Brent Soars Above $110 as Libya Burns

Oil futures rallied above $110 a barrel on Wednesday, posting the biggest three-day percentage gain in a year, as the escalating violence in Libya could further reduce its production.

Between 300,000 and 400,000 barrels per day of Libyan output -- up to 25 percent -- has been shut down, according to Reuters calculations, marking the first cut in oil supplies related to the recent wave of anti-government unrest in North Africa and the Middle East.

After Libyan leader Muammar Gaddafi vowed in a defiant speech on Tuesday that he would not step down, promising severe punishment to his detractors, analysts fear that long-lasting supply disruptions or even permanent damage lies ahead for the OPEC member's oil industry.



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Goldman (NYSE:GS) Likes Gold on Low Interest Rates

Believing interest rates in the U.S. will remain low for some time, Goldman Sachs (NYSE:GS) sees gold continuing to rise in price for 2011, along with other commodities, including oil.

They recently stated the believe gold will continue to rise through 2012, probably peaking at somewhere around $1,750 an ounce. That's hard to believe in light of the Federal Reserve continuing to inflate the money supply and doing nothing to alleviate the recession and little or no job creation.

Goldman sees gold futures rising to $1,690 an ounce by the end of 2011.

Much is this assumes the American economy will recover, which is a huge leap of faith in light of what's happening around the world, which should take years to work its way out; including the sovereign debt crisis in Europe, which most of us will probably find out is much worse than being revealed.

As for oil futures, Goldman sees them rising to about $105 a barrel in 2011, with increasing demand during the year.

Goldman said, "Energy is historically the best performing sector when the ISM is above 50, which seems increasingly likely given strong October ISM and our US economists upgrade to their 2011 growth outlook."

Oil Futures Trading Plummets: BP (NYSE:BP)

After watching the oil futures trading market rise over the last few weeks, it has once again plummeted as BP (NYSE:BP) is still uncertain on their final bottom kill attempt. This once again leads to much uncertainty for oil futures.


Oil futures traded at their lowest in a month. The primary concern is that the recovery isn't durable enough to bring down the excessive fuel inventories in the U.S. Yesterday in New York, oil futures dropped 35 cents or 0.5 percent to $75.42, this is the lowest since August 16th.

Crude oil for September delivery declined 29 cents or 0.9 percent to $75.13 a barrel.


The crude oil stockpiles lost 818,000 barrels to 354.2 million barrels, according to the Energy Department. A Bloomsberg News Survey showed it was expected to lose almost 1 million barrels.


Hussein Allidina, head of commodities research at Morgan Stanley said, that the economic growth in China as well as other emerging markets will push crude up to over $100 a barrel by next year.

BP (NYSE:BP) Upgraded From Hold To Buy: Stock Prices Rise, Oil Futures

Analysts from the Royal Bank of Scottland upgraded BP (NYSE:BP) from hold to buy. They said the reasoning for this was that they've dismissed the negative rumors of what the probable cost of the massive Gulf oil leak could be. After a three day weekend, oil and gas stocks saw an incline seeing sector wide gains of 2.5 percent or higher.

BP lead percentage gainers by 6.5 percent to $31.25 a share. Halliburton was up 3.6 percent at $26.65. Before the bell, Nasdaq 100 index futures rose 26.59 or 1.5 percent to 1,747.75. Dow Jones industrial average futures went up 102 or 1.1 percent to 9,628. Standard & Poors 500 index futures rose 12.00 or 1.2 percent 1.026.30.

Early on, the New York Stock Exchange Arca Oil Index was up 2.5 percent to 901.11 points. Leading was the Spanish oil company Repsol up 4.2 percent to $21.05. The Philadelphia Oil Service Sector Index also saw an increase of 3 percent to 170.4 points.

While the NYSE Arcca Natural Gas Index was ahead 2.6 percent to 492.25 points and had all 15 of its components trading higher. In morning trading National Fuel Gas Co., EOG Resources, and Ultra Petroleum Corporation were the front runners at 3.5 percent or higher.

