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.

OPEC said Tuesday it won't match member Saudi Arabia's 200,000 barrel per day production boost, because in the cartel's estimation there's no need to increase output, The Associated Press reported Tuesday.

OPEC President Chakib Khelil said there's no need to increase supply, citing factors outside of OPEC's control, including the weak U.S. dollar and U.S. pressure on Iran, for high oil prices. Khelil also blamed the U.S. mortgage crisis and speculators for driving oil prices higher.

The United States and the European Union want Iran to end uranium enrichment, a technology which would give Iran the materials needed to produce a nuclear bomb. Iran says it wants the nuclear technology solely to produce energy. If one discounts oil sands, Iran, also a member of OPEC, has the world's second largest proved oil reserves, after Saudi Arabia.

Khelil's comments had little impact on the oil market Tuesday. Oil closed down 19 cents to $136.55 in a session devoid of major price moves -- a rarity for the oil markets in the past two years.

Oil: A record year

Sure, there are several earnings reports coming that are going to shake, rattle, and roll, the market this week, including Morgan Stanley (NYSE: MS) and Goldman Sachs (NYSE: GS), but what about those all important economic releases? Last week, the consumer price index was revealed for May and showed a monthly increase of .6% as energy was HOT once again, and the overall transportation costs rose the most since November 2007. Core inflation was up only .2% and investors liked the number as it calls for the continuation of a "Fed-Pause," which helped the dollar move up for the week.

New Residential Construction (permits) popped last month on an unexpected increase of the multi-family housing starts. Think about it for a minute and you will quickly realize that as families are losing their homes due to the deteriorating economic conditions, they still need live somewhere. So, the increase of 326,000 permits for multi-family housing makes perfect sense. But, don't be fooled by the fact that these are still mixed into the totals and have skewed the overall stats upwards.

Still, the reports have shown difficult conditions as the total starts have hit lows last seen in 1991. Before that, the lows of this level were seen in 1974. Economists over at Economy.com are looking for housing starts to drop again in May down to 985 million. Since the economy has become the real story (aside from the oil horror show), housing is vitally important, as it is really a proxy for the financial fortitude of the average family. Realize that if they are not buying homes, it is because they don't have the funds, cannot get credit and do not have confidence in their financial future.

Oil fell to $122 in early trading Wednesday, as traders locked in profits earned during oil's record up in the first half of the year.

Oil fell $2.21 to $122.10 per barrel -- its lowest level in about two months -- despite the fact the U.S. Energy Information Administration Wednesday reported a 4.8 million decline in weekly crude oil inventories.

Jim Dietz, independent energy trader, told BloggingStocks Wednesday that the bottom line is compelling traders and institutional investors to unwind intermediate oil-long positions.

"In some cases you've got players [traders, institutions] with four-month and six-month positions where they're up 30% or 35%. It's kind of hard to sit on that profit when it looks like oil demand growth is going to slow," Dietz said. "A good strategy would be to sell half or most of your position and that's helping to push the market lower now." Dietz added that he was presently short oil with a monthly contract.

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.

As we discussed earlier today, oil prices had been falling this morning in anticipation of a bearish oil inventory report, and now prices are moving even more to the downside after the release of the actual report from the U.S. Department of Energy.

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 definitely been on a tear lately, but are losing ground today ahead of this week's inventory report, which is due out later this morning. Crude prices have dropped by $2.90 this morning, and are currently trading at $106.52.

So why exactly is the market selling off crude oil? Today's action is a result of anticipation over what we will see in this week's inventory report. Analysts are predicting that when the Department of Energy releases the current oil inventory report, we will see a rise of around 2.3 million barrels.

OK, I know what you are thinking. . . inventories have been rising for the past couple of months and prices have not been reacting. Well, that is true. In fact, if we do see a rise this week, it will mark nine out of past ten weeks where we have seen a rise in oil inventories. However, what makes this week a bit different is the fact that concerns over America's slowing economy have spiked once again, and possibly traders are going to start to focus more on the implications of a slowing U.S. economy.

Every day as I watch oil prices, I keep waiting for the market to take a breather and bring prices back down, but it just isn't happening yet. Prices are on the move yet again today, setting another new record, busting through the $110 barrier and hitting a high of $110.34. Currently oil is sitting at $110.23.

