http://today.reuters.com/news/artic...4_RTRUKOC_0_US-MARKETS-OIL.xml&src=rss&rpc=23 Oil falls 3 percent, healthy inventories weigh Mon Oct 2, 2006 3:32pm ET NEW YORK (Reuters) - Oil fell 3 percent to $61 a barrel on Monday as healthy fuel inventories in top consumer the United States countered plans by OPEC members Nigeria and Venezuela to trim output. U.S. crude <CLc1> settled down $1.88 at $61.03 a barrel, after dipping as low as $60.90 after [ BP said it had restarted production at the Lisburne oil field in Alaska over the weekend. London Brent <LCOc1> dropped $2.03 to $60.45. BP shut the 30,000 barrel per day (bpd) field last week after discovering a gas leak in a pipeline. The oil major has been restoring output at its giant Prudhoe Bay oil field in Alaska after severe pipeline corrosion was found in August. The Lisburne restart added to bearish market sentiment caused by ample U.S. supplies, which have sent prices falling from records over $78 a barrel in July and prompted concern among some OPEC members. Nigeria and Venezuela last week to pledge to cut supply by about 170,000 barrels per day, less than 1 percent of OPEC's total output, from October 1 as U.S. distillate stocks are at a seven-year high. "The fundamentals are not very rosy -- we've got very high stocks," said Olivier Jakob of Petromatrix. "The market is expecting now to have a bit less production from OPEC, but the question is how much." Some traders said the planned cutbacks by Nigeria and Venezuela would have little impact on prices unless larger producers in the Organization of the Petroleum Exporting Countries also said they would join the move. "The only significant thing would be if Saudi Arabia announced they were going to cut output, which they haven't," said Christopher Bellew, a broker at Bache Financial in London. "I really don't think anyone expects much in the way of output cuts at the moment." OPEC's second-largest producer, Iran, on Sunday backed any move by the 11-member group to bolster the market, while stopping short of saying it would trim its own output. Iran will support any OPEC move to bring oil prices back to an "acceptable and logical" level, Iran's OPEC Governor Hossein Kazempour Ardebili told Iran's official news agency IRNA. The row over Iran's nuclear program remains a focus for the oil market. Easing concern about the standoff with the West has helped bring U.S. prices down from July's record, but an official said on Monday Tehran will not suspend uranium enrichment, as demanded by the West. Oil has also been under pressure from brimming U.S. inventories. Stocks of distillates stood at a seven-year high in the week ended September 22, highlighting ample of heating fuel ahead of the Northern Hemisphere winter. "We've got high stocks and a lot of weather forecasts have been for a mild start to the winter," Bellew said. "People may be disappointed on the demand side in the next two to three months." Analysts polled by Reuters said U.S. government weekly inventory data to be released on Wednesday will show distillate stocks up another 1.3 million barrels for the week ending September 29, with gasoline stocks up 900,000 barrels. Data for crude stocks was expected to show a 700,000 barrel fall. Recent weak economic data has also raised doubts about the sustainability of economic growth in the United States in late 2006 and early next year. Some price support came after militants in OPEC member Nigeria had attacked a Royal Dutch Shell (RDSa.L: Quote, Profile, Research) pumping station on Monday.
We prop up those countries. Their governments don't despise us, but their people might. It's not like we're being bamboozled. Oil has propped up American money markets and Saudi investment in Wall Street numbers in the trillions. There's a lot of value being generated that the American people benefit from which is the result of these ME oil rich countries. This is also why it's so hard to switch off oil and to end support of these authoritarian states. I agree with your sentiments, but there's good reason things are the way it is and it's not entirely their doing.