BP (NYSE:BP) Stock Price Reaches All Time Low

Due to concerns continuing to mount about BP's (NYSE:BP) future, there is added pressure on oil and gas stocks by the New York stock oil futures. These losses came after BP announced that it has to date spent $2.35 billion. This money has went to various things including the oil cleanup efforts, legal claims that have been paid, and grants to the states on the Gulf that have seen the biggest impact since the April 20th rig disaster.

The other thing that is causing renewed concern and placing pressure on BP stocks, is the pending development of a tropical storm. If this storm hits the Gulf of Mexico as predicted, it will cause possible large delays in the fuel containment efforts. Broker Nomura cut it projected BP price target from 593p to 465p.

Nomura said, "a heavy inversion of both credit yield and equity volatility suggests the market is concerned about a near term credit event around BP." BP stock fell to $26.96 a share losing another 6.1 percent. This beating their prior day low of $28.56, losing a total market value of almost 53 percent since April 20th.

"BP's market cap is eroding and its ability to finance itself in the capital market is impaired. It's anybodies guess what can happen but the fear of the market is that that liability could be so enormous that BP may have to seek bankruptcy protection," said Orr.

Stock Prices, Oil Futures: BP (NYSE:BP) and Anadarko (NYSE:APC)

BP (NYSE:BP) stock prices drop as many are wondering about oil futures, this drop is due to Anadarko Petroleum (NYSE:APC) making it clear that they are refusing to pay their share, being 25 percent of the oil cleanup costs. Typically in a situation like what has happened in the Gulf of Mexico, all companies involved that have a stake in the company are liable. By law, the only exception is if BP were to be found negligent. Then Anadarko may be released of any liability and would not have to pay anything.

BP shares were down 4.4 percent to $30.34. That's almost a 50 percent drop from where they closed on April 20th. While Anadarko's shares saw a jump in trading of 1.3 percent.

Monday morning BP stated that the oil spill response had reached 2 billion. They said they've paid out over 32,000 claims of the more than 65,000 claims they've received. In excess of $105 million. In a statement BP said, "it is too early to quantify other potential costs and liabilities associated with the incident."

Mike Tosaw, investment advisor representative of Know Your Options Incorporated stated,
"over the short term we're not touching it with a 10 foot poll," although he does expect it to make it over the long term. Tosaw continues, "I personally am not putting my money where my mouth is on that. There's just too much uncertainty with it."

Buying Oil Futures Biggest Oil Stock Drop In History Anadarko (NYSE:APC) BP (NYSE:BP) Transocean (NYSE:RIG) Halliburton (NYSE:HAL) Cameron (NYSE:CAM)

As well as BP, Anadarko, Transocean, and Halliburton all see significant drops at the close of the New York Stock Exchange at 4:00 pm. This was the foreseen outcome if BP failed on their "top kill" attempt. For Anadarko, this is their biggest loss on record.

Anadarko dropped 20 percent to $42.10, they own a 25 percent stake in the well. Transocean is the company responsible for leasing the drilling rig to BP which exploded on April 20th. They dropped to $50.04 which is a 12 percent loss.

Then there is Halliburton. They provided oilfield services on the well itself, dropped to $21.15 at a loss of 15 percent. Cameron plunged as well. They are responsible for the blowout preventer for Transocean's Deepwater Horizon Rig. Their are down to $31.89, losing 12 percent.

Finally, there's BP who had it's biggest decline since 1992. In one day BP lost 18 billion dollars of their market value, for a total market value loss of 68 billion dollars since April 20th.

Oil Futures Down on Inventory Increase

Oil inventories continue to grow in the United States, and oil futures are falling in response to the increased supply, dropping to $74.40 a barrel a plunge of 1.7 percent on the New York Mercantile Exchange for June. July declined to $78.99 a barrel as well.

The spread, as you can see, is wider than normal, and traders are dropping the June contract in favor of the July futures contract.

