Will Global Oil Demand Contract in 2009?

A number of energy analysts are asserting that global oil demand for 2009 will contract for the first time in 26 years.

If this were to happen, it would pretty much depend upon the depth the economic crisis goes and reaches.

The major emerging market economies (BRIC) are expected to decline in growth from between 2 percent to 3.5 percent, but will still remain in the positive, if projections are accurate.

More significant as far as oil contraction goes, is whether demand in the U.S. can fall to the point where it becomes a factor. with oil and gas prices falling so much in the recent months, it's difficult to see this continuing to the point of it going into negative territory.

Still, it's unknown at this time how deep the economic crisis will go, and there is definitely the possibility oil demand could contract with BRIC slowing down.

It remains to be seen if the increase in domestic gasoline demand in the U.S. last week is an anamoly, or if it's the beginning of increased use.

Crude Oil Prices Continue to Fall off the Cliff: Now at 15-Month Low

In intraday trading crude oil fell of the cliff again, plunging by over $4 a barrel - a 15-month low. The continued fall in oil prices is completely tied to consumer demand, which has dropped as people cut back on spending on anything but essentials.

December delivery for crude oil dropped by $4.25 to $67.93 a barrel shortly after 11:00 a.m. EST today on the NYMEX. Oil futures hit a low of $67.50, the worst showing since June 27, 2007.

On London's ICE Futures Europe exchange, Brent crude has dropped by $3.40 for the December settlement, a 4.9 percent fall. It now stands at $66.32 a barrel. That's the lowest price since May 10, 2007.

For the week ending October 17, fuel demand in the U.S. averaged 18.7 million barrels a day, according to the report of the Energy Department released today. That's down 8.5 percent from the same period last year.

Average use of gasoline has also fallen, now averaging 8.8 million barrels a day for the last four weeks, down from last year by 4.3 percent.

With distillate fuel (heating oil, diesel) use also dropping significantly, we can see demand for oil will continue to fall for some time.

Even though the unprecedented special meeting by OPEC next month is expected to result in the cutback of 1 million barrels a day in production, that will do nothing to change the demand factor until the global economy recovers. That isn't going to happen any time soon.

Part of the result of all this will be less travel, which will affect not only oil companies, but airlines and shipping companies as well.

Oil inventories also continue to rise, as there was an increase of 3.18 millon barrels to 311.4 million barrels, the fourth time in a row.

U.S. Crude Oil Inventories Increase While Demand Slackens

Crude oil and gasoline inventories increased last week in the U.S., as crude supplies grew by 8.1 million barrels to 302.6 million, according to the Energy Information Administration.

As expected, the lowering demand because of economic fears, along with the growing inventory has put downward pressure on prices as oil dropped below $87 a barrel early in the day for November delivery. Gasoline futures also fell by over 10 cents to their lowest levels in a year.

Most analysts were surprised by the amount the oil inventory rose, as they had looked for a 6 percent gain, while the real gain was 8.6 percent, now bringing inventories up to 80.9 percent of capacity as of last week.

Gasoline supplies increased 7.2 million barrels to end the week at 186.8 million. Some analysts were especially surprised here, as they were looking more for an increase of around 1.1 million barrels.

Oil Prices Swinging Back and Forth On Gasoline Stockpiles and Crude Oil Supply

A government report showing gasoline stockpiles are lower than last weeks' forecast, along with a surprise that the crude oil supply grew more than expected, has oil prices swinging back and forth today after the release of the report.

In early trading, September delivery of light, sweet crude gained 51 cents, to reach $119.68 a barrel on the Nymex. After the report prices have been going up and down.

According to the Energy Information Administration, stockpiles of gasoline dropped by 4.4 million barrels last week. That's much more than the 1.4 million decline analysts were looking for.

Crude supplies also surprised analysts in the positive, as they grew to 1.7 million barrels, in contrast to the 1.2 million barrel drop analysts thought would be coming.

Oil Closing in on $120, Gas Prices Over $3.50

The price of gas across America has now reached over $3.51 a gallon, as prices for oil continue to break records almost daily. Diesel also broke new records, as it surged to $4.204 a gallon overnight. This was according to a survey by the Oil Price Information Service and the AAA.