http://today.reuters.com/news/artic...RTRUKOC_0_US-MARKETS-OIL-1.xml&src=rss&rpc=23 Oil dives below $59, OPEC head calls for more cuts Tue Oct 3, 2006 2:39pm ET LONDON (Reuters) - Oil tumbled more than two dollars on Tuesday to below $59 a barrel, sinking to the lowest level since February and prompting OPEC's president to call on the exporter group to deepen supply cuts. The drop extended a 6 percent slide over two days, pressured by ample fuel stockpiles in top consumer the United States and no evidence of other OPEC members joining Nigeria and Venezuela in cutting output. "We believe that the market is slightly oversupplied," OPEC President Edmund Daukoru, who is also Nigeria's top oil official, told Reuters. "(Today's drop in the oil price) vindicates what Nigeria is doing and I hope other members will act in the same way." U.S. crude <CLc1> lost $2.35 to $58.68 a barrel by 1830 GMT, after falling to $58.60, the lowest since February 17. London Brent <LCOc1> dropped $2.09 to $58.36. The decline in U.S. oil prices from a record $78.40 in mid-July helped the Dow Jones industrial average stock index climb to a record high 11,755.35 Tuesday, crossing a threshold set in January 2000. Oil's slide spilled into other commodities as well. Gold slipped nearly 3 percent as the decline in crude reduced the metal's appeal as a hedge against inflation, dealers said. Copper prices also fell. Nigeria and Venezuela last week pledged to cut crude supply from October 1 by about 170,000 barrels per day, less than 1 percent of OPEC's total output. Analysts have said the move will have little impact unless larger OPEC producers such as top world exporter Saudi Arabia decide to follow. The group pumps more than a third of the world's oil "The Nigerian and Venezuelan announcements are significant, but they don't remove a lot of oil from the market," said Mike Wittner, analyst at Calyon investment bank. "Saudi Arabia has been conspicuous by its silence." OPEC's second-largest producer Iran on Sunday backed any move by the 11-member group to bolster the market, but stopped short of saying it would trim output. NO "MAJOR" HURRICANES Brimming inventories of fuel ahead of the winter heating season have underpinned the steep decline in oil prices, adding to downward pressure from signs of slower economic growth in the world's largest economy. Analysts said they believe U.S. stocks of distillates, already at a seven-year high, rose 1.3 million barrels in the week to September 29. The U.S. government will release its inventory report for last week on Wednesday. "Given comfortable middle distillate stocks, it's hard to see a real supply worry in the winter," Wittner said. The government report is also expected to show gasoline stocks rose by 900,000 barrels and crude inventories fell by 700,000 barrels. <EIA/S> Prices have also eased due to a lack of hurricanes in the Gulf of Mexico, home to about a quarter of U.S. oil output. Last year, oil jumped to a then-record after Hurricane Katrina disrupted supply. A noted hurricane forecaster, William Gray's forecast team at Colorado State University, on Tuesday predicted the Atlantic hurricane season will see just two more tropical storms and no more "major" hurricanes.
OK, so OPEC isn't talking about cutting supplies, just countries that are OPEC-affiliated? And these countrie's cuts won't affect world supply that much?
just 2 countries. according to reports i've read, those 2 countries would only affect 1% of the world's oil supply. none of them possess the quantity of reserves that saudia arabia, for instance, does.
