http://www.nytimes.com/2008/09/16/business...s/16oil.html?hp

September 16, 2008
Crude Oil Declines, Trading Below $100
By JAD MOUAWAD

After more than six months in triple-digit territory, oil prices dropped sharply on Monday, falling under the symbolic $100-a-barrel threshold as financial woes raised concerns about slowing oil demand.

Oil futures in New York fell as much as $4.91, to $96.27, their lowest level since February.

Monday’s decline came after a powerful hurricane wreaked havoc in the Gulf of Mexico, disrupting domestic oil production and shutting refineries across the Texan coast. While oil companies are still assessing the damage, preliminary reports suggested that it was less severe than first feared.

The fact that prices fell despite disruptions caused by Hurricane Ike to offshore production, import terminals, and coastal refineries, reflects the deep shift in the market’s sentiment in recent weeks. Oil prices peaked at $145.29 a barrel in July but have since been falling as oil consumption has slowed.

Earlier this year, some analysts had predicted that oil prices could rise as high as $200 a barrel by the end of the year. On Saturday, the chief executive of Eni, Italy’s top oil company, predicted that prices might rapidly drop as low as $70 a barrel.

The financial crisis finally took the wind out of the great oil rally. Monday’s drop comes after a tumultuous weekend in New York where two of Wall Street’s most prestigious firms came to an end, with Lehman Brothers filing for bankruptcy and Merrill Lynch agreeing to sell itself.

Analysts said the market had become convinced that Wall Street’s meltdown could spread to other parts of the world, and that Asian economic growth would suffer, slowing down global oil demand.

“Investors seem convinced that global growth is done, and that will take the commodity cycle with it,” said Jan Stuart, an energy economist at UBS in New York. “People seem to think this is the end of the five year oil bubble. Anything relating to energy is a sell at that point.”

This is really quite remarkable.

Any opinions?

http://www.nytimes.com/2008/09/16/business...ml?ref=business

September 16, 2008
Crude Oil Continues Decline
By JAD MOUAWAD

Crude oil prices continued their retreat on Tuesday, falling $4.32 to $91.39 a barrel in early trading. That drop follows a decline of $5.47 a barrel to $95.71 on Monday, closing under the symbolic $100-a-barrel threshold.

Uncharacteristically, oil and gasoline prices moved in opposite directions on Monday, with gasoline up 16 cents a gallon nationwide in recent days because of refinery disruptions caused by Hurricane Ike.

Ike wreaked havoc along the Texas coast over the weekend. While it apparently caused only moderate damage to oil platforms in the Gulf of Mexico and to refineries along the coast, those refineries had to shut down ahead of the storm, and many have yet to restart because of power failures.

That oil prices are falling despite the hurricane reflects a deep shift in the market’s sentiment in recent weeks. Oil prices peaked at $145.29 a barrel in July but have since been falling as oil consumption has slowed markedly in Western countries. Some analysts expect oil prices to continue the slide in coming weeks, given the crisis on Wall Street and the darkening economic outlook.

“Wall Street now has everybody worried about the global economy,” said Adam E. Sieminski, chief energy economist at Deutsche Bank.

Early this year, some analysts predicted that surging demand and the limited growth in new supplies would push oil prices to $200 a barrel by the end of the year. Many are now scaling back their forecasts. Paolo Scaroni, the chief executive of Eni, Italy’s largest oil company, predicted on Saturday that the slowdown may push prices to $70 a barrel, a level that could bring average gasoline prices below $3.50 a gallon nationwide.

In a sign that the lower oil prices will eventually reach consumers, contracts for future delivery of gasoline dipped sharply in New York trading.

But the storm-related disruption in the gasoline market could continue for several weeks, analysts said. Gas at the pump rose to a nationwide average of $3.84 a gallon on Monday compared with $3.68 last week, according to AAA, the automobile group.

President Bush said Monday that the storm had created “an upward pressure on prices.” In some parts of the country, shortages pushed gas above $5 a gallon.

“There’s going to be a pinch,” the president said after a briefing on hurricane recovery efforts. “I wish it wasn’t the case, but it is.”

Ike, which came ashore near Galveston on Saturday, forced the closing of 14 refineries in Texas and Louisiana, or about 20 percent of the nation’s refining capacity. Along with another hurricane two weeks earlier, it shut down all oil and gas production in the Gulf of Mexico, or about a quarter of the nation’s domestic production.

Exxon Mobil said that its refinery in Beaumont, Tex., the nation’s third-largest, was the most seriously hit when a storm surge flooded it. At the nation’s largest refinery in Baytown, Exxon said power had been restored and the refinery sustained only limited damage.

The Louisiana Offshore Oil Port, the nation’s largest import terminal in the gulf, resumed offloading tankers on Monday, and both the Colonial and Plantation pipelines, two major product pipelines going from the Gulf Coast to the East Coast, were operating at reduced flow rates, according to the Energy Department.