That comes from the possibility of having to find storage when the burgeoning oil supply has filled up much of the available space.

Oil levels are now 29 percent higher than last year at the same time, and is the highest since December 2009.

Crude Oil Futures Up

Crude Oil Futures

After a report from the U.S. Energy Information Administration that gasoline stocks had fallen last week by 2.9 million barrels, the price of crude oil shot up as high as $83.03 a barrel, its highest levels since early January.

The benchmark contract settled to $80.96 as the day went on, a decrease of 0.5 percent a barrel.

Other news affecting the price of oil was the announcement from OPEC that crude demand per day would rise by over 190,000 barrels a day over its previous estimate of 28.94 million barrels a day.

Crude Oil Futures

Oil | Forty Dollars the Low for oil?

Now that oil futures prices have traded above the $40 mark for a couple weeks, some are concluding that the bottom may have finally been reached for the black gold.
After hitting a four-year low of $32.40 a barrel on Dec. 19, oil has now rebounded more than 20%. While occasionally falling below $40 in intraday trading, it has closed above $40 everyday since Jan. 20. Similarly, national average gasoline prices have risen above $1.90 a gallon from below $1.70 a month ago.
"While crude-oil markets may remain vulnerable to further disappointments in [...] economic conditions, there is also the potential for a price base to be forming," wrote Brenda Sullivan, an analyst at Sucden Financial Research, in a note.
Ultimately, analysts say the future direction of oil prices will depend on the outcome of the struggle of two opposing forces.
On the one hand, the weakening global economy is expected to lead demand for oil to fall for a second year, marking the first two-straight-year decline in decades. On the other hand, the Organization of Petroleum Exporting Countries is expected to continue cutting production at a record pace to put a floor under prices.
High stakes
The stakes are high for investors who are bullish on oil, especially those who've poured record amounts into oil exchange-traded funds.
Data showed investment in oil ETFs, a convenient investment channel for retail investors, has reached record levels. The number of crude futures contracts held by the United States Oil Fund (USO) , the largest oil ETF, hit a record high near 80,000 recently. One contract represents 1,000 barrels of oil.
Last year, the commodity proved one of the best ways to earn a lot of money - and then, to lose it all. After hitting a record high of $147 a barrel in July, oil fell more than $100, or 70% by year-end. It closed 2008 down 54%, its biggest loss ever and more than the stock market's tumble.
Trading in the first months of this year also didn't bode well for oil bulls. Crude has lost 10% so far this year, compared with a 5% loss in the Reuters/Jefferies CRB commodities index, and a 4% gain in gold prices.
On Friday, oil fell 2% to near $40 a barrel on the New York Mercantile Exchange after the U.S. reported a 16-year high unemployment rate. See Futures Movers.
Some analysts predict oil prices could fall to as low as $25 in the second quarter. The inflation-adjusted record low for Nymex oil is at $18.90 a barrel, hit on April 1, 1986. In non-adjusted dollar terms, that low was $9.75, the only time in Nymex history that oil fell below $10.
OPEC cuts production
Investors aren't the only ones wanted oil prices to stabilize. The 12 OPEC member countries, whose revenues heavily depend on oil prices, have made record cuts in their production.
Some of the members of OPEC said they want to see oil prices rise to at least $60 a barrel.
At its December meeting, OPEC agreed to reduce production by a record amount of 2.2 million barrels a day, starting from Jan. 1, adding to previous cuts of 2 million barrels. Overall, the reduction is equal to about 5% of the world's oil demand, which should easily offset any drop in demand, analysts believe.
Most energy agencies, including the U.S. Energy Information Administration and the International Energy Agency, predict world oil demand will fall by 1% to 2% this year, following a similar decline in 2008.
Chakib Khelil, Algeria's energy minister, said Tuesday there was a 50% chance of another supply cut during OPEC's next meeting on March 15, according to media reports.
But OPEC members, who control more than one third of the world's oil production, have a sketchy record of implementing production cuts.
Oil could rise if OPEC cuts production, said Phil Flynn, vice president at Alaron Trading. "But the problem is the compliance."