Great summary. The last quote...the final paragraph...is just dead on. All a bunch of trumped up fears to drive up prices. http://www.chron.com/disp/story.mpl/headline/biz/4234581.html Price slips as 'perfect storm' fades By KRISTEN HAYS and BRETT CLANTON Copyright 2006 Houston Chronicle Oil prices finished a two-day slide of more than $4 on Tuesday, prompting some stock analysts to downgrade the energy sector because of lower prices, increased supplies, eased political tensions, lack of hurricanes and expectations of a mild winter. Analysts said oil prices have fallen despite small production cuts announced by OPEC members Venezuela and Nigeria. The factors pushing down prices included traders looking ahead to a government report today that is expected to record a jump in U.S. fuel inventories. Merrill Lynch & Co. analysts Brian Belski, Cheryl Rowan and Jennifer Ziehe said in a report Tuesday that more than any other sector, energy benefited from a "perfect storm" of circumstances that pushed up prices in recent years. But geopolitical tensions and supply constraints have decreased since midsummer. And investors, such as hedge funds, that pumped so much money into this sector on rising prices are exiting, further fueling volatility among stocks within the energy sector, the Merrill analysts said. Their report downgraded the energy sector to "underweight" and noted other sectors, such as industrials and telecom services, are likely to perform better in the near future. Cyclical bumps in road "In a nutshell, the same variables that were defining the sector's secular highway armor are now creating cyclical bumps in the road for the first time in over four years," they said. Low natural gas prices, high inventories and rising production costs also prompted Lehman Bros. analyst Thomas Driscoll to downgrade the largest companies in the exploration and production sector from "neutral" to "negative." He said exploration and production companies "need to slash budgets to rein in out-of-control costs." He also said analysts expect conference calls related to third-quarter earnings "will lead investors to question the ability of E&Ps to fund '07 drilling plans; and this could lead to reductions in '07 production forecasts." Energy stocks took a beating. Oil majors and independents saw share prices fall Tuesday from 1.6 percent for Royal Dutch Shell to nearly 5 percent for Marathon Oil Corp. Crude oil for November delivery fell $2.35 to $58.68 a barrel Tuesday on the New York Mercantile Exchange, its lowest close since mid-February. On Monday, oil prices fell $1.88. In London, Brent crude fell $1.04 to $59.41 a barrel on the ICE Futures exchange. Natural gas is up Natural gas futures rose 11.6 cents to close at $5.759 per million British thermal units, 60 percent lower than a year ago, largely because of weak industrial demand and high natural gas stockpiles left over from a mild winter. Driscoll said that unless gas users significantly increase their demand to take advantage of lower prices, producers will be stuck with an oversupply. It could take them nine months to a year and a half to cut supplies enough to restore balance. Unlike with oil, the natural gas industry lacks an OPEC-like cartel to cut or increase production to influence prices. A $60 trigger? But the Organization of the Petroleum Exporting Countries, which pumps 40 percent of the world's oil, has hinted that $60 oil may trigger a production cut. The cartel took no such action at its meeting last month, although it softened its production quota of 28 million barrels a day so members could make cuts on their own. Last week Venezuela said it would cut oil production by 50,000 barrels a day, and Nigeria chimed in with plans to cut exports by 100,000 barrels. But analysts classified those cuts as blips in the oil picture because Saudi Arabia, the world's largest oil exporter, hasn't announced cuts. "Inventories are very high, and demand seems to be down a bit and there's no place to put the oil," Philip Verleger, an oil economist said. "In this situation, it's going to take very large cuts. Nigeria and Venezuela only made matters worse by announcing small cuts. What OPEC needs to do is cut 3 million barrels a day." Comfort zone? But Bill O'Grady, an analyst with A.G. Edwards & Sons, said he had a "sneaking suspicion" that Saudi Arabia is more comfortable with current prices than the market believes. "If I need revenue, like Venezuela, Iran or Nigeria, I would be much more interested in keeping prices higher and spearheading efforts to get OPEC to cut," he said. "But members who really have the influence are not terribly interested. Saudi Arabia, Kuwait and the United Arab Emirates are less than enamored with cutting output." Mary Novak, managing director of energy services at Global Insight in Lexington, Mass., said even though OPEC has indicated it's willing to defend $60, "we don't think they're willing to defend very heavily at $60." But once it hits $55, "we think you're going to see a significant market reaction," Novak said. Paul Weissgarber, head of AT Kearney's oil and gas practice in Dallas, said the high prices generated euphoria from investors, but "the reality is that what was propping it up was a lot of people's expectations that it was going up. I think the reality is that it was artificially inflated, and it's sort of settling back down to where it ought to be settling."
