About Oil Prices

Daniel Jones asked:


The continued weakness in the Oil markets is playing havoc across the commodity exporting nations. Russia’s recent emergency measures have confirmed the problems.

With memories of Russia’s effective wiping out of state debt back in 1998 very much to the fore, the chances of anyone coming to their aid is slim. The same can be said for Venezuela, Argentina, Iran etc.

Crude Oil is now pushing to a two year low and, if anything, the outlook looks ever more painful.

Not only this but Airlines and others who hedged their fuel costs earlier this year at $100, $120 per barrel or even higher will now be asked for cash margin on these forward purchased contracts. In the current poor economic situation who would lend to an airline to make a margin call? This could lead to enforced liquidation, if indeed this has not already happened to some. That may well drive the markets much lower. This is not a prospect that leads to a happy prognosis on individual state security.

BA has managed to confound analysts by reporting much higher Turnover than expected but in the same breathe reported a loss of £49m. A £65m profit was expected. Obviously the higher fuel costs were not being offset by the BA surcharges. With Crude Oil now down at around $50 (I would recommend a bit of hedging at these levels) the cut in costs is running against the fall in current passenger numbers. Octobers passenger numbers were down 4.4% on last year. Not exactly surprising. Nevertheless the reported loss can truly be said to be a sign of the past rather than any indication at all of the future. BA is likely to be a last-man-standing airline so selling out at this stage would not appear to be on the cards.

Many complained that the high oil prices were due to speculators pushing the price up. I wonder if those same commentators will cheer the speculators who are supposedly spread betting on crude oil to fall in price.

FinancialSpreads.com and paddypowertrader have both reported a surge in clients selling oil. The latter has confirmed a 25% increase in the number of accounts shorting crude (betting on oil to go down).

Crude prices have slumped more than 60% in value since hitting record highs of $147 per barrel in July 2008. They are now at their lowest levels since January 2007.

So whilst Russia et al may be experiencing problems, individual investors seem to be on the side of the consumer and driving down the price of oil.

So far OPEC has failed to control the market and the speculators have been winning.

If Russia continues to experience financial difficulties they may have little choice but to continue producing at the same rates and OPEC will have more problems controlling the price.

Is it time to join the speculators or just enjoy cheaper petrol?

NB. Financial spread betting carries a high level of risk and may not be suitable for all classes of investor. Only trade with money that you can afford to lose. Make sure you fully understand the risks involved. If necessary, seek independent financial advice.



James

dylan asked:


As the United States considers attacking Iraq, pushing the oil prices higher, China has again focused on the stabilization of its oil supply. Its plans to prevent disruptions to its oil reserve, according to a recent report by China Daily. Analysts said China pulled out to encourage the Russian Government - which does not want to see foreigners take over the firm - to push through a 2,200 kilometer Russia-China oil pipeline. The oil link could allow China to tap into its neighbor’s rich oil reserves to make sure the China’s oil reserve.

In recent years, China has experienced an increasingly volatile situation in terms of oil reserve, as demand continuously outpaces domestic output. According to Han, China’s annual domestic consumption will hit 300 million tons by 2010, while the IEA expects it to reach 523 million tons. By then, Han said, the net imports will reach 150 million tons. In other words, half of China’s oil reserve will be imported.To help secure its oil reserve, the government is scrutinizing its plans for strategic oil reserves, and “strives to implement them soon,” Han said. Some officials have also been calling for a special committee to direct the programme. Still, several uncertainties may slow down implementation of the plan, insiders have said. High prices, however, will not curb China’s appetite for overseas oil reserves, since the country has been a net importer since 1993, especially the oil reserve.

The government has listed Central Asia and Russia, the Middle East and North Africa, and South America as “three strategic regions” for domestic companies to access. Zhu Xingshan, an oil analyst with the Energy Research Institute of the SDPC, said Central Asian countries and Russia are first priorities for the expansion plan. “These countries see the oil industry as vital for the revival of their economies, but they need foreign companies to help tap their rich oil reserves, or the domestic oil reserve won’t be satisfied.” said Zhu.