OPEC in January met only two-thirds of its pledge to lower oil output, as several members continued to pump above target levels, a Reuters survey showed on Tuesday.
While Saudi Arabia and the United Arab Emirates lowered their production below or close to their targets, some other countries, such as Venezuela and Iran, have pumped more oil than their allowed quotas, the survey found.
Economic rebound?
Investors are also hoping demand will rebound once the economy is revived. With governments worldwide adopting stimulus packages, some economists believe the economy could bottom out in the second half of the year.
The Federal Reserve said late January the economy was in worse shape than it was in December, but a "gradual recovery [...] will begin later this year."
And in its January monthly report, the Energy Department's EIA said that after two years' decline, world oil consumption is expected to record a modest rebound in 2010,.
Such forecasts have already encouraged oil investors to build up their positions, even before prices start rising.
"We are in a world of increasing demand and decreasing supply for tangible things, especially energy," said Steven Podnos, a financial advisor at Wealth Care LLC. "Oil represents an attractive investment sector."
But for now, the oil market is still plagued by weak demand and lofty inventories. The EIA reported Wednesday that crude inventories in the U.S., the world's biggest oil consumer, rose for a sixth straight week to 346.1 million barrels, the highest level in 18 months.
Meanwhile, inventories at Cushing, Okla., the delivery point for Nymex crude futures, have reached a new record high of 34.3 million barrels.
Global demand is poised to post the largest contraction this year since 1982, analysts at Morgan Stanley said in a recent report.
"Supply constraints will remain a longer-term issue and will be intensified by the current bout of weaker prices," the Morgan Stanley analysts said. But "the magnitude of demand weakness will leave this constraint a non-issue in 2009."
They expect oil prices to average $35 barrels in 2009 and fall to a low of $25 in the second quarter.
The EIA, meanwhile, said in its January report, it expects oil prices to average $43 per barrel in 2009 and $55 in 2010.

While oil prices should rise this year, it'll be interesting to see if we've really hit an oil futures low, or it takes more time to work out depending on consumer demand connected to the economic crisis.

Arbitrage Opportunity as"Super Contango" Spurs Stockpiling of Oil

In what is called a "super contango," oil producers and refiners are storing up crude oil in record amounts in expectation that prices will surge in the summer months.

While a contango is the usual for oil markets, where up to a several-month gap between the current price of the delivery of oil is lower than that in the spring and summer. What insiders call a super contango, is when that spread of time lengthens beyond the norm, like it is at this time.

The spread in price is measured by the costs of oil storage versus tying up the money of investors.

February delivery of crude fell to $37.59 a barrel on the NYMEX, almost $15 less than the contract price for July. That's much farther out than usual, and so dubbed a super contango.

For the New York Mercantile Exchange, their delivery apex is in Cushing, Oklahoma, where inventory is up by over 40 percent for the month ending January 2. It's been 4 years since it held that much oil.

Overall, U.S. inventories for oil storage has increased 6.7 million barrels for the week ending January 2, ending at 325.4 million.

This contango period is expected to lengthen even more, and so Cushing could potentially fill to their capacity of 42.4 million barrels, although only about 80 percent of that capacity is operable storage space.

Some companies are leasing oil tankers at sea, as storage space is getting more difficult to find.

In an effort to cut costs, a number of American manufacturers started to cut spending on fuel in an move to manage the bottom line, which could also have a significant impact on storage.

What all this means as far as investors go, is it's a potentially lucrative arbitrage opportunity, as the decision to store oil at these prices for possible large profits in the future is the financial impetus behind all this.

What oil investors can do with this large of a spread, is buy up a January Oil contract and take physical delivery of the oil and store it, and then sell the higher-priced February contract at the same time.

With almost no risk involved, it's definitely something to look into quickly for just about guaranteed profits.

