In a new report today, the International Energy Agency warned that an insufficient amount of investment into oil supply is going to result in a serious supply shortage that could make the recent record high oil prices look weak in comparison.
Oil prices spiked to a record high $147 a barrel earlier this summer, but have since been in a pretty steady downward spiral, and were down again today, as the credit crunch and recession fears have created fear among oil investors that oil demand is going to erode over the months to come.
Prices were off sharply again today, and in afternoon trading oil was down another $3.17 a barrel to $56.16, off 5.3% on the day, as the U.S. government lowered its forecast for oil next year to $63.50, down from its previous estimate of $112 that it maintained back in October.
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.
OPEC has repeated what it has said before, but with a little twist. It will not raise supply before its September meeting. That means that relief from $130 plus crude prices may not be coming.
But, the small addition to the group's comments is that "OPEC has no plans to meet to discuss oil's surge to a fresh record, and would need to see a real supply threat to gather before the next scheduled meeting," according to Reuters.
While it is not entirely clear what that means, it probably includes disruptions of oil production in areas that have little political stability, especially Nigeria and Venezuela.
In general, OPEC says that speculation and a weak dollar are driving oil up. That is a convenient excuse for a cartel that is making hundreds of billions of dollars while gasoline prices move toward $5.
Douglas A. McIntyre is an editor at 247wallst.com.
The bulls have definitely had plenty of reason to continue to push prices higher this week. Concerns over supplies and the weak U.S. dollar continue to lead headlines, adding a boost to the current record high prices. Unfortunately for consumers at the gasoline pumps, higher oil will probably continue to prop up gasoline prices.
In an already uncertain market, any sort of rumors over supplies will always lead to higher prices, and that is definitely playing a part in the current market. Fresh concerns are flowing out of Iraq after Kurdish rebels threatened to start running suicide operations against American interests in the country. Iran is (as always) in the minds of traders as the country continues to defy the United Nations over its nuclear program.
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.
Earlier today oil prices had traded higher, as traders were betting that this past weekend's wintry weather would put a crimp in heating oil supplies. Since then, though, oil prices since turned to the downside, dipping under the psychological $90 barrier.
The main reason why oil prices have been falling today? You guessed it ... concerns over the health of the overall economy. Today's concerns are a runoff of last Friday's CPI report, which showed that inflation during the month of November was the highest that the economy had seen in the past two years. This sent the market tumbling to close out last week, and the bears have only continued to push down the market again today.
There has been a growing fear over the past year that the U.S. economy was moving full steam ahead towards a recession. The one thing that has provided some hope was the anticipation that the Federal Reserve would be willing to continue to slash interest rates in order to fuel economic activity and fight off any looming recession.
Despite wide speculation over the past couple of weeks that OPEC would lift its production quotas today, the oil cartel has announced that it decided to leave things as they are for now.
The main reason why the thirteen nation oil cartel probably decided to leave production unchanged is the fact that oil had dropped almost 10% in past week-and-a-half. Ironically, one of the main reasons for the recent drop was the anticipation that OPEC would be lifting its production quotas.
The group is next scheduled to gather on February 1 of next year to take another look at the current market environment and discuss possible changes at that time.
Crude prices have moved higher on today's news, with oil trading up $1.23 to $89.55 and earlier in the session broke through the $90 mark to hit a high on the day of $90.39.
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.
Hugo Chávez, the head of Venezuela, is hardly the most stable leader of a large nation. He may rank with Kim Jong il of North Korea in a race for odd-ball national presidents.
The mental state of the chief of a South American country may not seem terribly important until, that is, he threatens to cut off the supply of oil to the U.S. According to The Wall Street Journal (subscription required), "in a fiery speech before tens of thousands, President Hugo Chávez alleged the U.S. was planning to sabotage a vote Sunday on proposed constitutional changes and threatened to cut off oil shipments if Washington did so."
The odds that the CIA or some other organization is actually trying to mess with the elections in Venezuela are fairly small. But, given the history of the American intelligence community, they cannot be ruled out altogether.
Humor aside, if Mr. Chávez does make good on his threat, even if only because he is mad, the effect could be much greater than the explosion last week on one of the oil pipelines between Canada and the U.S. Hugo can take the price of a barrel of crude up to $100 all by himself.
As December rolls in, oil watchers will be turning their attention south. Oil's assault on $100 was turned back last week, but that was not the end of it.
Douglas A. McIntyre is an editor at 247wallst.com.
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.
Earlier this week, it looked as though oil was going to be making its final charge to break through $100 a barrel, but now the mood has changed as concerns are mounting over the effect an economic slowdown could have on oil demand. Since the middle of this year we have been hearing whispers from Wall Street that a possible recession is on the way, and this chatter has seemed to really pick up over the past week.
Just today we got even more worrisome news when the current consumer confidence figures showed a drop down to 87.3, which is the lowest level we have seen confidence since back in October 2005. There has also been a rise in people thinking that the economy is in trouble to 19.1%, up from 16.6%.
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.
Oil prices have retreated a bit today as last week's concerns over a tropical storm in the Gulf of Mexico turned out to be unwarranted. Now that the latest supply disruption scare has passed, most analysts are expecting to see prices continue to fall after oil's strong gains earlier this month.
I would caution against assuming too quickly that prices are going to head too much further south. There are still several factors that could easily keep prices at least where they are now, if not higher. The main issue this time of year is always going to be possible hurricane disruptions.
While this past weekend's scare fizzled out before causing any damage, the next possible major storm could form at any time, which would resonate panic in the markets and edge prices higher.
ExxonMobil (NYSE: XOM) implied volatility near average as oil trades above $82.
XOM closed at $91.76. Crude oil futures were up 0.79% to $82.15 according to Bloomberg. XOM overall option implied volatility of 26 is near its 26-week average of 24 according to Track Data, suggesting non-directional price fluctuations.
Chevron (NYSE: CVX) implied volatility near average as oil trades above $82.
CVX is an integrated energy company with a market cap of $198 billion and quarterly June 2007 revenue of $56 billion. CVX closed at $93.34. Crude oil futures are up 0.79% to $82.15 according to Bloomberg. CVX overall option implied volatility of 25 is near its 26-week average according to Track Data, suggesting non-directional risks.
Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.
In a new report today, the International Energy Agency warned that an insufficient amount of investment into oil supply is going to result in a serious supply shortage that could make the recent record high oil prices look weak in comparison.
Oil is starting the week off trading a little lower today, but 
Oil 
Oil surged above $98 per barrel Wednesday on expectations that U.S. oil stockpiles declined for a seventh consecutive week, 
Earlier today oil prices had traded higher, as traders were betting that this past weekend's wintry weather would put a crimp in heating oil supplies. Since then, though, oil prices since turned to the downside, dipping 
Despite wide speculation over the past couple of weeks that OPEC would lift its production quotas today, the oil cartel has announced that it decided to 
Oil prices have retreated a bit today as last week's 
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