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.
Traders have pushed prices through the $142 mark this morning, with the precious crude trading as high as $142.45, but have cooled off a bit and are now sitting at $141.06, which is $0.09 higher on the day. As Douglas McIntyre discussed earlier, typically such high oil prices are expected to put a crimp in demand, but this time around that may not be the case at all. Already many analysts are stating that demand may not fall too much, even with the record high gasoline prices.
We should get a slightly clearer picture on just how true that is later today when the Department of Energy releases the weekly inventory numbers. Last week inventories increased, but that is expected to reverse this week, and analysts are predicting this week's oil inventory numbers to actually show a decline of around 1.2 million barrels (compared with a 800,000 barrel increase that was reported last week).
Oil is starting the week off trading a little lower today, but Goldman Sachs (NYSE: GS) is looking for oil prices to continue to move higher, and expects to see $150 much sooner than previously thought.
While speaking today at a conference in Malaysian's capital, Kuala Lumpur, Jeffrey Currie stated that the possibility that we were going to see $150 oil was real, and that he believed that we would hit that time sometime this summer. Goldman has been bullish on oil prices for some time now, and last month went so far as to state that we would be seeing $200 oil at some point within the next two years.
While $150 oil may sound insane, it really is not that big of a difference from where we are now. Today prices have retreated a bit back down to around $136.25, but Friday they were close to breaking through the $140 mark, after trading up more than $11 and hitting a high on of $139.12. All it would really take is just one or two more days like that to make $150 oil a reality.
The current head of OPEC, Algerian Energy Minister Chakib Khelil, seems to say the same thing once a month. The repetition does not make it more convincing, but he went back to it again this weekend.
According to the AP, his view of oil is that "the high prices do not reflect market conditions but rather other factors linked to the weakening dollar, market speculation, and the U.S. subprime mortgage market turmoil."
Recent studies indicate that there is much more at play than the dollar and traders trying to make a buck. Oil exports are falling in many countries. Last month, Indonesia said it would drop out of OPEC. It is not longer a net exporter of crude. Mexico says that some of its largest fields are aging and that their yields are down, perhaps permanently.
Even in Saudi Arabia the need for petroleum to build infrastructure and fuel cars is rising, keeping more oil inside the country.
As far as anyone can tell China, India, and the emerging markets draw as much crude now as they did when oil was below $70. Governments in many of those states are still willing to underwrite the cost of oil to help drive GDP with cheap gas and diesel.
Saying that supply and demand are not at work is a convenient way to mask greed, but it does not work.
Douglas A. McIntyre is an editor at 247wallst.com.
It seems like everyday we are talking about the same news... rising oil prices. Today oil busted through the $135 mark and traded up as high as $135.09. Currently we are seeing oil at $133.91.
There are three main factors at work today helping push prices higher; supply concerns, global demand estimates, and once again, the weak U.S. dollar. Of the three, the weak U.S. dollar has received most of the blame recently for the run up in oil prices.
As we have discussed many times before, any time the dollar shows weakness traders will rush into commodities as a natural way to hedge against the falling dollar. That is exactly what we have been seeing for most of this year, and that has continued into today, as the dollar has continued to drop.
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.
Earlier this morning, prices had dropped $2.90, but after the actual report became available prices have fallen even more, and are currently trading down $4.59 to $104.83. What is a bit surprising is that prices have extended so far even though the report was less bearish than had been predicted.
Analysts had been looking to see an increase of 2.3 million barrels, but the actual report showed that inventories rose "only" by 200,000 barrels. Usually, seeing a smaller than expected jump would lead you to believe that prices would rally, but the market has shifted a bit, and we are now seeing more attention being given to demand.
Oil prices have continued to rise today, jumping to as high as $109.70 earlier in the day, and currently sitting at $109.62.
Fueling today's charge is, once again, the weak dollar. Yesterday, the euro set yet another record high against the U.S. dollar, moving up as high as $1.5464.
Also bringing money into oil today was a report from the International Energy Agency stating that demand for oil is going to remain high, due to growing demand in emerging markets, most notably China. Along with China, India continues to keep high demand. Both countries are going to remain large consumers as a result of the fact that they have fuel subsidies that reduce incentives for conservation.
The World Bank entered the increasingly-divided debate on where oil prices are headed Wednesday by announcing in its Global Economic Prospects 2008 report that oil prices will fall gradually through 2009 to about $75, then fall toward $50 per barrel, in the longer-term.
"In the longer term, the oil market balance is expected to loosen and prices are projected to fall toward $50 per barrel," the World Bank wrote in its report.Oil closed Wednesday down 74 cents to $95.59.
