FT - September 20 2006 - Kevin Morrison

Oil falls to six month low


Oil prices dropped to a six-month low on Wednesday following another increase in US heating oil stockpiles. This has taken inventories to levels that are comfortably expected to cover any supply disruption or cold snap.

ICE Brent for November delivery touched a six-month low of $60.76 a barrel. Brent later edged off its intra-day low to trade at $61.50, down 67 cents in late afternoon London trade, furthering the $1.88 decline from the previous session. The benchmark Brent crude contract is down about 22 per cent from its record high point of $78.65 last month. That is the biggest decline in oil prices in percentage terms for three years.

The benchmark West Texas Intermediate crude contract briefly dropped below the $61.04 a barrel level that it ended at last year when it hit an intra-day low of $60.60. The October WTI crude contract bounced off its intra-day low to trade at $61.25, down 41 cents, extending the $2.04 decline from the previous session.

With the October contract expiring at the close of trade on Wednesday, there was more trade in the November WTI contract, which was 62 cents lower at $61.55.

The 4.1m barrel increase in US distillates takes them to 148.7m, the highest level since January 1999, when Nymex crude futures were trading at $12.50.

High inventories of heating oil and natural gas have convinced traders that the worlds biggest oil consumer is well stocked to meet demand this winter, even if there are prolonged cold snaps. Kerosene stocks in Japan, the worlds third-largest consumer of winter heating fuels, are also 20 per cent above year-ago levels.

Nymex heating oil futures for October delivery dropped 1.75 cents to $1.6741 a gallon, near its seven-month low. US crude inventories dropped 2.8m barrels, but remain near their upper average level of the past five-years.

Traders said the oil price will remain weak over the next month, and could find a floor around the mid-$50s level, before staging a recovery by the end of the year.

Gold staged a late turnround trading at $582.40/$583.40 a troy ounce, up from the late quote of $576.70/$578.20 in late trade in New York on Tuesday.

The three-month copper price dropped almost 4 per cent to $7,210 a tonne on the London Metal Exchange in morning trade, but was quoted at $7,430 a tonne in late London trade, down $65 on the day.

Nickel markets remained volatile, falling more than $1,000 at one point on Wednesday, before trading at $26,850 a tonne, down $505 on the day. Nickel has declined more than 11 per cent in the past month.

Aluminium prices were $8 up at $2,461 a tonne, after experiencing turbulence.

Oil at $60, it is now at a level that's good for everybody.

OPEC wont want to let it go cheaper, so expect some movement to reduce output by them, all they need is to get the members to comply!

$45 is not out of the question imo.

That oil graph at the top is steadily going further and further down.

whatever Saudi reports to the world is often at considerablke variance to what is happening on the ground ...... Aramco is the eminence grise in many oilfield projects, and their recent record is of very limited project fracing (a tech term for a certain procedure) orders

Oil May Fall for 5th Week on Ample Fuel Supplies, Amaranth Loss

By Robert Tuttle and Mark Shenk


Sept. 22 (Bloomberg) -- Oil may fall for a fifth week amid rising U.S. fuel inventories and speculation that losses on natural gas bets at Amaranth Advisors LLC will trigger selling of energy futures by other funds.


Twenty-four of 43 analysts, traders and brokers, or 56 percent, said prices will fall next week, according to a Bloomberg News survey. Twelve said prices would rise and seven predicted little change. A week ago, forty-five percent of respondents forecast that futures would be little changed.

Oil has dropped 21 percent since reaching a record $78.40 a barrel on July 14 on rising U.S. supplies of gasoline, heating oil and diesel. Prices briefly dipped below $60 this week after Amaranth, a hedge fund which had $9.5 billion of assets in August, said it lost $4.6 billion this month in wrong-way bets on natural gas prices.

``Amaranth's big loss may spur liquidation of oil and natural gas futures contracts by some other hedge and pension funds in the weeks ahead,'' said Ken Hasegawa, a manager of the international department at oil broker Himawari CX Inc. in Tokyo. ``Oil in New York is searching for the bottom and may fall below $59 a barrel next week.''

Crude oil for November delivery fell $2.43, or 3.8 percent, to $61.59 a barrel in the first four days of trading this week on the New York Mercantile Exchange. Futures for delivery in October touched $59.80 on Sept. 20, the lowest for a contract closest to expiration since March 21. The October contract expired Sept. 20. November oil traded at $61.95 at 11:41 a.m. Singapore time.



U.S. Inventories

U.S. distillate supplies, including heating oil and diesel, rose to their highest level since January 1999 last week, according to an Energy Department report released on Sept. 20. Distillate consumption usually climbs as winter approaches.

Gasoline inventories rose 1.1 percent in the five weeks ended Sept. 15 to 207.6 million barrels, the report showed.

``The markets will be unable to ignore all this crude and product sloshing around in the world,'' said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut. ``There is not one iota of bullish news out there, which includes Iran.''

The U.S. agreed this week to give Iran, the world's No. 4 oil producer, more time to meet a United Nations demand to stop its research. Futures rose earlier this year on concern that Iran may cut exports if faced with UN sanctions.



