3 meeting and not at this weekend's gathering in Amsterdam.
Crude prices have risen almost 30 percent since the start of this year while gasoline prices are up 50 percent. Gasoline is especially in focus because the U.S. high-demand driving season starts in two weeks with fuel stocks far under year-ago levels.
The prices have put OPEC under pressure from consuming nations, which fear that tearaway oil prices could derail world economic growth. U.S. Energy Secretary Spencer Abraham (news - web sites) is likely to be one of many world officials who ask OPEC for more oil at the upcoming summit of energy producers and consumers.
"We are hopeful that Secretary Abraham can get a commitment from OPEC to raise production immediately," a group of U.S. lawmakers said in a letter to President Bush (news - web sites).
German Economy Minister Wolfgang Clement told reporters in Berlin: "It's a great risk. Nobody wins when the very positive development of the global economy is put at risk."
It wasn't so much the oil exporters who were driving the prices up but the speculators trying to make a quick buck.
Could not agree with you more. The President and his press secretary have, in fact, both resumed urging Congress to pass the energy bill.
I wish I knew want it meant, too.
How pathetic when $40.10 is considered a low price for oil.
Thanks for the laugh!
There is an alternative energy source. And it is one that can be adapted with technology we already have.
Out there on the bottom of the continental shelf that surround our shores from just a few miles out to a couple hundred miles out, the primordial ooze tumbles down off this shelf, accumulating like mountain talus at the base of the slope. Within this ooze, methane, the primary ingredient of natural gas, is constantly forming. The pressure and temperature conditions at this depth favor the formation of a rather odd compound called methane hydrate, a gelid mass composed of methane and water. As long as the temperature remains relatively cold, about 38 degrees Fahrenheit, this substance is stable. As it lies there in the ooze, it accrues into larger and larger masses. All that is necessary is to recover this quantity of methane hydrate and pump it to the surface, where upon warming, the methane is released. Result, vast and endless supply of natural gas, which burns in an internal combustion engine perfectly well, with an octane rating of about 130 or so, allowing more efficient high-compression engines to be developed. Clean-burning Diesels are probably the best application. There is already vast international trade in compressed natural gas, CNG, and it has a distribution system in place. Until moderately priced hydrogen fuel systems are available, this would be a very good intermediate solution to a relatively cheap energy source.
When the price of petroleum and gasoline get high enough, this is an alternative that should be explored. It should be getting explored right now.
http://marine.usgs.gov/fact-sheets/gas-hydrates/title.html
Au contraire, when prices kept rising, it was Bush’s fault, a) for not reeling in his oil buddies and their profit hungry motives and b) for being in bed with his Saudi buddies and putting their interests ahead of ours. Now it will demonstrate that Bush is in bed with the Saudis and he just got them to increase production to save his election chances. It’s the old game, heads I win, tails you lose.
I know no one is paying attention, but the same thing and worse is happening to steel prices. Someone is buying up all the available steel, which means somewhere the economy is expanding rapidly.
And that somewhere is China. The country has been so depressed for so long that it simply hasn't been a factor on the world economy until now. They are, now, beginning to emerge as a modern economy, and the entry of a billion people into the world markets is making itself felt. A billion new cars means an immediate increase in oil consumption. And in steel consumption. The pace of new construction there likewise is sucking up all the available steel, and if you deal in construction of any kind here in the US, you are finding that the prices change daily now. And only upward.
Its not about Bush, unless you want to argue that the Bushes control the steel markets also.
I know several folks who are in/have been in China recently. Much of this expansion owes to the forthcoming Olympic Games. Thousands of English speaking people are being recruited to teach English to thousand of Chinese as well.
40$ for a BARREL of oil? Heck Aquafina is more expensive.
How long will it take for the pump prices to plummet as fast as they rose? My guess, around the time of the Second Coming.
That's why I only carry a two headed coin for each football game.....