“China has been developing friendly relations with these countries, not only to regulate the oil reserve but to help Chinese companies compete favorably with Western companies,” Zhu said. “In the long run, the Middle East region is still our most important import source. But we need to diversify,” Zhu added.

“Overseas operations make up 60-70 per cent of the total business of a global giant like ExxonMobil,” said Ma Fucai in a recent news briefing. “Over the long-term, we are working towards that goal.” It is aslo hoped that bilateral oil reserve will be met.In this issue of the construction oil reserve Han said China should also actively take part in energy co-operation in the region, especially with neighboring countries like Japan and South Korea which are big oil consumers. Officials said the government is developing financial and taxation policies, including a State special fund, to encourage the companies’ overseas exploration. With the various help, it is hoped that the oil reserves will be harmonized.



Donald

104inc.com asked:


The beauty of the market, whether it’s commodities, mutual funds, or just plain ‘ol stocks, is that they never fail to surprise me.  Only a month ago, I wrote an article about oil and why (based on analyst’s opinions) the price has increased so much, going up to $147 per barrel back in July.  Well, just four short weeks later, oil has come down to under $108 per barrel.  How in the world does oil spike up so quickly?  More importantly, how does it plummet so drastically?  Oil prices have decreased over 25% in the last four weeks, which makes me laugh when I think about all of those big shots from Goldman Sachs and such who predicted that oil will hit $200 by the end of summer. 

Of course, there are a number of reasons (based on analyst’s opinions) as to why the price of oil has decreased so much.  The economy of “powerful” countries, such as China, is weak and in jeopardy of a recession.  Demand for products has decreased due to these countries having weak economies.  Furthermore, specifically with China, the currency there has increased in value, which obviously makes exports less desirable, hence, causing a decrease in the output of goods.  Yet, the average person would conclude that if a county’s currency appreciates in value, why would it be having economical problems?  For that, stay tuned for another article…we’re talking about oil here. 

The demand for gasoline is weak, which makes oil less appealing to investors.  This further drives prices down, considering consumers of gasoline are finding other means of transportation, a phenomenon that is not all that phenomenal.  It was only a matter of time for people to start getting sick of paying over $4.50 at the pump for a gallon of gas.  Another reason why the price of oil has decreased is because of a stronger dollar in the last few weeks.  Our currency is on the rise (yippie!), and this is causing investors to pull out of commodities (such as oil).  Investors usually purchase commodities in order to hedge against inflation, and if the dollar is increasing in value, well, there isn’t as much hedging necessary.

There are many other factors involved, including hurricane Gustav not having the impact investors had anticipated for it to have.  Also, refineries are starting to slowly come back online after being shut down for various reasons.  So then, is it safe to say that the oil bubble has finally burst?  Or is it just leaking for now but getting ready to grow larger again?  Some analysts believe that prices can spike again due to unforeseen geopolitical events (could they be any more vague?) or OPEC deciding to cut back production (basically them saying,” We need to drive demand up, so we should decrease supply and drive prices up because this year I want to make $2 Billion instead of only $1 Billion”). 

Whatever the reason is for oil prices decreasing, I really don’t care.  As long as gas prices are decreasing, which they have gone down in the past month from a national average of $4.11 to $3.67 according to AAA, and then I’m a happy camper.  Might I add that just because prices have gone down about $0.45 doesn’t mean I’m satisfied?  It wasn’t too long ago that I could fill up the gas tank of a gas guzzling Camaro for no more than $35.00.  I’d like to see those times again, very soon, so I can drive more like Jeff Gordon rather than Ms. Daisy.





Judith

Brian C asked:


I’ve been following the rise in oil prices a lot lately (as i’m sure many have) and I wanted to know if they was a way to know how much gas prices were expected to rise for every dollar oil prices rise. Is there a formula or a way to estimate

Claudia

Dylan Sun asked:


Oil prices rose to a new record settlement price Tuesday as traders turned their attention to a government inventory report expected to show tight supplies and shrugged off OPEC’s decision to boost output.