In contrast to the aftermath of hurricanes Katrina and Rita in 2005, which led to extended power cuts that delayed refining operations, oil companies and utilities seemed better prepared this time. But energy executives and analysts cautioned that it was too early to say how long it would take to restore operations.

“My guess is the market thinks the hurricane was not as damaging as it might have been,” said Roger B. Plank, executive vice president of the Apache Corporation, a large oil producer in the gulf. “But I think it’s premature to determine when production will be restored.”

Power failures from the earlier hurricane, Gustav, are still slowing pipeline deliveries from Louisiana. Apache crews were flying over some of its hundreds of gulf platforms, and Mr. Plank said it was “too early” to make a general assessment of damages.

The Energy Department said it would make oil from the nation’s petroleum reserves available to refiners to offset crude shortfalls. On Monday, Citgo Petroleum requested one million barrels of crude from the Strategic Petroleum Reserve. The Energy Department so far has approved loans for more than 900,000 barrels of oil this month.

Many analysts are unsure how low oil prices will fall. Last week, the OPEC cartel signaled that it was concerned about prices reaching $100 a barrel. But Saudi Arabia, the world’s biggest oil exporter, indicated it would keep pumping oil to get prices down to more manageable levels. “The Saudis have been clear,” Mr. Sieminski said. “They think the global economy has got issues, and they would like prices to be lower for a while.”

Oil demand remains the biggest wild card. Higher prices have caused consumers in developed countries, including the United States, to cut back on gasoline use. But in other parts of the world, particularly in developing economies in Asia and the Middle East, the demand remains strong.

“Clearly we’re in bearish territory, but not everything is bearish out there,” said Michael Wittner, the global head for oil research at Société Générale, in London. “The bullish long-term story, Asia-led demand growth meets maturing and more expensive supplies, is still there.”

Clifford Krauss contributed reporting.

http://www.belfasttelegraph.co.uk/business...l-13876381.html


Goldman Sachs: oil will super-spike to $200 per barrel

Wednesday, 7 May 2008

An oil price of $200 per barrel is a real possibility in the next two years, Goldman Sachs predicted yesterday as the commodity's price pushed further into record territory.

Three years after the investment bank invited ridicule by postulating a " super-spike" that would send oil over $100 a barrel for the first time, the Goldman Sachs analyst Arjun Murti warned that high prices would last even longer and go even higher than previously thought.

In London trading yesterday, Brent crude moved above $120 for the first time, while light sweet crude traded in New York set another intra-day record over $122, before settling at $121.84.

Mr Murti predicted that, although Western countries were beginning to discuss the need to reduce energy consumption, there was still no sign of the excess production capacity needed to cool the market. "The possibility of $150-$200 per barrel seems increasingly likely over the next six-24 months," Mr Murti told clients, "though predicting the ultimate peak in oil prices, as well as the remaining duration of the upcycle, remains a major uncertainty... a multi-year decline in global oil demand is needed in order to recreate a spare capacity cushion and bring about potentially lower energy commodity prices."

Goldman says that the factors leading the oil price higher remain firmly in place, particularly a lack of supply growth. Countries in the Opec producers' cartel are close to capacity, the growth in Russian production is slowing, and in Mexico it is falling. Meanwhile, demand from emerging markets continues to soar.

Mr Murti added: "We believe there is a fundamental misperception among many in the oil industry, Wall Street, the media, politicians and the general public that so-called 'speculators' are driving up the oil price to supposedly unjustified levels.

"Unfortunately, we do not think the energy crisis will be solved by finding and punishing the big, bad speculator.

"In fact, commodity investors are helping to solve the energy crisis by speeding up the process of incentivising higher capital spending on a wide range of energy projects, while at the same time encouraging lower levels of demand by energy users."

Search Query: Go

Establishing a trading range, economic slowdown reduces consumption, my guess current range is $90-105 with $120 during standard worry times. If it spends more than a couple days below $90 my guess will shift to $85-100.

Of course there are a lot of events that can pull it out of the range.

Most of the "experts" in oil think that supply & demand would have oil trading at about $60 a barrel. The excess over that, these folks say, is from the futures speculators. Remember, there is real oil that you use and paper oil that you trade. Sometimes it is is hard to tell which is which.

That would've been true 18-24 months ago, they aren't taking into account changes in exchange rates and the shift towards more expensive sources.

Actually, the dollar has gained significantly against the Euro and Pound in the last year or so. And, lest we forget, there are 250,000 pair of combat boots standing on the world's second largest and first cheapest supply of sweet crude.

125,000 of those boots belong to US Soldier.

125,000 belong to the private mercenary armies of Blackwater, and BigOil, who make 4 times as much money for easier work.