The price of oil has risen from about $30 per barrel at the height of the economic recession to the present $77 per barrel. Much of the increase is due to the weakness in the U.S. dollar. Rex Tillerson, CEO of Exxon Mobil (XOM) told CNBC: "If you put the price of oil, which is priced in dollars around the world, and if you look at what some effects are with the weak dollar -- in our view that is contributing $20 to $25 dollars per barrel to the price."

Globally, Tillerson said, oil is well supplied with historic high inventory levels, especially in the U.S. This is causing the market to be a "bit soft," according to Tillerson.

Today would have been an exciting day with positive and mixed economic data, a big draw in oil inventories, and the FOMC minutes coming out. But the trading volume is drying up as the A-Team traders are throwing in the towel and not coming back to work until next Tuesday. This was one of those days where there was no feel for an up or down day literally until right at the closing bell.

Here were today's unofficial closing bell levels:

Dow 9,277.27 -33.33 (-0.36%)
S&P 500 994.53 -3.51 (-0.35%)
Nasdaq 1,966.70 -2.19 (-0.11%)

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Oil prices dropped a bit today, after a government report showed that inventories unexpectedly rose last week.

According to today's report from the Commerce Department, oil inventories rose by 200,000 barrels last week. Going into today's report analysts had forecast a 1.1 million barrel drop in supplies.

Oil prices are moving strongly higher today following a government report that showed inventories dropped dramatically last week.

Today's report from the Energy Department indicated that oil inventories fell by 8.4 million barrels last week, in stark contrast to the increase of 1.2 million barrels that analysts had been expecting to see for the precious crude.

This morning, oil firm Halliburton (NYSE:HAL) posted second-quarter earnings and a warning about North American natural gas markets. First things first, HAL reported second-quarter earnings of 30 cents per share (excluding a $12-million charge stemming from job cuts). While these results were far worse than the 55 cents per share the company earned a year ago, they still managed to top the consensus estimate by four cents per share. The situation was the same for quarterly revenue, which fell to $3.49 billion (from $4.49 billion a year ago) but still managed to outpace the Street's expectations - which called for $3.41 billion.

A late day rally based on imbalance orders and on the Treasury's PPIP winners made a wishy-washy day even that more confusing. The market started out with a slight upside bid, but it never could find its footing. This is probably due to continued earnings jitters ahead of earnings season.

Continued oil inventory data and continued worries about regulating the commodities markets were based around how much speculators can really control.

Here were the unofficial closing bell levels:

Dow 8,184.68 +21.08 (0.26%)
S&P 500 880.29 -0.74 (-0.08%)
Nasdaq 1,749.09 +2.92 (0.17%)

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Oil prices have dropped a bit this morning, challenging support at the $70 level, due mainly to what some call "mixed signals" about the U.S. economy. The black gold has backed off as data pointed to the fact that the U.S. economy is still weak, even if it is emerging from the recession.

On Tuesday, the Federal Reserve announced that industrial production dropped more than expected during May, which has triggered the new weakness in the oil patch. Crude prices have also felt the sting of the market's early week weakness as the Dow Jones Industrial Average has backed off from its recent rally. In addition, the dollar has played an important part in crude prices. A weak dollar leads to higher oil prices as commodities are considered a safe-haven investment against a weak dollar.

Why is there conflicting information coming out of the oil patch? One minute we hear that there's an oversupply of oil sitting in supertankers offshore. Now Saudi oil minister Ali Naimi says that higher consumption in China is driving up prices. He further states that the world economy has recovered enough to sustain $75 to $80 per barrel oil. Is some of this just hype ahead of tomorrow's OPEC meeting?

We should keep in mind, however, that markets do not always move on fundamentals. Very often "perception" plays a bigger role. Prices have recovered from $32.70 in February to $63 per barrel recently. Much of this increase, even Mr. Naimi concedes, is due to speculation.

While I was not a finance major in college, I do know a few things about supply and demand. If there is ample supply and lower demand, prices should be low. If there is limited supply and high demand, prices should be high. I guess oil investors never really studied supply and demand economics.

Black gold is higher in European trading, as investors believe that the U.S. recession may have bottomed. Such a bottom could signal rising demand, which is enough for beleaguered black gold investors. In fact, Gerard Rigby from Fuel First Consulting in Sydney, Australia, noted, "The feeling is we've seen the worst of it, and the only way now is up . . . Some of this is also a trading momentum play."

Oil prices have been moving higher today, but have dropped a bit following this week's inventory report that showed mixed signals for oil and gasoline inventories. Oil inventories fell more than expected last week, but gasoline supplies saw a drop that was slightly lower than analysts had been expecting to see.