Even factoring in OPEC’s decision to increase oil production by 500,000barrels per day starting Nov. 1, “supplies are tight,” said Addison Armstrong, an analyst at TFS Energy Futures LLC. And according to analyst predictions, they’re going to get even tighter. Analysts surveyed by Dow Jones Newswires, on average, expect Wednesday’s report from the Energy Department’s Energy Information Administration will say that crude oil inventories fell by 2.7 million barrels in the week ended Sept. 7.

Investors had already priced in OPEC’s increase, and many were looking for a larger production boost, analysts said. Light, sweet crude oil for October delivery rose 74 cents to settle at $78.23 a barrel on the New York Mercantile Exchange after alternating frequently between gains and losses. The settlement price bested the previous record, set July 31, by 2 cents. Oil’s rise pulled October gasoline 0.25 cent higher to settle at $1.9811 a gallon after the contract spent much of the day in negative territory. In other Nymex trading, heating oil futures rose 1.11 cents to settle at $2.1827 a gallon, and October natural gas added 4.3 cents to settle at $5.934 per 1,000 cubic feet.

In London, October Brent crude oil rose 90 cents to settle at $76.38 a barrel on the ICE Futures exchange. OPEC, which produces about 40 percent of the world’s oil, had long been expected to hold production levels steady at the meeting. But rumors started circulating on Monday that Saudi Arabia was campaigning to boost production. Many analysts think the Saudis are worried high oil prices will crimp demand for crude oil, which could hurt OPEC nations in the long run.

However, some analysts interpreted the fact that Tuesday’s meeting lasted longer than expected as a sign the Saudis had a hard time persuading other OPEC nations to boost production. Tim Evans, an analyst at Citigroup Inc., thinks some OPEC members are worried demand for oil will slow in the fourth quarter, which combined with more supplies could mean sharply lower prices. Many OPEC countries already produce more oil than their quotas. But Omar Farouk Ibrahim, spokesman for the Organization of Petroleum Exporting Countries, said the announced increase would be based on the group’s current production, not quotas ?a

Meaning the 12-nation cartel will be adding actual oil to the market. That translates into a quota increase of nearly 1.4 million barrels per day, Evans said. “This is a big number,” Evans said, adding that it would take futures traders a while to digest its significance. “This is not something that the market’s going to adjust to in a few minutes.” At the pump, meanwhile, gas prices slid 0.5 cent overnight to a national average of $2.814 a gallon, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, peaked at $3.227 in late May.

Source: News.tootoo.com (http://news.tootoo.com/)



Brenda

John Bogdanski asked:


Understanding factors that drive the volatility in residential heating oil prices.

Fluctuations: Variations that occur in the price of petroleum distillate products due to incremental, somewhat predictable, changes in the supply and demand of such products.



Dale

Dylan Sun asked:


Oil prices rose to a new record settlement price Tuesday as traders turned their attention to a government inventory report expected to show tight supplies and shrugged off OPEC’s decision to boost output.

Even factoring in OPEC’s decision to increase oil production by 500,000barrels per day starting Nov. 1, “supplies are tight,” said Addison Armstrong, an analyst at TFS Energy Futures LLC. And according to analyst predictions, they’re going to get even tighter. Analysts surveyed by Dow Jones Newswires, on average, expect Wednesday’s report from the Energy Department’s Energy Information Administration will say that crude oil inventories fell by 2.7 million barrels in the week ended Sept. 7.

Investors had already priced in OPEC’s increase, and many were looking for a larger production boost, analysts said. Light, sweet crude oil for October delivery rose 74 cents to settle at $78.23 a barrel on the New York Mercantile Exchange after alternating frequently between gains and losses. The settlement price bested the previous record, set July 31, by 2 cents. Oil’s rise pulled October gasoline 0.25 cent higher to settle at $1.9811 a gallon after the contract spent much of the day in negative territory. In other Nymex trading, heating oil futures rose 1.11 cents to settle at $2.1827 a gallon, and October natural gas added 4.3 cents to settle at $5.934 per 1,000 cubic feet.