Today's move should come as no surprise if you keep up with the current situation surrounding the U.S. dollar. The dollar has been in a literal free fall lately, and is on the decline again today, with the fragile greenback falling to under 100 yen. In case you were wondering, this is the lowest for the dollar versus the yen in the past twelve years.

The main reason for what we are seeing is widespread fear that America is entering into a recession. Some well respected professionals, including billionaire Warren Buffett have said that while the current environment defies traditional definitions of a recession, America is basically already in a recession. The economy grew by 0.6% during the fourth quarter last year.

Stocks rise and fall, bonds can reach default status, and housing? Well, we know what can happen to home prices, at least cyclically. But oil knows only one direction: vertical. Or so it seems, lately.

Oil closed Wednesday up $1.17 to $109.92, another record-high close, driven to new levels of the stratosphere by the falling dollar -- which hit a new record low of $1.55 versus the euro -- and continuing concern that the U.S. Federal Reserve's credit market infusions will not be enough to prevent the U.S. economy from tailspinning into a deep recession. Earlier in the session, oil traded at an all-time high of $110.20, breaching the $110 level for the first time.

The other major energy commodities also closed higher. Heating oil gained about 3 cents to $3.03 per gallon, unleaded gasoline rose 1 cent to $2.72 per gallon, and natural gas rose about 1 cent to $10.05 per million BTUs.

Weekly crude oil inventories jumped 6.2 million barrels to 311.6 million barrels for the week ending March 7, 2008, well above the consensus estimate, the U.S. Energy Information Agency announced Wednesday. Weekly gasoline inventories increased 1.7 million barrels, while distillate supplies fell 1.2 million barrels.

Analysts surveyed by Bloomberg News had expected weekly oil inventories to rise by 1.7 million barrels. Oil futures fell about $1 to $107.02 per barrel immediately after the news.

Refineries operated at 85.0% of their operable capacity last week, compared to 85.9% in the previous week. However, analysts are quick to point out that some decline in refinery capacity is expected in late winter and early spring as refineries undertake maintenance and convert systems for gasoline production to get ready for the summer driving season, historically a period of high gasoline consumption in the United States.

Oil Analysis: Another bearish weekly inventory report for oil, but don't tell that to oil traders in the trading pits. Driven by institutional investors (and other investors) seeking a lucrative return on assets in the face of likely under-performing stocks and bonds, oil has to-date largely ignored a two-month rise in inventories in the largest oil consuming market, the United States, to trade at record highs. Currently, there's little hard evidence to suggest the pattern will change anytime soon.

It seems like everyday we are seeing new highs for oil, and today is no exception, with prices hitting a high today of $106.42, and are currently trading up $0.84 to $106.31.

It is not surprising that as we see oil continue to head higher, we also have the other side of the coin that shows the dollar falling to new lows. As the market continues to push the dollar lower, you have to wonder just how high oil is headed? It took so long for oil to break through the psychological $100 barrier, and now, as Joseph Lazzaro pointed out earlier, there is already talk of a $100 floor for oil.

Last night we saw oil close at an all time of $105.47, and judging by the looks of things right now, we are going to be setting yet another record close again today. For now it looks as though there really is not too much that could turn the recent price surge around.

This week the market was impacted by a surprising decline in U.S. inventories, and the official (albeit expected) announcement from OPEC that it would not be lifting production quotas. Look for oil prices to remain strong at least until the middle of next week, and depending on next week's inventory report we could easily be looking at $110 oil. Scary... but definitely not out of the question at this point.

Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.

Oil prices are moving to the upside again today, adding to yesterday's strong gains to trade up as high as $105.97 a barrel.

On Wednesday, oil prices surged on two basic factors. The first being a decline in U.S. inventories (the first in eight weeks), and the second being OPEC's decision not to adjust its production quotas. While the inventory report may have come as a surprise to some, the OPEC decision was mostly expected, as the oil cartel had been hinting all along that it was not in favor of lifting its output.

The primary reason though why traders are pushing prices higher is Wednesday's inventory report. Analysts had been expecting to see an increase for the eighth-straight week, but instead were served up data that showed crude supplies dropping by 3.1 million barrels.