Crude Oil Prices

A look at crude oil prices and what effect they are having on the economy.

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Monday, May 12, 2008

Oil prices slip after first reaching yet another new record high

Oil prices spiked to a new record above $126 a barrel this morning before heading lower as investors took their profits and an earthquake in China suggested a possible drop in demand.
 
After trading as high as $126.40 oil prices settled for the day down $1.73 from Friday's closing record, to close at $124.23.  This marked the first time in six trading sessions that oil prices closed down.
 
According to AAA and the Oil Price Information Service the pain at pump got  worse overnight as the price at pump is now averaging $3.718 a gallon, up 1.1 cents overnight.  Meanwhile the gas futures fell 3.7 cents to settle at $3.1642 after trading at a record level of $3.218.
 
Retail diesel prices rose 3.1 cents overnight to a record national average of $4.316 a gallon.  Heating oil prices managed to closer lower today dropping 7.62 cents to settle at $3.5598.
 
Natural gas fell 2 cents to settle at $11.301 per 1,000 cubic feet after rising to its own trading record of $11.675.
 
The Bush administration said today that they will resist the calls to sell crude from the U.S. Strategic Petroleum Reserve to help boost available oil supplies in the market.  White House press secretary Dana Perino told reports past attempts to influence energy prices by using the oil stockpile have not been successfull.
 
Perino also rejected new calls from Congress to stop adding oil to the reserve.  "The president believes that we need an even larger Strategic Petroleum Reserve in order to protect ourselves against oil shocks," she said.  As a result the Energy Department will continue with its plan to accept bids this week from oil companies to supply millions of barrels of additional crude to the stockpile.
 
The Senate is expected to vote on Tuesday to stop futures deliveries to the reserve.
 
BP Plc began returning crude production to it six shutdown units that were shutdown on Friday after a truck clearing snow from a blizzard hit a power line which lead to the outage.  All units were back up on Saturday and production is reported to be ramping up slowly.
 
Oil imports to China, the world's second-biggest consumer, dropped 3.9 percent from last year to 14.24 million metrix tons, about 3.5 million barrels a day., the Bejing-based Customs General Administration of China said on its website today.  This was the first decline in 18 months.
 
In India, production at factories, utilities and mines rose 3 percent from last year after gaining 8.6 percent in February.  Economists surveyed forecast a 5.8 percent increase.
 
"If you have a continuation of that drop in Chinese imports, if that extends beyond a month, and if you have a slowdown in India, that obviously changes the dynamic for the oil market," said Kyle Cooper, director of research a IAF Advisors in Houston.
 
On Monday OPEC President Chakib Khelil said geopolitical factors, speculation and the value of the dollar would continue to affect oil prices for the next months or years.
 
"There is a geopolitical situation that the market expects to continue.  You have the Iran crisis, the crisis that may develop with Venezuela, with the possibilty of the United States imposing an embargo on Venezuela," he said.  "You have also problems in Nigeria," Khelil said.
 
"You have all those elements plus the recession problems in the United States and a strong fall of dollar, which has had a terrible impact on oil prices," he added.
 
On Friday, Columbia said it recovered documents from a slain guerrilla that indicate Venezuelan President Hugo Chavez has offered assitance to Columbian rebels.  Some U.S. lawmakers have cited the documents to argue that the White House should add Venezuela to a list of state terror sponsors that includes North Korea, Iran, Syria, Sudan and Cuba.

Such a move would most likely spur Venezuela to cut off oil exports to the U.S., but analysts believe such a provocative diplomatic step is unlikely.

Yet another airline company has added fuel surcharges.  Starting tomorrow Canadian baed Westjet Airlines will add a ticket surcharge ranging from C$20 to C$45 per ticket.

Saudia Arabia it considering delaying crude oil shipments to Taiwan because the island is reconsidering its bid for a water and power project in the Middle East kingdom.

The island's parliament has told Taiwan Power Co., part of a consortium including two Saudi companies, to halt its plan to bid for the $4 billion project.

The Taiwanese government, via Taiwan Power, Taiwan Water Corp, and Taiwan Cogeneration Corp, had planned to invest $720 million in the seawater desalination and power generation project.

Taiwan water is state run.  Taiwan Power is the biggest shareholder of Taiwan Cogeneration, a producer of electricit and steam.  Saudia Arabia is the island's biggest supplier of oil.

The slid in oil prices did takethe relative strength back down to 69% today from 77% yesterday.  The 20 day moving average is at $118.08 and the 50 day moving average is at $110.17.  Volume was up by over 4,000 shares to 316,844 contracts trading hands today.  Open interest for the June contract currently sit at 262,650 down from 280,224 on Friday.  Over all time periods volume was up as was open interest.  Currently I see oil prices continuning to slide for a couple more days at least before leveling off in the $116-$120 range for a couple of weeks and then advancing forward once again toward the $140-$150 per barrel area.