Nuclear Negotiations

Ali Larijani, Iran's top nuclear negotiator, will meet with the European Union's foreign policy chief Javier Solana next week for talks on Iran's nuclear program, the official Islamic Republic News Agency said Sept. 20.

Iran has about two weeks to begin negotiations on its nuclear program, including suspension of uranium enrichment, before the U.S. renews a push for United Nations sanctions on the country, a European diplomat said Sept. 20.

Iran failed to meet an Aug. 31 deadline to suspend uranium enrichment. The U.S. and some European countries accuse Iran of trying to develop nuclear weapons. Iran says its nuclear program is strictly for civilian energy.

Russia's government this week denounced Exxon Mobil Corp. and Royal Dutch Shell Plc for breaching environmental rules in their oil and gas projects in Sakhalin Island, in eastern Russia.

The government is stepping up pressure on three Sakhalin projects operated by Shell, Exxon and Total SA under production- sharing agreements that grant the state a share of oil after the investors recover costs.



`Technical Correction'

``Now that prices have declined sharply, there is potential for a technical correction back to the upside,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. A rise could be driven by ``worries about Russian government moves to pressure Sakhalin Island oil producers or movement in the UN Security Council toward placing sanctions on Iran.''

The 11 members of the Organization of Petroleum Exporting Countries, which produce 40 percent of world oil output, kept their output target at 28 million barrels a day at the group's Sept. 11 meeting. Ministers from Nigeria, Iran and Algeria said they were concerned about the pace of declining prices.

``Traders are going to push toward $55 and see what OPEC's resolve looks like below $60,'' said Adam Sieminski, chief energy economist at Deutsche Bank Securities AG in New York. ``Then look for OPEC ministers to get serious about an emergency meeting and quota cuts.''

OPEC isn't considering an emergency meeting over the current oil price because ``prices are still at a good level,'' Saudi Oil Minister Ali al-Naimi said to reporters at an energy and environment conference in Riyadh on Sept. 19.

The survey has correctly predicted the direction of prices 52 percent of the time since it was introduced.

Bloomberg's survey of oil analysts and traders, conducted each Thursday, asks for an assessment of whether crude oil futures are likely to rise, fall or remain neutral in the coming week. The results were:

RISE      NEUTRAL      FALL
 12            7             24

BreakAway Investor
By Andrew Mickey


Continued investment in new oil production will cause oil prices to fall once again. Its basic supply and demand. OPEC might not like it, but oils headed back to $30. Yep, I said it. Within four years oil prices will be back to OPECs ideal range. Its all part of the boom and bust cycle of the energy industry.


I know it seems unlikely now. But it didnt seem likely in the early years of the Reagan administration either. What will happen when it does fall back to $30? Think about it.


Will you and your portfolio be prepared? Ethanol will cool off and stockholders will be left holding the bag. Home Depots solar panels will likely be found conveniently stored away next to all the other half-finished home improvement projects in millions of half-finished basements across the country. And the $4,000 premium everyone paid to get his hands on a hybrid car will become something I dont like to talk about.


Chrysler will be king of the car world. It wont be able to produce enough gas-guzzlers to satisfy the return of the American demand. Car companies will go back to stuffing as many airbags into a car as possible and filming commercials with close-ups of the J.D. Power & Associates trophy every car seems to win. And dont even get me started about oil sands.


There are a lot of bets being placed on oil prices remaining high, please take note that the big oil companies are not banking on oil prices remaining this high. They realize the downward spiral of oil prices over the past month proves the amount of speculative dollars that were being pumped into buying up oil. They arent even basing their capital budgeting decision on $50 or $60 oil. Theyre planning on $30 to $40 oil.


Theres still plenty of opportunity left in the oil service industry, though. After all, these companies have a lot of work to do to get oil prices back to a reasonable level.


Finally, lets take a look at the inflation-adjusted history of oil prices: In 1974, oil climbed to $40 a barrel. Oil lingered in the $30 to $40 range for almost seven years -- until 1981, when oil surged to $70.


Following that high, oil prices steadily fell back into the $40 to $50 range over the next couple years. Then, about five years after hitting $70, oil was trading at $15 a barrel and wouldnt reach above $40 for any sustainable period of time for almost two decades.


If you want to play oil, and I encourage you to do so, put your money in the companies that will be playing a big role in getting oil prices back down to normal. Oil service stocks will remain highly profitable and will continue to grow, at least for a few more years

Nymex Oil Falls as Iran Standoff May Be Nearing a Resolution - By Robert Tuttle


Sept. 22 (Bloomberg) -- Crude oil fell, ending a fourth week of declines, on signs the standoff with Iran over its nuclear program may be nearing resolution.

Iran is willing to discuss suspending uranium enrichment, the country's president Mahmoud Ahmadinejad said yesterday at the United Nations. The UN Security Council had given Iran until Aug. 31 to suspend enrichment or face possible sanctions. Concern Iran may cut oil exports if faced with sanctions helped push oil to a record this summer.

The Iranians ``seem to be willing to make a few concessions and that's liable to take a little more risk premium out of the market,'' said James Ritterbusch, president of Ritterbusch & Associates in Galena, Illinois.