Which would make this curiouser... Government to hold off on refilling oil reserve All markets have boom and bust cycles. It is the nature of greed and the herd mentality. In leveraged markets the effects of even subtle market perceptions is magnified by the compunded risk. Once the leveraged lemmings start jumping none can afford to be the last one off the cliff. How many times would people have to see the same cycle before they understand it? I personally have seen the Oil boom and bust of the late 70's and early 80's. The silver boom and bust when the Bass brothers attempted to corner the market. The Houston real estate boom and bust that followed, the housing one and the shopping center one. And the great stock bubble of 1999. I'm old but I didn't see the the crash of 1929. And yes I am implying that Bush and political allies had an active, calculated role in the subtle shift in perception world oil market right down to his 'addicted to oil' speech. Not that that's a bad thing, unless real disinformation was used to inflate prices until the drop would influence the election. That would be criminal. Hey Colorado State reduced their 2006 hurricane estimates for the El Nino effect....today. That water must have really changed tempature quickly, because you know oceans do that.
are you suggesting that these scientists lied in their forecasts before the hurricane season to prompt the price of oil to rise??
but...these scientists who came up with these forecasts...it's not like they all work in the same place. there are forecasts from all over the world. even the european models were projecting an intense season. and they were just coming off of one of the most violent hurricane seasons in history. complete with the destruction of a major american city. and lots of production shutdowns from platforms in the gulf....that STILL aren't back on line. they certainly got it wrong. but no one can forecast wind shear. though, my bet is that they will take it much more into account in next year's projections.
I am suggesting that the data is subject to interpretation and bias; the predictions are reviewed and discussed, many influences weigh on the final determination. There only a couple of agencies that issue predictions and they are governmentally funded. The process is certainly corruptable. I don't know anything but I don't see how you could miss the influence of an El Nino. They take years to develop and it seems like the last one was the most studied weather event in history. It was on the news every night. Of course it would be worse for the scientist to predict five storms and have 10 than it would to predict 10 and have 5 so there is an inherent bias to over predict.
right. i hear ya. and maybe so. but i don't think every group that's out there making these predictions gets funding from the US government. but i'm sorta with you on this ...because i was arguing before that all of these fears would pop the market like a bubble when they didn't come to fruition...that the whole market was based on chicken littleism.
There are a lot of private risk assesment groups out there but if American Re thinks there is less risk in the Gulf when the Colorado State report says there is a big risk, they aren't going public. They are just going to take on all the indemnity policies they can find. Again, I don't know anything other than it is the prerogative of the executive branch to direct public information and we should assume they would use this discretion to their own ends within the limits of the law. Also, one would be a fool not to factor in a certain level of healthy skepticism about corporate morality when you are talking about this scale of profit.
Just wait until November, prices will not crash and will remain at relatively high levels (perhaps not $70/barrel, but still high) - and it has nothing to do with the US elections. Currently, refinery maintenance season is nearly in full effect in the US as the summer driving season ends. This will lead to substantial refined product inventory draws, thereby reducing much of the excess storage that was built up over the summer in anticipation of hurricane season. If there is any further near-term fall in prices, the balance will likely be restored by the end of the year, warm winter or not. In the very near-term the US market will have an effect on pricing, but in the long term the US is not the primary driver of oil prices, China is the primary driver. As long as they continue soaking up barrels of oil and refined products, the market will not be in a freefall. 5-year deferred crude futures are still trading at $62.50/barrel today. Also, price increase over the last two years are entirely rational given the limited global spare crude production and refining capacity. There has been only a million barrels a day of spare capacity (and nearly all of it is Saudi Heavy/Sour Crude) and the market needed to create a buffer between supply and demand. It was absolutely necessary for prices to increase in order to constrain demand to levels that supply could support. Therefore, it was necessary to have higher global prices to constrain demand in developing markets such as China and India which had explosive demand growth leading up to the price increases. Both of those countries began substituting coal as a marginal fuel source so that further oil demand increases could be avoided. I assure you, prices will not collapse.