China's voracious appetite for energy is eating into global capacity and sending prices skywards (Financial Times May 21 2004 5:00)
Don't hold your breath waiting for new refineries to be built. If you want to know why, try to figure out which agency is known by the initials EPA. If you're even more curious, do some research into why heavy manufacturing has left the building. Hint: it isn't all labor related. Same thing applies to refineries.
californicators spell refinery -- N-I-M-B-Y
Yes, and tell me what gasoline is $1.95/9 in one small town and $1.84/9 in an adjacent town? Bush's fault? The Middle East? Greed? Someone help me understand...
" He should have released the oil reserves........"
Of course, MR. Kerry and his democrap coherts, especially the media are NOT going to mention the fact that Bill Clinton, via Al Gore sold, at lower than market price, our oil reserves at Elk Hills.
How soon they all forget. This is from TomPaine.com....hardly a right wing outfit....a few years old, but worth remembering.
****
MEDIA SILENCE ON AL GORE: Why Haven't Reporters Questioned Him About His Ties to Oxy?
The Sound of Silence Is Deafening
David Case is the executive editor of TomPaine.com.
For decades, Vice President Gore has been receiving $20,000 annual payments from Occidental Petroleum, ostensibly for the mineral rights on land. But the company has never used the land, and the Gores currently rent it out to a competing firm.
So what does the firm get for its money? The answer is not clear. But Occidental won a bid last year for the prized Elk Hills oil reserve, tripling the company's U.S oil reserves. The sale, which was the largest privatization of a national asset ever, was advocated by the vice president in his drive to "re-invent government."
The Center for Public Integrity (CPI) published these revelations in its book The Buying of the President 2000 in early January, 2000. Hardly a hip-shooting advocacy outfit, CPI is the same group, led by former 60 Minutes producer Charles Lewis, that broke the Lincoln bedroom story in 1996.
Maybe patronage from a major oil company - which may whiff of conflict of interest, if not outright corruption - isn't as sexy as the White-House-as-Motel 6. Nonetheless, at least for readers of the major dailies, CPI's revelations may well have never been made.
The cozy relationship received some ink in local newspapers, and it was briefly covered on both the Wall Street Journal and New York Times editorial pages. But so far, according to CPI and a Lexis-Nexis search, Gore hasn't fielded a single question from the majors' phalanx of campaign trail journalists.
Granted, these reporters have treated conscientious voters to up-to-the-minute stories on Gore's penchant for drab suits, and his alpha-male complex. It's understandable, therefore, that there's been no time to probe a matter as boring as possible high-level corruption.
Nonetheless, at least some people think it should be front-page news. "It seems to be the type of thing that voters ought to know about," says Tom Wicker, a veteran New York Times columnist (and TomPaine.com contributor).
* For decades, Occidental has patronized the Gore family (in the 1970s the vice president inherited the Oxy payments from his father, who was given a $500,000 per year job when he retired from the Senate).
* Then, in his effort to "re-invent government" Gore recommended the sale of Elk Hills, a strategic oil reserve which the government has guardedly held since the early twentieth century.
* Finally, the Department of Energy, in an unusual closed bid, sold the reserve to Occidental. "The bids are still sealed to this hour," despite CPI's attempts to review them, according to Eisner. Moreover, he points out, "the environmental review for the Elk Hills sale was conducted by ICF Kaiser, on whose board Gore's campaign manager Tony Coehlo sits."
When CPI's investigators asked the campaign about the payments and the appearance of corruption, Gore's lawyers stonewalled them. Gore's office didn't return TomPaine.com's requests for comment.
The rest of this article can be found at:
http://www.tompaine.com/feature2.cfm/ID/2780
Gas prices go up instantaneously when oil prices go up, since the existing gas is now worth more.
But when oil prices drop, existing stocks of gasoline never drop in price because, after all, the price paid for them was much higher.
Or so an economist writing for the WSJ once explained it.
With a straight face, I'm told.
China is also buying gold, a lot of gold.
They might not need all that oil if Americans stopped shopping at the Dollar store, etc.
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