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http://www.foxbusiness.com/markets/article/oil-continues-rally-100-barrel_377340_2.html
Wednesday, Nov. 21 2007
Supply Worries Send Oil Prices Close to $100 a Barrel
Crude oil prices rose above a record $99 per barrel Wednesday as worries
about inadequate winter supplies in the Northern Hemisphere and news of
refinery problems stoked bullish sentiment.
The declining U.S. dollar and speculation that the U.S. Federal Reserve will
again cut interest rates also boosted prices. Some investors put their money
into oil contracts, betting that gains in their price will offset dollar
weakness.
"The market is now really looking at $100 a barrel as the next target to
hit," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
"The fact that we are having this surge in pricing in this short trading
week underscores the strength of this bull run for oil."
Light, sweet crude for January delivery rose as high as $99.29 a barrel in
electronic trading after the New York Mercantile Exchange closed, breaking
the previous intraday record of $98.62 set last week. The contract was
trading at $98.04 a barrel -- up 1 cent on Tuesday's close -- at midday in
Europe. Brent crude for January delivery was little changed at $95.88.
The contract surged $3.39 during the floor session Tuesday in New York to a
record close of $98.03 a barrel. The Nymex will be closed on Thursday for
Thanks giving and close early on Friday.
"There were strong gains in almost all commodities (Tuesday), hence we will
view the rise of the oil markets in that global context," said Olivier Jakob
at Petromatrix in Switzerland. "The mythical $100 per barrel is of course
within reach for today with or without the help of the weekly statistics."
Energy futures got a boost on news of problems at two oil facilities
Tuesday. A Valero Energy Corp. refinery in Memphis, Tennessee, that
processes 180,000 barrels of crude a day has shut down for 10 days of
unplanned maintenance. Also, a Royal Dutch Shell PLC plant that converts
bitumen from Alberta's oil sands region into 155,000 barrels a day of
synthetic crude oil was temporarily shut down due to a fire.
Beyond these temporary concerns, investors are anxious that as global demand
for energy grows, fueled by China and India's rapid development, oil
supplies won't be able to keep up.
Currently, oil producers are turning out about 85 million barrels a day,
while the U.S. Department of Energy says consumption is between 85 million
and 86 million barrels a day.
"The long-term underlying trend is that demand is powering forward and the
supply situation looks tight," said Jeff Brown, managing director and chief
economist at FACTS Global Energy in Singapore.
Oil prices also got support after the Fed said it thinks U.S. economic
growth will slow next year to between 1.8 % and 2.5%, less than the Fed's
previous projections. It also projected that U.S. inflation should fall next
year to between a 1.8% and 2.1% increase.
That could mean the Fed will cut interest rates further, and that could
weigh on the dollar. On Tuesday, the euro hit an all-time high against the
dollar, breaking through the $1.48 mark.
"When the U.S. dollar hit a record low, oil also surged ahead. It's been an
inverse relationship," Shum said. "Also, the Fed indicating worries about
the U.S. economy has caused worry that the Fed will cut interest rates."
Crude prices are within the range of inflation-adjusted highs set in early
1980. Depending on how the adjustment is calculated, $38 a barrel then would
be worth $96 to $103 or more today.
Oil product prices also fell back from higher level earlier Wednesday.
December heating oil futures were down 0.01 cent at $2.6900 a gallon after
closing in New York at $2.6901 a gallon, a record settlement. Gasoline
prices were unchanged at $2.4715 a gallon.
Natural gas futures gained 0.1 cents to $7.478 per 1,000 cubic feet.
Traders were also closely watching for the release of Wednesday's petroleum
inventory report from the U.S. Energy Department's Energy Information
Administration.
Analysts surveyed by Dow Jones Newswires, on average, predict that crude oil
inventories rose by 800,000 barrels last week, while refinery use grew by
0.4 percentage point to 88.1% of capacity.
Gasoline likely grew by 700,000 barrels, the analysts predicted, while
inventories of distillates, which include heating oil and diesel fuel, fell
by 400,000 barrels.
