So much for that oil slump. Oil's price pullback lasted all of one day as buyers piled back into oil futures Wednesday, sending oil surging up $5.00 to a new record close of $104.52, after OPEC said it would maintain current production quotas.
The Organization of Petroleum Exporting Countries agreed to maintain production targets at a meeting Tuesday in Vienna, Bloomberg News reported. That price-bullish reality, combined with a surprise report by the U.S. Department of Energy indicating that U.S. crude inventories fell for the first time in eight weeks, was enough to send the oil pits into frenzied buyer mode, once again. Earlier this week oil broke through the previous nominal high of $103.76 set back in 1980.
Gasoline, heating oil prices surge
The other major energy commodities also rocketed higher. Heating oil surged 14 cents to $2.93 per gallon, unleaded gasoline jumped 10 cents to $2.63 per gallon and natural gas climbed 37 cents to $9.72 per million BTUs.
And once again, OPEC repeated its oft-stated rationale that "the markets are well supplied," Bloomberg News reported, arguing that speculators and investors seeking to buy oil as a long-term asset and as an inflation hedge, are primarily behind oil's climb to the stratosphere. And once again, traders and other oil buyers acted as if there won't be enough oil to meet global demand at some point in the months ahead.
The increase is all the more disconcerting because demand characteristics are bearish regarding the world's largest consumer of oil, the United States. Gasoline demand has fallen over the past month for the first time in more than 15 years and heating oil demand is enter the spring, the period when demand subsides as U.S. homes and businesses turn off oil-fired furnaces. In a typical market, that would lead to a fall in prices. But this market, jolted by surging Asian hemisphere oil demand and seemingly with a new threat to an oil producer somewhere in the world almost weekly, is anything but typical.
Still, critics say OPEC could have slowed oil's record run-up and/or provided more of a safety cushion against the effects of geopolitics and other events on oil's price, by increasing production a year ago. OPEC refused. President Bush is one of those critics. President Bush said Tuesday that it would be a "mistake" for OPEC not to increase supplies, The New York Times reported, adding that it was "obvious" that demand was stripping supplies, and pushing up prices.
Short sellers losing money
Saudi Arabia's Oil Minister Ali Al-Naimi disagreed 100%. He said there was no need to increase supplies by "even one barrel of oil," The Times reported Wednesday, adding that the reason behind today's soaring oil prices was "tremendous speculation."
Speculation or emerging market demand-induced, the reality in early March 2008 is that the oil market is one where the bulls are firmly in charge, and few are certain when the buying will stop, i.e. when a market top will occur. Moreover, there's no more sobering statistic regarding oil than this: traders who shorted oil at $100 per barrel -- that's one hundred dollars per barrel -- are being hurt bad, and they will be routed if oil heads higher. Most of them will cut their loses and avoid that fate by covering their short positions by buying oil futures -- for those that shorted, it's the dreaded 'short squeeze' -- which will drive oil's price even higher.
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Reader Comments (Page 1 of 1)
3-05-2008 @ 5:37PM
George S said...
Apparently the Bush administration can't do anything about this oil price hikes...we are on our own.... Since the oil suppliers don't want to increase productions why can't we reduce the demands...in this way we save money and they lose money. Start with car pooling. This is the only country that millions of cars are driven by every day with no passengers only the driver/owner. We are spoiled...we need to sacrifice. The arab nations are laughing behind our backs...they are controlling and manipulating us with their black gold.
3-05-2008 @ 5:30PM
tcarden398 said...
Nice to see the republicans can ruin the value of the dollar and control the supply of oil. Hey lets keep making bigger piles of money!!!!
Republicans... wrong for the working man and for America.
3-05-2008 @ 6:22PM
Mike said...
AND DON'T THEY WANT TO PUT A CAP OF 40-60 DOLLARS PER BARREL ON IT.
WHAT THE F....................K DOES CONGRESS DO.
GO HOME ON VACTION, BUT BEFORE RECESS THEY VOTE THEM SELF'S A RAISE AND FORGET THE PEOPLE'S WILL AND WELL BEING, NICE JOB CONGRESS.
3-05-2008 @ 6:42PM
DALE BOGGS said...
the rape of american citizens with this entire energy thing is another way that foreign oil and products need to be controlled by a private company or organization any time the government is involved the dollar goes out of the tax payers pocket, we have the technology and the will to properly handle this ridiculouse situation
as long as we keep the politicians out of it.
3-06-2008 @ 6:42AM
axaflaxar said...
we are screwed huh Jim?
3-07-2008 @ 9:46AM
Jerry said...
The only way to correct this problem is to go to the root. We need to eliminate the Federal Reserve, and establish a US Treasury note. US citizens would receive equal exchange, while foreign holders of Fed notes would receive nothing. Essentially, we would be filing bankruptcy as a country, and dispensing the unsecured debt.
This can be done by executive order. JFK signed an executive order doing away with the Fed. He even printed 6B Dollars in treasury notes--six weeks later he was assassinated. The day after LBJ took office, he reversed the executive order. Why do only a few Americans know that?