Crude Oil Prices

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

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Friday, May 16, 2008

Oil prices soar to another new record

Oil prices once again soared to a new record high today on the New York Mercantile Exchange.  After soaring as high as $127.82 a barrel , a new record, oil futures settled for the day up $2.17 at $126.29, also a new record.  This marks the 8th time in the last ten trading sessions that oil prices have set a new record high.
 
Gasoline prices also continue to climb at the pumps.  AAA and the Oil Price Information Service said gasoline prices rose almost one cent to a new record high of $3.787 a gallon.  Gasoline futures followed oil higher and jumped 5.777 cents to settle at $3.2438 a gallon
 
Diesel fuel prices also set a new record at the pump, $4.482 a gallon.  Heating oil futures also climbed 8.04 cents to $3.7028 a gallon.
 
Natual gas didn't follow the trend higher.  Instead natural gas futures fell 30.5 cents to settle at $11.094 per 1,000 cubic feet.
 
President Bush wrapped up a meeting with Saudi Arabia's King Abdullah today.  The countries oil minister announced they have opened its taps and have been pumping an additional 300,000 barrels of crude a day since last Saturday.  In the past Saudi Arabia has acknowledged pumping 11 million barrels a day.  Now with the increase, it is pumping 9.45 million barrels a day.
 
The Bush administration has given in to congressional pressure and agreed to temporarily stop filling the Strategic Petroleum Reserve on July 1st.
 
Both of these move did nothing to deter the increase in oil futures.  "All in all, we're seeing another strong move here on little fundamental news," said Jim Ritterbusch, president of Ritterbusch & Associates.  The reason for the rising prices in the face of negative news is all about market expectations.
 
Goldman Sach's underscored the sentiment today when it hiked its forecast for oil prices for the second half of the year to $141 a barrel, up from $107 previously.  Analysts believe the oil market is undergoing a "structural repricing" that will continue to play out for some time to come.
 
"We would view any pullback in oil, regardless of the size or duration -- although a correction could be as large as 15 percent -- as an opportunity to re-establish long positions in oil before the summer," Goldman Sahs advised traders.
 
The number of rigs actively exploring for oil and natural gas rose this week by 16 to 1,862.  1,471 rigs were exploring for natural gas, 381 for oil and 10 were listed as miscellaneous.  One year ago, the rig count stood at 1,744.
 
The Interior Department is moving forward with an oil and gas lease sale covering nearly 4 million acres in Alaska's National Petroleum Reserve.  The government says the lease area could hold up to 3 billion barrels of oil.  The decision includes a plan to set aside more than 600,000 acres of land considered environmentally sensitive.
 
Environmentalists are both happy and sad by the decision.  Some would have preferred that part of the land off limits for 10 years would have been placed off limits permantently.
 
The National Petroleum Reserve-Alaska sits on federal land that is part of Alaska's North Slope, lying just west of the Arctic National Widlife Refuge.
 
Meanwhile, on the trading front the relative strength gained ground on the move higher today, ending the day at 70%.  Still looks like we should see be seeing either a move sideways or a drop in prices.  The 20-day moving average finally crossed the $120 level closing at $120.19.  The 50-day moving average closed up for the day at $112.05
 
Volume dropped off nicely on both the June contracts and all months as a whole.  The June contract saw 242,464 contracts traded with open interest dropping down to 142,410 open contracts.  Expiration for the June contracts is next week.  Overall contracts saw a sharp drop in the number of open contract, down over 1 million contracts to close with 5,490,142 open contracts.