Crude oil for November delivery fell $1.04, or 1.7 percent, to close at $60.55 a barrel on the New York Mercantile Exchange, down 23 percent from the record of $78.40 a barrel reached on July 14. Futures for delivery in November are down 5.4 percent this week. Oil has declined four straight weeks, dropping 17 percent since Aug. 25.

Crude oil also fell as speculators became more cautious about trading energy futures after Amaranth Advisors LLC, a hedge fund which had $9.5 billion of assets in August, said it lost $6 billion this month in wrong-way bets on natural-gas prices.



Fund Liquidation

Amaranth ``obviously has added to the recent downside pressure,'' said Phil Flynn, a commodities trader for Chicago- based Alaron Trading. ``There has been a lot of fund liquidation.''

The United Nations Security Council is demanding that Iran, the world's fourth-biggest oil producer, stop enriching uranium, a process that can produce nuclear fuel or the core of a nuclear bomb. Iran missed an Aug. 31 UN deadline for suspending enrichment.

``The market concerns on Iran have been largely assuaged,'' said Jason Schenker, an economist with Wachovia Corp. in Charlotte, North Carolina. ``It's in everybody's best interest that there is some sort of resolution'' to the conflict.

In London, Brent crude oil futures for November settlement fell 93 cents, or 1.5 percent, to $60.41 a barrel on the ICE Futures exchange.

``With anything bullish you'll see the market reacting to it, but in your heart of hearts at the moment we are still in a negative trend,'' said Richard Harvey, a broker with ABN Amro in London. The price of ``$60.30 on Brent would be a floor level after which you might see more selling.'' Brent touched $60.30 a barrel on Sept. 20, the lowest since March.

Oil traders have been keeping tabs on comments by Ahmadinejad and Venezuelan President Hugo Chavez, who were in New York this week with other world leaders for the UN General Assembly.



Export Disruptions

The two countries are among places where ideology could disrupt oil exports, analysts say. Leaders of the two countries were both critical of the U.S. government this week, with Chavez referring to President George W. Bush as ``the devil'' and a ``world tyrant.''

Even so, ``not a drop of oil has been shut in by any of the speeches this week,'' Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut, said in a note.

Iran, the Organization of Petroleum Exporting Countries' second-biggest producer, pumped 4.02 million barrels of oil a day in August, according to Bloomberg estimates. Venezuela, OPEC's fourth-biggest producer, produced 2.5 million barrels a day.

OPEC, which pumps about 40 percent of the world's oil, last week forecast global daily demand will rise 1.4 percent to 84.4 million barrels this year, and 1.5 percent next year to 85.7 million barrels.



Production Quotas

The 11-member group left its output target of 28 million barrels a day unchanged at a Sept. 11 meeting.

``With oil above $60, there is going to be considerable external pressure for them to maintain the current production quota,'' Schenker said.

The target will be reviewed again in December. Ministers from Nigeria, Iran and Algeria said they were concerned about the pace of declining prices.

``I think the cartel is a little bit split right now,'' Flynn said. ``Whenever we hear this kind of rhetoric, we are near a point where they may cut back production.''



Supplies Jump

Oil sank to a six-month low of $60 a barrel in New York on Sept. 20 after a U.S. Energy Department report showed the nation's gasoline stockpiles rose a fifth week and distillate supplies, including heating oil and diesel, reached a seven-year high.

U.S. distillate inventories, including diesel and heating oil, jumped 4.1 million barrels to 148.7 million last week, their highest since January 1999, the Energy Department reported on Sept. 20.

Gasoline supplies rose 560,000 barrels to 207.6 million, 6.2 percent higher than a year ago.

Oil supplies, which fell for a third straight week, dropping 2.85 million barrels to 324.9 million barrels, may begin to rise as refineries shut units in the fall for planned maintenance.

``The refinery maintenance is going to be even more bearish pressure on crude prices,'' said David Kirsch, an energy markets analyst at PFC Energy in Washington. ``You are not going to have that demand in Europe and the U.S.''

FT - September 22 2006 - By Chris Flood

Crude sinks towards $60 level


Crude oil threatened to sink below the $60 a barrel level this week for the first time in six months, continuing a retreat in which prices have fallen more than 20 per cent since early August.

Crude has reached a level at which traders suspect Saudi Arabia might start to trim output and put pressure on members of the Organisation of the Petroleum Exporting Counties for a production cut.

Petrologistics, the oil consultancy, estimated that Opec had pumped 400,00 barrels a day less so far this month compared to August, mainly due to lower output from Saudi Arabia and Iran.

Nymex November West Texas Intermediate fell 62 cents to $60.97 a barrel on Friday, taking the decline for the front month contract over the week to 3.7 per cent. ICE November Brent dropped 53 cents to $60.81 a barrel on Friday, falling 4 per cent this week.

Growing confidence that the US is well stocked to meet energy demands this winter, even in the event of prolonged spell of cold weather, dragged Nymex October heating oil 3 per cent lower this week to $1.6520 a gallon. With natural gas stocks on course to reach their highest level since 1974, there was more downward pressure on prices with Nymex October Henry Hub falling 4.6 per cent to $4.75 per million British thermal units this week.

Traders say the start of refineries autumn maintenance programmes should provide support for product prices in the fourth quarter.

Production of biodiesel in the European Union is expected to rise to 4.5m tonnes next year, an increase of more than 40 per cent in two years, raising concerns that there might not be enough vegetable oil produced to meet demand.