Foreign supply constraints continue to be a factor in oil prices in the U.S., as the problems in Nigeria continue, and Mexico is producing less oil than usual, dropping be 7.8 percent in the first quarter, producing about 2.91 million barrels a day.

Crude for delivery in the U.S. increased by 23 cents on Wednesday to finish at $118.30 a barrel.

London Brent crude increased by 51 cents to settle at $116.46 a barrel; down from the record of $116.75 set on Tuesday.

Gasoline futures hit another record high today after the reports last week of U.S.inventories dropping by 3.2 million barrels.

Oil Futures Break another Record: Close over $110 a Barrel

Crude oil futures broke another record today, as they surged to a new intraday high of $112.21, and broke another record when it closed at $110.87 a barrel.

While the increase was connected to news from the Energy Information Administration that oil inventories in the U.S. had fallen by 3.2 million barrels last week, speculators continue to play a big role in the price of oil futures. According to the Energy Information Administration, gasoline inventory also slid, falling by 3.4 million barrels last week.

"Fundamentally, there's no reason we should be at these levels. Speculation has definitely taken over this market," GRZ Energy trader Anthony Grisanti told FOX Business this morning. "I think $120 is right around the corner. There is nothing that can turn this market around at this point."

Oil inventory in the U.S. stands at 316 million barrels as of April 4.

Crude Oil Up over $2 a Barrel in New York

Prices for crude oil increased by $2.86 to close at $109.09 a barrel on the NYMEX. That's the highest closing price since March 18.

May delivery for gasoline closely mirrored the crude oil price rise, rising by 2.68 cents a gallon, to close at $2.7835 in New York. The national average is now at an all-time high according to AAA, where they reported on their Web site that it now stands at $3.339 a gallon.

Futures for RBOB also broke an intraday record, as it went up to $2.7978. RBOB is the gasoline used to mix with ethanol.

The two major factors in the increase in prices were investors moving to commodities again, and the ongoing concerns about fuel inventory declines. It was estimated in a Bloomberg News survey that gasoline supplies dropped by 2.5 million barrels last week.

"We're seeing the funds jump in and buy commodities," said Phil Flynn, a senior trader at Alaron Trading Corp. in Chicago. "Commodities had by far the best returns during the last quarter. It would be risky to bet that either the stock market or dollar has hit a bottom yet."

Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts said, "There's little that's rational with the gains in the commodity markets now. I don't think we'll see oil prices fall until the economic slowdown is much more severe or inventories just become too high."

Commodity investment

In the first quarter alone, commodity investment has exploded to $400 billion, an increase of over 20 percent. Some think it'll pullback some, which could provide more investing opportunities.

Oil and Gas Prices Rise on Gas Inventory Drop

Crude oil surged by over $3 a barrel as reports from the U.S. Energy Department showed that the gas inventory fell for the third week.

Gasoline Inventory

Gasoline inventory fell to 224.7 million barrels, a 4.53 million barrel drop last week. That's the largest decrease in the gasoline supply since August.

"The robust supply cushion for gasoline appears to be vanishing before our eyes," said John Kilduff, vice president of risk management at MF Global Ltd. in New York.

May delivery for gasoline rose to $2.7745 a gallon, a 13.53 cent increase. Futures reached as high as $2.7836 a gallon for RBOB, the gasoline mixed with ethanol. That's a intraday record. RBOB started trading in October 2005.

"The gasoline drop was a real eye-opener," said Rick Mueller, director of oil practice at Energy Security Analysis Inc. "Supplies are falling when we aren't even close to the driving season. We should be building stocks ahead of the driving season, not seeing them drop."

Refineries

The report revealed that refineries were running at less capacity than the same week last year, as they operated at 82.2 percent, in contrast to 87 percent during the same period last year.

Inventory for crude oil increased by 7.32 million barrels, to end at 319.2 million barrels last week. Crude supplies increased by 1.8 million percent of the five-year average said the Energy Department.

"It's hard to argue that there is any problem with crude oil supplies," Mueller said. "At least in the U.S., refiners have plenty of crude oil on hand."

Crude oil futures for May delivery increased to $104.78 a barrel, a $3.80 rise.

Brent Crude

For Brent crude, May delivery increased to $103.75 a barrel on London's ICE Futures Europe exchange, a $3.58 percent rise.