The bank said that because OPEC has limited spare capacity and is holding down production, oil prices will likely remain quite elevated and volatile. However, high prices and increasing environmental concerns should continue to moderate growth in demand.
The Washington, D.C.-based international bank said it sees finely balanced markets in 2008-2009, then rising upstream investment in oil producing countries (OPEC and non-OPEC) should result in new supplies that exceed the growth in demand.
Oil surged above $98 per barrel Wednesday on expectations that U.S. oil stockpiles declined for a seventh consecutive week, Bloomberg News reported Wednesday.
Oil rose $2.31 to $98.29 before pulling back slightly to $97.75, as traders attempted to gauge both U.S. demand and geopolitical factors affecting supply as the new year dawns.
Demand, Nigeria weigh
Independent energy trader Jim Dietz told BloggingStocks Wednesday that unrest in Nigeria is also putting energy traders' moods in a bullish frame of mind.
"We've got the political situation in Nigeria popping up again where 12 people were killed by militants and a near-unanimous consensus that U.S. stock piles will be lower, so that's more than enough to send this oil market higher," Dietz said. "I know it's not what consumers want to hear at the start of a new year, but oil and heating oil prices are heading higher, at least for the short-term."
Heating oil gained about 4 cents to $2.69, while unleaded gasoline rose 5 cents to $2.53 in Wednesday morning trading. Natural gas gained 17 cents to $7.65 per million BTUs.
Hedge funds, which control more than $2 trillion in assets, and when one includes leverage, substantially more than that, are an institution that has helped produce massive increases in trading volumes and financial transactions in the last decade.
Further, together with wealth management investment funds, private equity funds, and of course investment banks and brokers, these institutions form the bulk of the market's "shorter-term players" - - organizations that are likely to have an investment horizon that is shorter than the typical person's. They're also more-likely to use aggressive investment techniques and invest in high-risk instruments.
Few deny that the above institutions, particularly hedge funds, with their buying power and volumes, have increased market liquidity.
However, lately a growing chorus is beginning to question the ultimate impact of hedge funds, and comparable players. Namely, they're asking if hedge funds and their companions are distorting prices of commodities, stocks, and other investments.
After getting off to a strong start earlier in the session, oil prices have traded lower in mid-day action on a growing assumption that OPEC will elect to raise its output quota during next week's meeting. It should come as no surprise really that we are starting to hear some OPEC rumors considering that oil prices have ballooned by over 40% since August and have been testing even inflation-adjusted all time highs in its pursuit of the $100 mark.
As fellow BloggingStocks writer Joseph Lazzaro pointed out earlier this morning, prices had risen as high as $99.11 this morning in reaction to lower temperatures, but that has all changed as traders have instead focused on news from over the weekend indicating that the thirteen nation oil cartel OPEC may be considering production increases next week.
The main cause for the rising belief in OPEC adjustments comes from a statement this weekend by Iranian Oil Minister Iranian Gholam Hossein Nozari, who stated that his country would be willing to consider lifting its quota. According to Nozari, "if statistics and data indicate there is a need to produce more oil, we have the capacity to increase the output and supply more oil for the market." However, he made it clear that he did not believe that the world was currently facing a shortage of the precious crude.
The U.S. Federal Reserve's bold action Tuesday to decrease short-term interest rates by 50 basis points, or one-half percentage point, served as clear signal to the markets that the Fed agrees that the housing slump and subsequent subprime mortgage default-induced credit crunch have helped slow U.S. economic growth to near-stall levels, but the interest rate cut and likely future cuts do not offer a downside-free economic horizon.
On the contrary, the easing and the growth stimulus that's likely to ensue will undoubtedly bring to the forefront an issue that the world's major industrialized economies have danced around for about a generation: namely, the inexorable rise in the price of oil.
Recall that in 2005 the Fed began to tighten monetary policy, i.e. started its short-term interest rate increase cycle, in part to slow the U.S. economy in order to take price pressure (inflation) off commodities, principally oil, but also natural gas, copper, aluminum, silver, corn and wheat, among others. Leaving aside for the moment the philosophical critique regarding whether its possible for a nation's central bank to slow inflation of globally-based commodities, the Fed's action did have the effect of slowing U.S. growth, which reduced price pressure on numerous vital commodities. Hence, from an inflation standpoint, the Fed's tightening can be interpreted as a qualified success.
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.
Oil continued to remain strong with prices 
Oil is starting the week off trading a little lower today, but 
As we discussed earlier today, oil prices had been falling this morning in 
Oil surged above $98 per barrel Wednesday on expectations that U.S. oil stockpiles declined for a seventh consecutive week, 
After getting off to a strong start earlier in the session, oil prices have traded lower in mid-day action on a growing assumption that 
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