Posted on 11/07/2007 5:42:44 AM PST by thackney
VIENNA, Austria — Oil prices jumped above $98 a barrel today, a new record, amid expectations of declining U.S. supplies. The falling dollar and OPEC's apparent reluctance to pump more crude into the market also boosted prices.
Light, sweet crude for December delivery surge $1.25 to $97.95 a barrel by midday in Europe after earlier reaching as high as a record $98.62 in electronic trading on the New York Mercantile Exchange.
The contract hit a high of $97.10 Tuesday before closing at $96.70 a barrel, a record settlement 66 percent higher than the close on the first trading day of the year.
In London, Brent crude rose $1.31 to $94.57 a barrel on the ICE Futures exchange. A number of North Sea oil platforms were evacuated Tuesday ahead of expected severe weather, and BP PLC said it expects to shut production Thursday from its Valhall oil and gas field.
"The oil market sentiment remains bullish ... there is an overall upward trend toward the $100 level," said Victor Shum, energy analyst with Purvin & Gertz in Singapore. "Meanwhile, we can expect extreme volatility where on the one hand some traders will take profit while others will buy back positions."
Traders remain worried about whether supplies will be adequate to meet demand for heating fuel in the approaching Northern Hemisphere winter. News of an attack Monday on an oil pipeline in Yemen added to those concerns.
Figures to be released later Wednesday by the U.S. Energy Department's Energy Information Administration are expected to show crude supplies dropped last week. Analysts surveyed by Dow Jones Newswires predict, on average, that crude oil inventories fell by 1.6 million barrels.
"The price rise is really driven by expectations of drawdowns in crude oil and distillate stocks inventories in the U.S. inventory report," said Shum. "Some cold weather reports out of the U.S. and Europe serve as a reminder that winter is coming and that there are still supply concerns."
On Tuesday, the U.S. Department of Energy's EIA said oil stocks in the countries of the Organization for Economic Cooperation and Development are forecast to fall this winter, ending the year at the lowest level since January 2005.
In London, International Energy Agency head Nobuo Tanaka said he shared those concerns.
"We very much share the same opinions as the EIA (U.S. Energy Information Administration) on inventories heading into the fourth quarter — the stocks situation continues to tighten," Tanaka told Dow Jones Newswires at the release in London of the agency's long-term energy outlook.
"Stocks need to be higher, something that is in the power of producer countries to address," Tanaka later told a news conference.
According to the Paris-based IEA, consumers and governments globally are currently doing too little to improve energy supply security and cut pollution. In its annual outlook for energy through 2030, the agency said the next 10 years are critical for governments globally to address these challenges as energy demand surges in the booming economies of China and India.
Continuing strong global oil demand and lower-than-expected output from countries outside the Organization of Petroleum Exporting Countries will put more reliance on supplies from OPEC and global inventories, the U.S.' EIA said in its short-term outlook.
Any reduction in oil inventories is likely due to a suspension of output at Mexico's state oil company Petroleos Mexicanos, a major crude exporter to the United States, which temporarily shut its ports last week due to severe weather.
The weak U.S. dollar, which fell to another new low against the euro Wednesday, is also lifting oil prices. Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.
In Vienna, PVM Oil Associates noted another potential bullish factor, saying that — despite record prices — OPEC "has not shown any intention of increasing supplies on top of the 5,000,000 b/d (barrel a day) hike, which became effective at the beginning of this month."
Analysts also expect the EIA to report Wednesday that gasoline inventories rose by 200,000 barrels during the week ended Nov. 2, while supplies of distillates, which include heating oil and diesel fuel, fell by 500,000 barrels.
Heating oil futures added 2.75 cents to $2.6353 a gallon (3.8 liters) while gasoline prices rose 2.23 cents to $2.4573 a gallon. Natural gas futures rose 5.3 cents to $7.916 per 1,000 cubic feet.
The analysts expect that refinery use grew by 0.8 percentage point to 87 percent of capacity.
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Bush’s fault.
I don’t believe that there is NOT mega profits being made, despite all the spin by economics folks here at FR and even folks like Rush.
That is because you haven't tried to lease a drill rig lately.
Mega profits by Sheiks maybe.
Shooting at some food doesn't exactly produce a bubbling crude anymore.
Does it really matter? What matters is to break away from foreign energy sources and sky high prices helps with that.
Banks make mega profits...even more so than Big Oil. Maybe you should pull your money out in protest?
Both I believe, compounding the result.
>>Shooting at some food doesn’t exactly produce a bubbling crude anymore.
The Geico ad that uses the Jed Clampett snippets is just hilarious. If you haven’t seen it, you should look for it on YouTube, it’s a riot.
One has to wonder if the price of oil is being driven up deliberately by hedge funds (hello! George Soros).
I'll look for it.
Speculating on the speculators?
I’m suprised that the enemedia isn’t front-paging every quarter-dollar rise in price...
Oil now $9.25 -(war for oil)
Oil now $9.50 -(Illegally in Iraq)
Oil now $9.75 -(women and minorities hardest hit)
I’ll give them time. They rarely dissapoint.
The only conspiracy is that of the left: No coal, no drilling, no new refineries. All of that hurts.
The profit made is irrelevant. The price is set on the open world market. If oil companies are making huge profits, it’s just their good fortune. If we were using alternatives, the oil companies would not make so much.
The collapsing dollar is an excellent point. That’s definately complicating things.
Bottom line is there is a tipping point. Is it $4/gal for gas? Not sure. But wherever that tipping point is, when we hit it, there will be a major contraction of the economy. I say this as someone who lived through the gas shortages, and that contraction, along with Jimmah Cartah, made my decision to go into the USN easy.
Other than staying as debt free as possible, not sure how to prepare for the coming contraction. Might be a good time to sell an SUV, before they achieve white elephant status.
The Chicaom supplied dollar stores will boom because of the cash and credit crunched as low to middle income people and credit-maxed people scramble just for necessities like soap, TP, canned food, etc. Rent on apartments will stay the same, but will most likely drop 30% on single-family detached homes.
Simple, food, shelter, energy will be what the US consumer tries to pay for for the next 36 months. Wages will not increase though employers will charge more for increased business costs and medical coverage will continue to rise as well as homeowners and auto insurance co.'s will also continue to push up their premiums to recover their investment losses in the sub-prime underwriter categories.
Watch the real trickle-down effect of all of this.
I read yesterday that the net effect of the shrink-back (valuation loss of the dollar) in our economy is going to be in the neighborhood of $7-9 trillion dollars from conservative estimates in the next 12 months. With all this coming down, don't forget, our lovely government at all levels is going to raise taxes and fees as that they will never cut their spending or the size of what they do becaseu"they have to maintain the level of service" (LOL!).
This is not being negative, but, realistic as to the magnitude of our greed and arrogance.
Time to pay the fiddler for the tune.
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