The cash price, oil sold for immediate delivery has moved nearly identically to the futures price.
Posted on 10/06/2006 3:37:38 AM PDT by familyop
SINGAPORE (Reuters) - Oil held around $60 on Friday, as traders weighed OPEC's plans to cut production against overflowing stockpiles in top consumer the United States.
U.S. crude rose 7 cents to $60.10 a barrel by 0806 GMT, after dipping to a low of $59.60 in early trade. London Brent rose 13 cents to $60.13.
"The market is moving on rumors that Saudi Arabia has agreed to cut production since prices have continued to fall despite the earlier news," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures.
Officials from the Organization of the Petroleum Exporting Countries (OPEC) said on Thursday the group would cut output by 1 million barrels per day (bpd) as soon as possible, its first output cut in more than two years.
An OPEC delegate said Saudi Arabia would lower production by 300,000 bpd as part of the plan, while OPEC President Edmund Daukoru said six producers, including Saudi Arabia, had already reduced output voluntarily.
"Saudi Arabia has not said anything yet but the market is speculating that they will make a significant announcement," Emori said.
The cutback plans by OPEC, which pumps more than a third of the world's oil, expands on marginal supply cutbacks announced last week by Nigeria and Venezuela.
Nine OPEC countries will take part in the supply curbs and will cut their "fair share" from overall OPEC production, a senior delegate said. OPEC pumped 29.47 million bpd in September, a Reuters survey showed.
Daukoru said on Thursday that some members wanted an emergency meeting before a gathering already scheduled for December, and talks were continuing on how to stem what he called a free-fall in prices.
STOCK CUSHION
Oil prices have been little boosted as investors turned their attention to brimming U.S. fuel inventories and as some traders remained skeptical in the absence of a formal OPEC announcement.
"There were some knee-jerk reactions to news of OPEC cutting supplies but the gain was not sustained mainly because of high U.S. stock levels," said Ken Hasegawa, a manager at Himiwari CX, Japan's largest commodities futures broker.
U.S. crude stocks rose by 3.3 million barrels last week to 328.1 million barrels, countering expectations for a drop and leaving them nearly 7 percent higher than a year ago, according to a government report this week .
Distillate supplies, which include heating oil, rose 200,000 barrels to the highest level since 1999.
Despite the high stock cushion, OPEC's plan disappointed the world's top oil consumer, which expressed concern given peak winter demand is around the corner.
U.S. Energy Secretary Sam Bodman said he did not want OPEC to cut daily output by 1 million barrels, and White House economic adviser Al Hubbard said President George W. Bush was not happy with oil prices near $59 a barrel.
OPEC's official output limit has stood at 28 million bpd for more than a year. Analysts say OPEC's plan to slash output by 1 million bpd would at best lend support to prices, but was unlikely to drive prices much higher.
"Even if OPEC cuts output now, prices would very much stay at the same level," Hasegawa said.
Violence in Nigeria remains a potentially bullish factor, given the risk of further supply disruptions. Nigerian militants accused troops of razing a village in the oil-producing Niger Delta on Thursday and threatened reprisals, although a military spokesman denied an attack had occurred.
The latest incidents this week did not affect production, though a fifth of Nigeria's production capacity remains shut.
It's not about helping the consumer, it's all about lining the shiek's pocket with money.
Please tell me why the price of oil fluctuated from low to high...and low again? I just don't understand it. Is it low again for the elections? If it can be so manipulated there is something wrong here. After elections will it go back up? Is there a "nudge nudge, wink wink," thing going on here?
I wouldn't think so, unless our government has developed a machine that controls the minds of Arabs.
There may be a temporary rise in fuel prices as I am about to buy my next three months worth of fuel. I last bought on July 10th. Of course I also may increase my tactical reserve to five months.
***"The market is moving on rumors ***
The price of oil has been moving on rumor for the last 3 years. At last this guy isnt telling us that old supply and demand BS.
Cut back your driving 15%, and don't fill up unless you see gas below $2 at the station near you. Make the oil companies drown in crude as they try to store it in off-shore facilities because there is no more storage space.
Pres. Bush has already declared that no oil will be put into the strategic oil reserve over the winter, so that will be one less place they can store the stuff.
What we are talking about as "the price of a barrel of oil" is actually the speculative future price of oil. The price of gasoline is also based on futures, what the distributor thinks he will have to pay for a gallon of gasoline to replace the one he sells you.
There have been all kinds of rumors about why the price of crude futures went up, and correspondingly the gasoline price, and you can pick a reason. It was, IMHO, a giant speculative bubble on the part of commodities traders.
Our recent price drop comes from abundant US stockpiles (remember supply and demand?), but no 'wink, wink' is possible.
Like any other conspiracy theory, it's entertaining to discuss, but way too many people would need to be conspirators. The media and the Dems have been looking for 'proof' of this gigantic, evil conspiracy for many years, and have come up with zippo.
I assume you really meant to include Saudi Arabia in the group.
Which is why the price of oil is down. You can buy oil futures like mad, but there comes a point where the oil must be delivered SOMEWHERE
I'm guessing that people where filling up storage tanks in anticipation of a bad hurricane season hitting the Gulf oil rigs. Now that the season is winding down with no significant hits, speculators are stuck with a lot of oil. And with the price of oil going down, it speculators will want to unload before it goes down further
So what you are in essence saying is that speculators drove up the price of fuel. When the market got flooded and they had nowhere to store any more supply and demand brought it back down. I pretty much agree with that.
It proves that the reason for the price going up was NOT supply and demand, but profit taking. The cause of it coming down was a glut.
I believe now for a little whie at least it will seek its proper level and then the speculators will step in again and drive it up.
The cash price, oil sold for immediate delivery has moved nearly identically to the futures price.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.