Gold rose 1.3 per cent to $586.60 a troy ounce this week, helped by weakness in the dollar. After holding above $570 early in the week, dealers said gold was building a base, helped by a return of consumer interest and physical buying, especially from India for the approaching festival season. This could prove an important support for prices after a fall of almost 30 per cent in world jewellery fabrication in the first half of this year.

Silver rose 2.9 per cent to $11.12 a troy ounce while platinum fell 1.5 per cent to $1,140 but palladium gained 1.6 per cent to $313 a troy ounce.

Aluminium firmed up 0.5 per cent at $2,540 a tonne as a conference held this week in Moscow suggested that the market would remain balanced next year but growing annual demand of 2m tonnes would cause deficits thereafter.

Rusal, the worlds third largest aluminium producer, outlined ambitious investment plans to spend $16.7bn to double annual output to 5m tonnes, as it seeks to become the world No.1 producer.

Base metals were firmer over the week. Copper rose 3.6 per cent to $7,530 a tonne. Nickel rose 8.8 per cent supported by ongoing strike action at Incos Voisey Bay mine in Canada. Nickel remains underpinned by low stocks, strong demand and tight supply.

The Business - 24 September 2006

Saudis plan to boost output by up to 1.5m - By Rupert Steiner


SAUDI Arabia, the worlds largest oil producer, is planning to boost future production capacity by 1.5m barrels a day to counter potential supply disruptions expected from Iran, Venezuela and Iraq. The Kingdom, which owns 25% of the worlds proven reserves, has previously said production capacity would be sustained at 12m barrels. But in a private briefing to investment bankers on Thursday, executives at Lehman Brothers in London were told by representatives of the Kingdom that the revised figure for production will be up to 13.5m barrels a day by 2011.

They were presented with an updated assessment document entitled Saudi Arabias Strategic Energy Initiative: Safeguarding Against Supply Disruptions which has been prompted by regional conflict and high oil prices.

The Saudi oil authorities, under Ali al-Naimi, are embarking on $30bn (E44bn, $56bn) of downstream expansion projects over the coming years and are talking to investment banks competing for the project finance work. Saudi oil advisers plan to meet executives from other banks this week.

The higher-than-expected oil capacity will come on stream from three oil fields: Munifa, with 900,000 extra barrels per day, and Shaybah and an unconfirmed third field contributing 300,000 extra barrels each. The increase in production has been prompted by geopolitical tensions. The briefing document, which has been seen by The Business, says: In light of regional conflict and high oil prices, the Saudi leadership has recently issued a directive to decouple energy and foreign policy, and to remove all political considerations from oil production decisions.

To increase production so as to mitigate against effects of major supply disruptions from four key exporters of concern: Iran: threats to use oil as a political weapon; possibility of war with US. Venezuela: Threats to use oil as political weapon. Nigeria: Continuing unrest. Iraq: Successful attacks against oil infrastructure and likelihood of civil war.

New information contained in the briefing says that by June 2007 Saudi Arabia is expected to have enough spare capacity to offset all Iranian exports. By 2009/10 the goal is to satisfy global demand during a potential disruption from Iran and one of the three other major Opec exporters.

Saudi Arabia is one of the few countries which has the means to increase production capacity. Iran and Venezuela lack capital for expansion, face increasing domestic demand and their political environments precludes foreign investment.

Iran currently exports between 2.2m to 2.4m barrels of oil a day. Saudi Arabia exports nearly four times as much, approximately 8.5m and its spare capacity is 1.8m-2m.

Venezeulas president Hugo Chavez has nationalised privately owned oil fields and unilaterally rewritten contracts requiring foreign oil companies to pay the state higher royalties than they originally agreed. He has also threatened to use the oil as a weapon against the US.

Nigeria and Iraq lack the capital, security and stability necessary for capacity expansion.

Saboteurs have dented oil production in Nigeria. Oil production is down by around 550,000 barrels a day, because members of the Movement for the Emancipation of the Niger Delta seek to emancipate the oil-rich region from what it sees as exploitative foreign oil companies. It wants to return the countrys oil wealth to the people and is attacking pipelines and kidnapping foreign oil workers.

In Iraq, oil production is at least 500,000 barrels a day lower than the 2m produced when Saddam Hussein was in power. The US and Iraqi military find it hard to stop saboteurs blowing up pipelines after they are repaired.

Saudi Arabia has eight refineries with a combined crude throughput capacity of 2.1m barrels a day and about 1.75m of overseas refining capacity. The Kingdom plans to upgrade and expand the Rabigh refinery by 425,000 barrels a day.

It will expand its refining capacity in North America, building two new domestic and three new overseas refineries in the next five years creating the worlds largest refinery.

Some in the oil industry warn Saudi Arabias targets are overambitious a number of variables stand between it setting bold production goals and achieving them. But in the past three years, Saudi Aramco, the state-owned oil company, has increased its sustained capacity by 800,000 barrels a day. And it is investing heavily between 2004 and 2009, the Saudi government will have spent more than $17bn (9bn, e13.3bn) to increase its upstream capacity.

Dai,

I think this is the key sentence!