Going into today's inventory report from the Department of Energy, analysts had been expecting a drop of inventories of 3.7 million barrels, but the actual report showed that last week inventories fell by 6.3 million barrels. This is a pretty hefty drop of 2.1% for the week. Gasoline inventories also fell last week, but the drop was a little less than analyst estimates of 3.6 million barrels, with an actual decline of 3.3 million barrels.

One reason why prices have come back a bit is that analysts had believed that the gasoline report would be more bullish since the report covered the week after hurricane Gustave, and leading into Ike when a lot of production facilities were either shut in completely, or at least working a reduced rate. The report indicated that refineries were operating at 77.4% last week, which was slightly below the 77.8% that analysts had been predicting.

Oil prices have been falling today, helped by the release of the weekly inventory report which showed larger than expected reserves in the precious crude.

Going into today's report, analysts were expecting to see the Department of Energy announce that oil inventories fell by 1.9 million barrels last week, but in fact we only saw a decline of 1.6 million barrels.

Gasoline is probably more on the minds of most consumers, and what we saw in gasoline demand was even more extreme. Analysts had expected to see a rise of about 500,000 barrels of gasoline supplies last week, but the actual increase came in at 2.9 million barrels, a clear sign that high gasoline prices have forced many of us to cut back on our usage.

As if there were not plenty to worry about, Goldman Sachs (NYSE:GS) is forecasting oil prices to hit $150 to $200 in the next six months to two years. According to Bloomberg, a note from one the of the bank's analysts said:``The possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months, though predicting the ultimate peak in oil prices as well as the remaining duration of the upcycle remains a major uncertainty."'

Observers do not need help from Goldman to make the case. Recent problems with production in Nigeria and political unrest in the Middle East have already moved oil above $120. That situations could continue and move into other unstable countries such as Venezuela.

The theory that a slowdown in the global economy would drop oil prices has not borne out. China, India, and other major developing nations continue to push demand higher. Even in the US where gas prices are now over $3.50, consumers have not cut back use enough to move pricing down.

Some new fields will come online. Brazil just made a major discovery off its Atlantic coast, but production will not be up and running there for several years. During that time, exports from large producers like Mexico and Russia will continue to fall due to aging of their fields.

Nuclear power looks better every day.

Douglas A. McIntyre is an editor at 247wallst.com and the author of the Ten Stocks Under $10 letter.

Another strong start to the day for oil prices, as the weak dollar has led traders to push oil up to another new high today of $114.53, though it has moved a bit lower in early morning trading.

As we noted last night, there were several factors at work yesterday, but today's move is being attributed mostly to investor fears over the weak U.S. dollar. The euro has been moving strongly lately, and continuing to trade at record levels against the dollar, currently trading at $1.5966.

It is strange writing about oil's recent run up because typically we would be talking about supply and demand, but that is just not what is pushing prices higher. Traders are moving into oil (and all commodities) mainly because they are just flat out out-performing the stock market, and with the dollar continuing to fall, the procession into commodities still has a way to go before traders get tired.

Yesterday, we took a look at falling oil prices, and that trend has continued today, sending prices below the $100 mark. As we mentioned yesterday, the selling was coming as traders have turned their attention to demand, and that is the same story that we are seeing again today.

Right now prices are trading just slightly higher than the psychological $100 barrier, at $100.31, but only a short time ago prices had retreated all the way down to $98.65.

One thing that we always like to keep track of is the weekly inventory reports from the U.S. Department of Energy. These reports are typically issued each Wednesday, and going into yesterday's report analysts had been looking to see a rise of 2.3 million barrels. While the market was given news of rising inventories, the numbers were actually much lower than had been expected, with an increase of 200,000 barrels.

Under most circumstances, a drop in demand in the US would bring oil prices down some. The recession should cut the amount of oil consumed here as drivers, airlines, and other big markets for oil-based products shrink.

It may not be that simple. Many analysts now believe that the amount of oil available is not quite so large as was hoped. Older fields are pumping less crude. There are fewer discoveries of large, new reserves, even off-shore. OPEC is not increasing production. Oil exporters are keeping more crude to power their own increasing number of cars and trucks.

According to The Wall Street Journal, the Bush administration now believes "prices will remain buoyant well after speculative investors head elsewhere, as the cost of finding new sources of oil continues to soar and demand in Asia and the Middle East climbs." If the view is right, even if interest rates fall, the US economy faces a multi-year problem with the pricing of its most critical commodity.

Oil prices have already beaten up the airline and car industries. Similar problems will begin to move into other sectors. Retail sales depend on buyers getting out and about. So does the tourism industry. Petrochemical-based products are used in everything from lubricants to plastics.

The Fed and Treasury can solve a lot of problems. Oil prices are not among those.

Douglas A. McIntyre is an editor at 247wallst.com.