Posted on 01/08/2007 9:11:59 AM PST by BenLurkin
Oil prices dropped by $1 a barrel Monday, resuming last week's plunge as ample heating oil supplies go unused due to mild weather in the Northeast United States. Prices had briefly rebounded in earlier trading on reports that OPEC oil ministers are considering another cut, and worries that a dispute between Russia and Belarus could result in energy shortages in parts of Europe.
However, the rally failed to take hold. Although forecasters say temperatures in the Northeast should return to normal over the next couple weeks, it won't be enough to make up for the recent historically warm weather. U.S. supplies of crude oil remain well above normal, and U.S. heating oil supplies are also at the upper end of the average range for this time of year.
"Right now, I still think the backdrop of pretty lush inventories is going to be critical," said Jason Schenker, an economist with Wachovia Corp.
Light, sweet crude for February delivery dropped $1.03 to $55.28 a barrel in midday trading on the New York Mercantile Exchange. The contract had fallen nearly 8 percent last week, the biggest one-week drop since April 2005.
Brent crude for February fell $1.01 to $54.63 a barrel on the ICE Futures exchange.
Heating oil futures decreased 1.43 cents to $1.5515 a gallon; natural gas prices gained 20.8 cents to $6.392 per 1,000 cubic feet; and gasoline futures fell 3.61 cents to $1.4570.
Gas prices at the pump have yet to follow suit -- the average U.S. retail price for a gallon of gasoline is $2.305, compared to $2.300 a month ago -- but analysts say if the futures plunge holds, a drop in wholesale costs should allow retailers to lower prices.
On Monday, prices had initially bounced higher amid reports that Belarus had ordered a halt to deliveries of Russian oil that goes via its territory to Germany, Poland and Ukraine.
Belarus recently had to accept a doubling of the price it pays for imports of Russian natural gas, on which it depends for industry and home heating, under the threat of supplies being but off. The two countries are now locked in a dispute over oil duties, with Russia determined to stop Belarus from re-exporting petroleum products made from processing Russian oil bought cheaply.
Countries in the European Union, which depends on Russia for 25 percent of its gas consumption, suffered a brief disruption in early 2006 after Moscow suspended gas deliveries to Ukraine because of a pricing dispute. Ukraine and Belarus are the transit route for Russian gas to Europe.
The energy markets brushed off the news, though, and were similarly unfazed by OPEC anxiety over recent declines in prices. OPEC's announcements of production cuts over the past several months haven't been able to keep prices above $60 a barrel for long, largely because many traders doubt cuts are fully enforced.
Citing a senior OPEC source, Dow Jones Newswires reported Monday that members of the Organization of Petroleum Exporting Countries have begun talks on the potential need for a further output cut in response to a 10 percent drop in oil prices since the beginning of the year. OPEC had no immediate comment.
The oil cartel agreed to a 1.2 million barrel-a-day cut in crude output beginning in November and another 500,000 barrel-a-day cut set to begin Feb. 1.
Still, in the longer term, analysts said many other factors that could send prices higher remained in place.
"With all the current bearish exuberance, we remind ourselves that Chinese demand, the overall (growth in the) economy, and the various geopolitical situations are hardly gone and should not be forgotten," said John Kilduff, senior vice president for energy risk management at Fimat USA.
Exactly!
Anything that keeps the gas in the pipe, the oil in the tank, and the wood on the pile is OK with me.
How come gasoline prices haven't dropped in proportion to the fall in crude prices? A gallon of regular is still about 2.17 in my neck of the woods. It ought to be well under 2.00, shouldn't it?
OK. Dumb question.
It is -31 this morning. No wind. No sun.
Minimal if any price drops at the pump as the gouging continues....If there was a dramatic price increase per barrel cost, immediately at the pump price per gallon spikes up...But, when there are dramatic price per barrel drops the same 'ol Dogma..."it will be a few weeks before it is seen at the pumps".
Oh yeah, there are many here at FR who do not believe there is gouging.
Another positive effect of 'global warming'- less use of evil fossil fuels, and suprize! a reduction of evil bad CO2 released into the atmosphere.
That must be why it's cold today, which will mean more people turning up the furnace releasing evil bad CO2 into the atmosphere, which means it will be warm for the weekend again.
Didn't everyone enjoy a round of golf before the Patriots victory yesterday?
Last time oil was at this per barrel price...at the pump per gallon prices were $.30 to $.40 cheaper...gouging.
Well you see, when the barrel price goes up, the price at the pump goes up right away because they will have to pay more for the new fuel coming.
When the price of the barrel goes down, all that expensive fuel is still in the pipeline, so it takes time before the price goes down.. Then the price will go up magically just before new cheap fuel enters the pipeline, usually because of a scare in the ME or something.
Then people stop b*tching,or something else comes alot to b*tch about, and the never ending gouge is forgotten about for a while
"Oil Prices Fall on Mild Weather Concerns"
_______
Since when is mild weather a "concern?"
Oh, the AP...
It's $1.99 in my neck of the woods.
You haven't heard? Tulips will bud too early. It's a crisis. Rats will be fatter because of less winter kill, and there will be a poulation explosion. Lets see, what other "concerns" have I heard; oh yeah, Bark beetles will spread because the colder temps in the interior usually kills them, limiting them to coastal regions.
When can I shut off my a/c??? Man it's been a warm winter down here in Ft. Lauderdale.....
And people that use the word "gouging" are just ignorant of how how markets set prices. They see a price they don't like and cry about how awful those gasoline sellers are. They'd rather get angry and hostile instead of spending even five minutes trying to understand how markets set prices. That'd take too much mental effort.
Maybe where you live, but around here, it's within already within $.05 of where it was the last few times gas was oil was $55/bbl.
Check for yourself, here.
Keep in mind, oil has only dropped to this level in the last couple days, so it takes a few days for gasoline to catch up.
But it will. It always does.
Where are you at? Can I make it there from Ohio on a half a tank?
Tulips budding early is only a crisis if it gets cold again.
And "crisis" is relative. If you have a prize tulip garden, you may be upset.
Sweet Crude is a 35-45 bbl commodity TOPS... every dollar over that is flat out greed tax by futures traders.... pure and simple. Even at $55 its still at least 10-20 bbl overpriced.
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