"executives at Lehman Brothers in London were told by representatives of the Kingdom that the revised figure for production will be up to 13.5m barrels a day by 2011"


2011 is five years away, and with the continuing world demand, is unlikely to depress the price much, if at all, when this extra production is brought online IMO.

There are people that say the saudis are having propblems with their existing fields, including Ghawar!

One example can be found by clicking HERE

Another by clicking HERE

Andy - 2011, yes that's very key.

I have seen articles stating the poo will drop fiuther and then they go and talk about the recent big find in the GOM being an integral party of the imminent change down per barrel.

Makes me laugh!

New York Times - Published: September 25, 2006 - By HEATHER TIMMONS and CARTER DOUGHERTY

Oil Prices Fall as Speculators Retreat


LONDON, Crude oil prices traded below $60 a barrel today for the first time in six months, as speculators continued their retreat from the commodity markets, worried by cooling economies and an improving picture for oil supplies.

Today, the market reacted to news that Iran had agreed to hold talks about its nuclear program, and that the oil giant BP would resume pumping oil from Prudhoe Bay, Alaska, ahead of schedule. But analysts said the decline had as much or more to do with underlying economic factors, particularly slowing economic growth in the United States.

The benchmark price for a barrel of light, low-sulfur crude to be delivered in November traded as low as $59.52 a barrel on the New York Mercantile Exchange, before rallying in the last 90 minutes to reach $61.40 a barrel at the close of floor trading, a gain of 76 cents.

More broadly, oil prices have fallen 24 percent from their peak in July, when they were driven up on heavy speculation by traders and hedge funds over signs that geopolitical tensions and hurricanes would crimp supply. As it happened, few supply problems actually developed.

Where oil prices may be headed next is a matter of considerable debate among experts.

The oil markets fundamentals have finally asserted themselves, the Center for Global Energy Studies wrote today in a report. The upward momentum of oil prices disappeared, and it will therefore take a combination of special factors to bring it back, said the report by the center, which was founded by a former Saudi petroleum minister.

Other market watchers noted that prices for oil for future delivery, which some economists use for their planning purposes, have not fallen as much as spot prices, and that most futures contracts continue to hover around $66 a barrel.

The story is still very much the same for the futures market, said Eoin OCallaghan, an oil analyst with BNP Paribas. That points to more expensive oil in the coming months.

So-called noncommercial buyers, meaning hedge funds and investors rather than the producers and refiners who actually ship and use the oil, have poured money into energy and commodities markets in recent years, believing that growth in places like China, India and Brazil had put the world into a super cycle that would continue to drive up prices even if major industrial nations faltered. In recent weeks, many of the noncommercials have bailed out again as prices started to fall.

The members of the Organization of Petroleum Exporting Countries have been in telephone contact about the market trend but as yet they have no plans to convene an emergency meeting to address falling prices, an OPEC spokesman said today. The cartel last met on Sept. 11.

About 22,000 noncommercial buyers now hold long positions that is, bets that crude oil prices will rise according to the most recent report from the Commodity Futures Trading Corporation; in August the figure was 83,000. It is a huge reversal in position, said David Kirsch, an oil markets analyst with PFC Energy in Washington.

PFC noted in a report today that noncommercials have been reducing their long positions for five straight weeks, and have pushed prices below their 200-day moving average, a significant marker to technical analysts of the market.

Kamal Murari, global head of energy marketing for Dresdner Kleinwort, said: The move down that has taken place has been sharp and sudden. The fact that it has moved as significantly as it has means that any forced liquidation has been mostly priced into the market.

Many market participants think OPEC will act to stem the decline if prices fall to $55 a barrel, Mr. Murari said.

He suggested that some of the selling in the oil market may be linked to the recent well-publicized losses by some big investors in natural gas, which may have forced some funds to liquidate other energy assets.

For the consumer, retail fuel prices have fallen markedly in the United States, but less so in Europe, where excise taxes are much higher and crude accounts for a proportionally smaller part of the pump price.

For the larger economy, falling oil prices may do little now to counteract slowing growth on either side of the Atlantic, economists said.

It doesnt feed through that if the crude price falls below X, then economic growth will rise by Y, said Mike Wittner, an energy analyst at Calyon.

Daily Telegraph - Market report - By Simon Goodley - (Filed: 26/09/2006)


London's reliance on Big Oil and metals caused a gloomy session for traders, as the price of a barrel of crude dropped below $60, provoking investors to re-evaluate their positions.

BP, one of the FTSE's biggest losers on the day, dropped 10 to 563p, despite news that the company had moved to restore output at Prudhoe Bay earlier than expected. Rival Shell lost 19p to 17.40. Meanwhile Tullow Oil dropped 7 to 350p after the company said it had agreed to acquire Australian oil and gas company Hardman Resources, up 25 to 78p, in a deal worth $1.11bn (584m).

Mining stocks were also caught up in the fall as base metals slipped on growing nervousness about falling demand. Vedanta, which has been suffering problems at one of its projects in India, was the main casualty, down 81p to 11.12. Elsewhere in the sector Xstrata was off 23p to 20.36, BHP Billiton down 34 to 853p, Anglo American 74p cheaper at 20.60 and Rio Tinto down 55p to 23.52.