Wednesday, Nov. 21 2007
Supply Worries Send Oil Prices Close to $100 a Barrel
Crude oil prices rose above a record $99 per barrel Wednesday as worries
about inadequate winter supplies in the Northern Hemisphere and news of
refinery problems stoked bullish sentiment.
The declining U.S. dollar and speculation that the U.S. Federal Reserve will
again cut interest rates also boosted prices. Some investors put their money
into oil contracts, betting that gains in their price will offset dollar
weakness.
"The market is now really looking at $100 a barrel as the next target to
hit," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.
"The fact that we are having this surge in pricing in this short trading
week underscores the strength of this bull run for oil."
Light, sweet crude for January delivery rose as high as $99.29 a barrel in
electronic trading after the New York Mercantile Exchange closed, breaking
the previous intraday record of $98.62 set last week. The contract was
trading at $98.04 a barrel -- up 1 cent on Tuesday's close -- at midday in
Europe. Brent crude for January delivery was little changed at $95.88.
The contract surged $3.39 during the floor session Tuesday in New York to a
record close of $98.03 a barrel. The Nymex will be closed on Thursday for
Thanks giving and close early on Friday.
"There were strong gains in almost all commodities (Tuesday), hence we will
view the rise of the oil markets in that global context," said Olivier Jakob
at Petromatrix in Switzerland. "The mythical $100 per barrel is of course
within reach for today with or without the help of the weekly statistics."
Energy futures got a boost on news of problems at two oil facilities
Tuesday. A Valero Energy Corp. refinery in Memphis, Tennessee, that
processes 180,000 barrels of crude a day has shut down for 10 days of
unplanned maintenance. Also, a Royal Dutch Shell PLC plant that converts
bitumen from Alberta's oil sands region into 155,000 barrels a day of
synthetic crude oil was temporarily shut down due to a fire.
Beyond these temporary concerns, investors are anxious that as global demand
for energy grows, fueled by China and India's rapid development, oil
supplies won't be able to keep up.
Currently, oil producers are turning out about 85 million barrels a day,
while the U.S. Department of Energy says consumption is between 85 million
and 86 million barrels a day.
"The long-term underlying trend is that demand is powering forward and the
supply situation looks tight," said Jeff Brown, managing director and chief
economist at FACTS Global Energy in Singapore.
Oil prices also got support after the Fed said it thinks U.S. economic
growth will slow next year to between 1.8 % and 2.5%, less than the Fed's
previous projections. It also projected that U.S. inflation should fall next
year to between a 1.8% and 2.1% increase.
That could mean the Fed will cut interest rates further, and that could
weigh on the dollar. On Tuesday, the euro hit an all-time high against the
dollar, breaking through the $1.48 mark.
"When the U.S. dollar hit a record low, oil also surged ahead. It's been an
inverse relationship," Shum said. "Also, the Fed indicating worries about
the U.S. economy has caused worry that the Fed will cut interest rates."
Crude prices are within the range of inflation-adjusted highs set in early
1980. Depending on how the adjustment is calculated, $38 a barrel then would
be worth $96 to $103 or more today.
Oil product prices also fell back from higher level earlier Wednesday.
December heating oil futures were down 0.01 cent at $2.6900 a gallon after
closing in New York at $2.6901 a gallon, a record settlement. Gasoline
prices were unchanged at $2.4715 a gallon.
Natural gas futures gained 0.1 cents to $7.478 per 1,000 cubic feet.
Traders were also closely watching for the release of Wednesday's petroleum
inventory report from the U.S. Energy Department's Energy Information
Administration.
Analysts surveyed by Dow Jones Newswires, on average, predict that crude oil
inventories rose by 800,000 barrels last week, while refinery use grew by
0.4 percentage point to 88.1% of capacity.
Gasoline likely grew by 700,000 barrels, the analysts predicted, while
inventories of distillates, which include heating oil and diesel fuel, fell
by 400,000 barrels.