The ICE Futures exchange in London had Brent crude for February dropping by $1.51 to end the session at $42.91 a barrel.

On Wednesday, we'll get a better look at oil stockpiles from the weekly energy report.

Crude Oil Poised for First Annual Decline in Seven Years

With consumers tightening their wallets over economic concerns, crude oil will suffer its first annual decline in seven years, as supplies rise over decreasing demand.

On the New York Mercantile Exchange, prices fell 99 cents for February delivery of crude oil, settling at $39.03 a barrel. Earlier in the day it fell below $38 a barrel. So far this year oil prices are down by 59 percent.

Crude-oil inventory fell last week by 1.45 million barrels, while on the other hand, according to analysts' estimates, gasoline stockpiles are rising, with projections of an extra 1.7 million barrels added for the week ending December 26.

Also increasing were heating oil, diesel, and other distillate fuel supplies, adding 1.5 million barrels to the inventory.

On London's ICE Futures Europe exchange, Brent crude oil fell by 40 cents to end the session at $40.15 a barrel.

I don't see anything changing the primary fundamental of declining oil demand changing any time soon, and that should be the key element to watch with oil, barring any geopolitical problems that may unfold.

Oil Plunges to Lowest Level in Four Years

Today on the New York Mercantile Exchange, oil fell to its lowest level in four years, dropping to $36.22 at the end of the trading day. That was a 9.6 percent or $3.84 plunge per barrel for January delivery.

While trading volume was higher for February, it still fell $2.94 to finish the session at $41.67 a barrel on the NYMEX.

OPEC is of course panicking at the potential unrest that will inevitably come if prices continue to fall, and so cut production by another 4.2 billion more barrels a day on Wednesday, but that hasn't impressed traders much, as assertions and practical cooperation are two different things. Many countries say they'll participate in cutbacks historically, but full cooperation rarely, if ever, happens.

Price is the driving force behind the decline, as economic weakness is causing consumers to cut back on driving. If prices were to go higher at this time, consumers would simply cut back more. It's not a good time for OPEC, and it could become an even more dangerous situation going forward in a number of the countries that are part of the organization.

It'll be difficult to develop a supply/demand balance going forward, as economic uncertainty and the unknown continue to hamper stability. Whenever that becomes stable, the price range is expected to flucuate by around $15 a barrel.

January gasoline on Globex also moved down with oil, as prices drooped 5 cents to finish at 92 cents a gallon. Heating oil followed suit, ending down by 7 cents to $1.37 a gallon.

OPEC Could Cut Production by 1 Million Barrels in Cairo

Fighting to stave off oil plunging below $50 a barrel, OPEC may cut production another 1 million barrels a day.

Expectations are at the next OPEC meeting on November 29 they will definitely cut production again, the question is only by how much. The 1 million barrels a day figure is expected by most analysts; although some have said it could be anywhere from 500,000 a day to 3 million barrels a day.

The problem from OPEC's standpoint is it's one thing to announce production cuts, it's another thing to implement them, as supply cut announcements from September and October are still in the process of being put into action.

Iran is calling for cuts between 1 to 1.5 million barrels a day.

Oil futures closed Friday's session down to $57.04 a barrel for December delivery on the Nymex.

Crude Drops Below $59 a Barrel as Demand Expectations Continue to Fall

Healthy assumptions that the International Energy Agency (IEA) will lower its forecast for oil demand in 2009, again drove crude oil prices down, as it settled at $59.33 barrel; it's lowest close since March 2007.

A number of factors, including the increasing strength of the U.S. dollar and the anemic equity markets continue to put downward pressure on energy prices.

So far the original 2008 forecast has been revised downward seven times this year, dropping usage by close to 1.3 million barrels a day.

Gasoline prices are mirroring the crude price drop, as regular gasonline across the U.S. dropped to an average of $2.22 a gallon, said the AAA.