Oil and mining sectors account for around 40pc of the FTSE, meaning that the sell-off was particularly keenly felt in London, pushing the benchmark FTSE 100 down 24 points to 5798. The mid-cap FTSE 250 lost 28.2 to close on 9755.8, while in New York the Dow Jones was trading off about 15 points at 11492 as City traders went home.

"The FTSE has given up its support at 5820 and has remained the weakest index in Europe," said Angus Campbell, a market strategist at spread betting group Finspreads. "With so much of the rally in the past 18 months coming from high expectations of increased earnings for oil and mining companies, the reversal of crude and metal prices has really caused investors in these stocks to reconsider their positions. Our clients are becoming defensive, being largely short of the FTSE with the expectation that equity prices will fall further in the weeks ahead."

Traders added that the market has broken its two week downside - a worry considering we are approaching October, traditionally a weak month.

AFX - 27 September 2006

November crude settled up $1.95 at $62.96 a barrel after hitting an intraday high of $63.10 a barrel.

October heating oil settled up 5.63 cents to $1.7141 a gallon. October gasoline settled up 4.81 cents to $1.5399 a gallon.

October natural gas settled down 32.5 cents at $4.201 a million British thermal units.

Bloomberg - Sept. 27

Oil Rises the Most in Six Months as Speculators Buy Contracts - By Mark Shenk


Crude oil rose, climbing the most in six months, as speculators who had sold contracts in a bet that prices would fall bought them back.

Prices failed to drop below $60, prompting the purchases. Futures have declined 20 percent from a record $78.40 a barrel on July 14. Oil fell earlier today after the release of an Energy Department report showing that U.S. inventories of distillate fuel, a category that includes heating oil and diesel, and gasoline rose last week.

``The report was clearly bearish but when the market failed to break into new territory, sentiment shifted,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. ``Short-term traders look at failure to decline as a bullish signal.''

Crude oil for November delivery rose $1.95, or 3.2 percent, to close at $62.96 a barrel on the New York Mercantile Exchange, the highest since Sept. 18. Prices had the biggest single-session gain since March 23. Oil touched a six-month low of $59.52 on Sept. 25 in New York.

Supplies of distillate fuel jumped 2.62 million barrels to 151.3 million. The gain left stockpiles 18 percent above the five-year average for the month. Gasoline supplies rose 6.3 million barrels to 213.9 million.

Crude oil supplies slipped 109,000 barrels to 324.8 million last week, the report showed. A decline of 1.7 million barrels was expected, according to the median of 13 analysts surveyed by Bloomberg News. The drop left inventories 6.3 percent higher than the five-year average for the date.

The department released its weekly report on petroleum inventories at 10:30 a.m. in Washington.



Iranian Standoff

Iran will not surrender its ``inalienable'' right to develop nuclear technology, President Mahmoud Ahmadinejad said, as diplomats met to try and resolve the international dispute over the country's atomic program. Iran, the world's fourth-biggest oil producer, ignored the United Nations Security Council's Aug. 31 deadline to freeze uranium enrichment or face sanctions.

``Iran's path is quite clear, the nation's right is inalienable and Iranians will make optimum use of all capacities,'' the state-run Islamic Republic News Agency quoted Ahmadinejad as saying in a speech today in Tehran.

Iran's nuclear negotiator Ali Larijani was today meeting with European Union foreign policy chief Javier Solana in Berlin for talks. The discussions are aimed at breaking the deadlock over Iran's nuclear activities, which the U.S. and its allies suspect are cover for building a weapon.

``I don't think Ahmadinejad's speech is the primary reason for today's move higher because there's little new in what he's saying,'' said Michael Fitzpatrick, vice president for energy risk management at Fimat USA in New York. ``The main reason for this move is the failure to break through $60.''

Brent crude oil for November settlement rose $2.09, or 3.5 percent, to close at $62.21 a barrel on the London-based ICE Futures exchange.



OPEC Concern

Organization of Petroleum Exporting Countries' President Edmund Daukoru wants action to be taken to prevent a further decline in the crude oil price, Reuters said, citing an interview yesterday in Abuja, Nigeria.

``Something needs to be done to steady the price,'' Reuters reported Daukoru as saying. ``We are already talking among ourselves in the OPEC fold. The price is very low and it's not good for investors.''

OPEC agreed this month to leave its members' production targets unchanged. OPEC ministers will discuss quotas when they meet Dec. 14 in Abuja.

``The big question is where OPEC will decide to put in a floor,'' said Bill O'Grady, an analyst with AG Edwards & Sons in St. Louis.

The Times - September 28, 2006

Falling oil price a real boon but can Opec live with it? - James Harding


THE September surprise has been the fall in the oil price. Since mid-July, a barrel of light sweet crude has dropped by more than 20 per cent from just over $78 to nearly $60.

This is the most important business development so far this year, holding out the possibility of an altogether more benign environment for British trade and industry in 2007. The surge in fuel costs has in the past year accounted for more than a third (34 per cent) of the total rise in manufacturing industrys input prices, just less than a third (29 per cent) of the increase in inflation. The rule of thumb is that a 10 per cent increase in the price of oil knocks about 0.1 per cent off global economic growth. By implication, a 20 per cent fall could provide a boost to growth of at least 0.2 per cent.