obviously you are very educated on this subject but I must contend one point again, price does not affect demand. demand will increase regardless, it is driven by other factors, mainly the economy. the reason that india and china went to coal is a market correction, even though the demand exploded in those countries it still didn't support the oil prices, so they turned to alternatives. as soon as prices fall down to their "correct" levels, oil will be an option. the price correction right now has everything to do with demand and supply. why should oil markets worry about constraining demand. today I read an article in oil and gas publication about an exploration rig in the gulf trying to drill at 38,000 feet. that's what demand does, it increases drilling activity, it drives the market to try to meet demand, it doesn't try to constrain it. it tries to take advantage.
prices always rise. prices always fall. sometimes they go way over where they should be. sometimes they go way under where they should be. remember that as early as Dec 2004, the price fell below $20. that was less than 2 years ago. the world isn't fundamentally different 2 years later. the fundamentals of that market have not changed that significantly. prices already have collapsed. we're talking about a 25% drop in price in about a 2 month period, already. prices at the pump are down about 1/3 from where they were a month or so ago. there will be a spike in price today, for sure. maybe a spike for the next week or so because of OPEC's announcement. but all the market analysts i'm reading are saying the market is so bearish that it won't hold. that OPEC has less power over this than they think they do. they don't always get their way. they've tried to prevent price collapses before and failed. and yeah...I know about China. and I know about how estimates for demand in China are overstated every year, sometimes by 2-3x as much as they really end up being. Dubious, if you're concerned about lies, lies and more lies, I'd follow you big time in those reports. and them more times they're overstated, the less and less the markets believe them the next time. you can only cry wolf so many times. bottom line...the prices were way overinflated. this is a correction. we see this in every sort of market. we shouldn't be shocked to see it with oil.
MadMax you love this oil topic. Me? I'm personally starting worry about the price of oil... massage oil.
Nevermind: http://news.yahoo.com/s/ap/20061005/ap_on_bi_ge/opec_oil_output ABUJA, Nigeria - With oil prices recently dipping to seven-month lows, OPEC's president said Thursday that the group is considering an emergency meeting to discuss the possibility of cutting output. "We are toying with the idea of an emergency meeting," said Edmund Daukoru, a Nigerian oil minister who is also serving as president of the Organization of Petroleum Exporting Countries. The comments came after oil prices rebounded Wednesday from a seven-month low and jumped more than $1 a barrel Thursday. But prices for crude-oil futures in New York are still roughly 23 percent below their July peak of $78.40. A Financial Times report on Thursday said OPEC has informally agreed to cut output 4 percent in coming weeks to defend the $50 to $55 per barrel price range. It cited an unnamed OPEC official. Dow Jones Newswires, citing an unidentified OPEC governor, said OPEC ministers agreed to cut 1 million barrels a day from its current oil production levels, with Saudi Arabia cutting 300,000 barrels per day, effective as soon as possible. "We each have an idea of what is an appropriate response ... we agree that something needs to be done," Daukoru said, referring to possible cuts in output. "We will have to agree on how much, how soon and how we distribute it among the member countries." Daukoru said OPEC members would only agree on a formal position on oil cuts after consultations. But he said Venezuela has already promised to announce a cut of 50,000 barrels per day. "Algeria also gave me some understanding," Daukoru said. "The Saudis were already taking some measures on their own as part of leadership." Saudi Arabia's ambassador to the U.S. had said on Wednesday that he did not expect OPEC to hold an emergency meeting to discuss prices ahead of its scheduled Dec. 14 meeting, despite the recent decline in prices. Light, sweet crude for November delivery on the New York Mercantile Exchange rose $1.19 to $60.60 a barrel in electronic trading by afternoon in Europe. The price went as high as $60.97 during the day. Nymex crude had settled on Tuesday at $58.68 a barrel, the lowest close since Feb. 16.
i just think it affects people soooo heavily. i know people who are greatly affected when they are forced to pay $3/gallon to get around. people who don't have that cash to spare.