In London, October Brent crude oil rose 90 cents to settle at $76.38 a barrel on the ICE Futures exchange. OPEC, which produces about 40 percent of the world’s oil, had long been expected to hold production levels steady at the meeting. But rumors started circulating on Monday that Saudi Arabia was campaigning to boost production. Many analysts think the Saudis are worried high oil prices will crimp demand for crude oil, which could hurt OPEC nations in the long run.

However, some analysts interpreted the fact that Tuesday’s meeting lasted longer than expected as a sign the Saudis had a hard time persuading other OPEC nations to boost production. Tim Evans, an analyst at Citigroup Inc., thinks some OPEC members are worried demand for oil will slow in the fourth quarter, which combined with more supplies could mean sharply lower prices. Many OPEC countries already produce more oil than their quotas. But Omar Farouk Ibrahim, spokesman for the Organization of Petroleum Exporting Countries, said the announced increase would be based on the group’s current production, not quotas ?a

Meaning the 12-nation cartel will be adding actual oil to the market. That translates into a quota increase of nearly 1.4 million barrels per day, Evans said. “This is a big number,” Evans said, adding that it would take futures traders a while to digest its significance. “This is not something that the market’s going to adjust to in a few minutes.” At the pump, meanwhile, gas prices slid 0.5 cent overnight to a national average of $2.814 a gallon, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, peaked at $3.227 in late May.



Karen

pawn_takes_king asked:


I have seen this several times already in media reports. They claim that limited refining capacity is partially to blame for increased (crude) oil prices. I can understand that refining capacity would affect prices at the pump, but how is it that it affects world crude oil prices? It would seem that limited refining capacity that would cause limited supplies at the gas pump which would result in less crude oil being used, thus causing higher crude oil supplies. If other countries do not have as limited a refining capacity, wouldn’t it make sense that they would have lower prices at their pumps (all else being equal)?
pjallittle, if I understand you correctly, you are saying that the US market is so large, that when the refining capacity goes down, OPEC and other producers react by limiting supply. Even if producers could instantly change their production, this would result in the price of crude remaining the roughly the same. However, instead it used as reason for higher crude oil prices. In other words, if what you are saying is true, the opposite would also apply. So, if refining capacity magically increases in the US, the price of crude oil falls even if demand for crude oil increases? This also does not make sense to me.

Brenda

Andrea W asked:


What are the oil prices and the affect on the economy?

Jeanette

Muna wa Wanjiru asked:


The oil that we use originally comes from crude oil. This crude oil is the pure form of oil. For this reason the crude oil future can be somewhat difficult to predict.

There are many companies who will seek to buy the crude oil that is drilled. For these companies the crude oil future is one which is very important to gauge. Without having a proper analysis of the numerous industries who use this fuel source the oil importing companies will not have any idea about the amount of crude oil they should consider importing.

The crude oil future will need to be given much thought as the production count is measured in the amount of oil barrels which are filled. These oil barrels are the measurement amount for knowing the way that the oil should be distributed. With this knowledge the many governments can negotiate the price to pay for their share of the crude oil.

This however does not guarantee the crude oil future as with so many oil spills on land and the oceans there are some countries which are considering other ways of finding the crude oil they require. There is also the other problem of various countries needing the byproducts of the crude oil rather than the crude oil itself. This situation makes the crude oil future very hard to predict.

On the one hand the crude oil is not needed as other fuel sources are found and used. Yet as these new fuel sources are the byproducts of crude oil itself, there is a confusion to be found. It is this uncertain atmosphere which hinders the ability of knowing what the crude oil future is like.

To help the customers out perhaps the governments should find a way of locating and refining the oil at the same processing plant. This step would lower the costs the companies and governments need to pay. This is yet another solution to the crude oil future uncertainty.

Crude oil in all of its many forms whether it is refined or not is a commodity which is sorely needed. You can use the price range as a way of seeing the crude oil future. When the oil prices are high it means there is a demand for crude oil and the low prices mean a drop on the crude oil demand.



Leroy