Just as higher fuel prices have acted as a choke on investment and spending, the fall in the cost of energy promises to lift a burden on both businesses and consumers. Think of it as a tax cut, not from Chancellor Gordon but King Abdullah.

The mystery is that there has been little change to the fear factors that at the beginning of the summer pushed up the price of crude and prompted analysts to forecast Brent soaring past $100 a barrel. The reasons not to be cheerful remain: the Iranian nuclear threat has hardly disappeared; peace has not broken out in the Middle East; Iraq is hardly a safe haven for foreign investment; nor is Nigeria; Commandante Chez and Czar Putin continue their arbitrary rule over national energy assets; the Peak Oil doomsayers have not gone away. So, what has changed?

Market forces are, finally, exerting their power over feelings. A global surplus of supply of 500,000 barrels per day (bpd) in 2005 has risen to about one million bpd in the first half of this year, dispelling the fear premium that accounted for as much as 20 per cent of the recent spike in the price. Inventories are rising stockdays of crude have risen from 70 to 74 days cover. Oil refineries have been running flat out to satisfy summer petrol demand and have built up huge stocks. There is now a glut of heavier oil products, middle distillates and heating oil, which will depress the market this winter. At the same time, there are signs of a slight weakening of demand, particularly as growth falters in the United States.

Meanwhile, non-Opec supply is growing with estimates of about between one million and 1.8 million bpd of extra oil coming on stream in 2007, creating competition for Opec producers. The Centre for Global Energy Studies estimates that that high non-Opec growth could send the oil price falling below $50 per barrel by the third quarter of 2007.

That is, if Opec does not act. The future oil price is, once again, in the hands of the cartel. If the oil producers want to sustain the oil price even at todays level, they will have to cut their output sharply this winter. But they have to agree what price they wish to defend: $60 a barrel? $50? The problem for Opec is that many of its members have grown accustomed to the extraordinary revenue. Venezuela, Iran, Iraq and Nigeria cannot easily afford to cut output. Algeria and Libya may talk a lot about a cut, but do little. It will be left, chiefly, to Saudi Arabia. The question is whether the Saudis, given the economic and demographic strains inside the Kingdom, can afford a $50 million a day loss in income.

When it comes to natural gas, bless the weather. The Met Office has been forecasting a mild winter, notwithstanding the possibility of a cold snap in January. A warm Christmas, as well as a huge increase in supply, have sent UK forward gas prices for this winter tumbling from 88p per therm in April to 61p this week.

Last winters price spikes and the brief emergency declared by National Grid were due to supply bottlenecks and frustration by UK gas shippers to secure supplies on the Continent. This year, the expectation is that more gas will be available to offset the steady decline in UK North Sea output. This week Norsk Hydro sent the first gas through Langeled, a sub-sea pipeline linking Norwegian gasfields to England. The Norwegians are planning to ship every molecule of spare gas down the Langeled pipe this winter. Some gas analysts predict the winter 2006 price could fall to 50p per therm. (The falling natural gas price should help to bring down electricity prices.)

Company finance directors and spendthrift shoppers alike have reason to hope that energy prices will be more manageable in the coming year, a function of the market economy rather than global anxiety. Oil may not fall back to its post-World War II average of $25.56 per barrel. But the surge was exaggerrated by huge volumes of hedge fund speculation. That would suggest the price will not halt here.

FT - September 28 2006

Crude spikes higher on Opec rumours - By Chris Flood


Crude oil spiked by more than $1 on Thursday after Reuters reported that the Organisation of the Petroleum Exporting Countries had agreed an informal production cut. However, the Opec secretariat in Vienna later said it was unaware of any agreement.

Nymex November West Texas Intermediate hit $64 a barrel but retreated to trade $70 cents higher at $63.66 a barrel. ICE November Brent jumped to $63.63 a barrel before easing back to trade $1.04 higher at $63.25.

Saudi Arabia started to trim its production earlier this month and speculation has been growing in the market that the cartel will cut output. But Edmund Daukoru, Opecs president, said yesterday that even if Opec reached an agreement to cut ahead of the cartel December 14 meeting, it would be difficult logistically to lower supplies before November at the earliest.

The expected slowdown in the US economy next year will not be enough to substantially hurt commodity prices, according to Credit Suisse. It said the crude oil market and key metals (copper, zinc and nickel) would continue to face several years of supply deficit.

The deficits are too large to be deluged by a US economic slowdown, especially one which is consumption-led rather than industrially driven, said Jay Bhutani of Credit Suisse.

Natural gas prices were weaker after the release of the latest US weekly inventories data which showed a 77bn cubic feet increase in stocks, slightly below market expectations. The continuing inventory rise means gas in storage is on track to reach 3.3 trillion cubic feet by the end of October, ensuring plentiful supplies even if there is prolonged cold winter weather.

FT - September 29 2006

Hedge fund interest in commodities growing - By Kevin Morrison


Energy and metal prices have had a significant correction since they reached their record or long-term peaks earlier this year but talk of a prolonged downturn may be premature.

Barclays Capital said the 53-month upward trend in the Goldman Sachs Commodity Index had been broken, as institutional investor inflows into commodity product indices slowed. But it said hedge fund activity in commodities was still growing, as was private investor interest.