On London's ICE Futures Europe exchange, Brent crude oil fell $3.37 for December delivery, settling at $55.71 a barrel.

Weak Economy Continues to Put Downward Pressure on Oil Prices

Prices for oil dropped to near $60 a barrel Thursday, the lowest level in close to a year and a half.

With growing consensus showing we will be in for a long economic downturn, consumers are cutting back on everything but buying necessities, drying up oil demand.

The obvious effect of this is also to push gas prices down with oil, and that has many experts saying that could result in gas falling to $2 a gallon by the end of 2008. The AAA says overnight gas prices fell to $2.34 a gallon on average.

In just the last month average prices of gasoline have declined by close to 33 percent in the U.S.

Oil for December delivery settled at $60.77 a barrel on the New York Mercantile Exchange, a drop of $4.53 or 7 percent.

Brent Crude on the ICE Futures exchange in London fell $4.44, to settle at $57.43 for December delivery.

Weak Demand Driving Oil Prices Down, Not Supply

While OPEC Secretary-General Abdalla el-Badri said the leaders of countries will definitely get together again if the recent daily cut of 1.5 million barrels in oil production doesn't curb plunging prices, it won't really matter, as it's not supply driving prices down, but demand.

Jittery consumers will continue to cut back on driving and traveling in response to the credit crisis and economic weakness.

"Until you see a change in economic sentiment, there won't be any sustained rallies in the oil market," said Kyle Cooper, an analyst at IAF Advisors in Houston. OPEC "can announce all the cuts they like and the market will ignore it."

Even if there is another meeting and decisions made to drop daily production more, it's doubtful all the countries would be willing or able to comply with the agreement anyway, which would do more harm to OPEC than help, as it would make it look even more desparate.

A number of OPEC countries are in great need for cash just like most countries around the world.

Gasoline usage dropped again last week, falling by 6.4 percent from the same period a year ago. Declining prices at the gas stations did nothing to jumpstart demand.

Crude oil closed down 49 cents today for December delivery, settling at $62.73 a barrel on the New York Mercantile Exchange.

In after-hour trading it rebounded some to $64.37 a barrel at about 4:00 EST.

On the London Ice Futures Europe exchange, Brent crude fell another $1.12, to settle at $60.29 a barrel.

OPEC Cuts Oil Production by 1.5 Million Barrels a Day

As expected today, OPEC announced it was making significant cuts in oil production, dropping it by 1.5 million barrels a day. That's about half-way between the 1 million to 2 million barrel cut analysts were looking for.

OPEC President Chakib Khelil was quick to communicate that the cuts weren't for the purpose of prices increasing, but to keep them from falling to unsustainable levels.

OPEC came under fire from some quarters for possibly fueling the flames of the economic crisis rather than helping it out.

Still, Khelil added that if prices continue to drop, OPEC was ready to step in at any time and reduce production again until prices stabilize.

Even with the oil production cuts, prices plunged by 5 percent today, dropping to below $63 a barrel at one point in the trading session. At about noon EST prices stood at $64.51 a barrel.

As Commodity Surge says, here's OPEC's problem:

"OPEC is of course cautious in their approach, as some of the other oil-producing nations pressured them to cut production by at least 2 million barrels a day. The problem they face is if they cut it too much, and prices surge too high, consumers will cut back even more on expenses, and the plan would backfire."

OPEC seems to be attempting to keep prices from falling below $60 a barrel.

Scott Bleier Predicts Oil will Fall to $50 a Barrel

Scott Bleier was right in mid-July when he said the commodity boom was going to go through a correction, and with that correction oil would fall to $100 a barrel.

He was wrong only in that it has fallen far below that, and now Scott says it'll fall as low as $50 a barrel. He could very well be right.

Forced liquidation of commodities by large funds, as well as decreased demand, could pressure it even lower than $50.

OPEC's upcoming emergency session where they're expected to decrease daily oil production by 1 million a day in order to stop the price plunge, probably won't have the desired effect, and oil will continue to fall.

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.