The fall in the oil price below $60 a barrel this week prompted talk that oil could be heading for the mid-$50s. Such gossip was enough to spur some ministers of the Organisation of the Petroleum Exporting Countries into action to bolster the sagging, but still relatively high, oil price.

Nigeria and Venezuela said on Friday that they would cut oil output by up to 170,000 barrels a day from Saturday, equivalent to about seven per cent of Opecs estimated production.

While other Opec members said they would not formally cut output, they have been quietly lowering production this year.

Saudi Arabia is estimated to have produced an average of about 9.1m b/d in September, down about 200,000 b/d from its August output, and about 400,000 b/d lower than the same period last year.

The announcement by Nigeria and Venezuela had little effect on prices as traders had factored in a cut, after comments by Edmund Daukoru, Nigerias energy minister and Opec president, that Nigeria would look to trim output.

ICE Brent crude futures for November delivery slipped 6 cents to $62.48 a barrel by the close.

Brent touched a six-month low of $59.32 during the week, and is down more than 20 per cent from its recent peak of $78.65, having suffered its biggest price fall for 15 years in the quarter.

November West Texas Intermediate fell 96 cents to $61.80 a barrel in morning trade on the New York Mercantile Exchange, but settled 15 cents up on the day at $62.91 a barrel. During the week it touched a six-month low of $59.52.

Traders said the move by Opec was a sign that it did not want oil prices to fall below $60 a barrel.

Petroleum product prices have also had a poor quarter, with Nymex gasoline futures down by a third on the quarter to $1.4750 a gallon, and US heating oil futures 17 per cent lower at $1.6675 a gallon.

US natural gas futures are down 36 per cent from the beginning of August, but only nine per cent on the quarter.

Bloomberg

Crude Oil Is Steady as Slower Economic Growth May Curb Fuel Use - By Mark Shenk


Crude oil was little changed as slowing economic growth in the U.S., the world's biggest energy consumer, may cut fuel demand.

Consumer spending in the U.S. rose 0.1 percent last month, the smallest gain since November, the Commerce Department said today. Yesterday, the department cut its estimate of the nation's second-quarter economic growth to an annual rate of 2.6 percent.

``The personal spending and GDP numbers are taking some support away from the market because they translate into slackening energy demand,'' said John Kilduff, vice president of risk management at Fimat USA in New York.

Futures have declined 20 percent from a record $78.40 a barrel on July 14 as tensions in the Middle East eased and U.S. fuel stockpiles increased.

Oct. 2 - Bloomberg

Oil Falls to $61.03 on Signs OPEC Cuts May Have Little Impact - By Mark Shenk


Crude oil plunged to $61.03 a barrel in New York on speculation that the decision by Venezuela and Nigeria to cut output will have little impact on supply.

Venezuela and Nigeria will reduce crude production by a combined 170,000 barrels a day, the Organization of Petroleum Exporting Countries said on Sept. 29. The countries were unable to produce as much as their OPEC quotas allowed in August. Saudi Arabia, OPEC's biggest producer, hasn't announced a cut. Rising fuel stockpiles and a slowing economy have also weighed on oil.

``These cuts may prove to be illusory,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. ``The announcements are going to be taken with a grain of salt until the Saudis say they are going to cut, especially since they are voluntary.''

Crude oil for November delivery fell $1.88, or 3 percent, the biggest drop in almost two weeks, on the New York Mercantile Exchange. It was the lowest close since Sept. 26. Prices are down 7.9 percent from a year ago. Futures have declined 22 percent from a record $78.40 a barrel on July 14 as tensions in the Middle East eased and U.S. fuel stockpiles increased.

There is a global oil surplus of at least 500,000 barrels a day, Venezuelan Oil Minister Rafael Ramirez said in a statement Sept. 29 as he explained the country's decision to cut production. The country will reduce output by 50,000 barrels a day, and Nigeria will cut 120,000 barrels, OPEC spokesman Omar Farouk Ibrahim said.



Production Targets

Venezuela produced 2.5 million barrels a day in August, 723,000 barrels below the quota set by OPEC, according to a Bloomberg News survey. Nigerian output averaged 2.2 million barrels a day in August, 106,000 barrels less than allowed by the quota. The two nations were the fourth- and fifth-biggest sources of U.S. oil imports during the first seven months of the year.

``There is clear skepticism about the Nigerian and Venezuelan production cuts,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. ``We don't know if their statements are credible or if it would be sufficient to affect supply.''

Iran, OPEC's second-biggest oil producer, considers international oil prices too low and said it will support ``any'' OPEC measure that helps raise them. Iran produced 4.02 million barrels of oil a day in August, 90,000 barrels below its OPEC quota. Other OPEC members such as Saudi Arabia are exceeding their limits.



Iranian Support

``The Islamic Republic of Iran will support any effort by OPEC members to strengthen the oil market and return prices to an acceptable and rational level,'' Iran's OPEC Governor Hossein Kazempour Ardebili said, the state-run Islamic Republic News Agency IRNA reported today. Ardebili didn't specify whether Iran would change its current oil output to affect prices.

On Sept. 11, OPEC members agreed to leave their production targets unchanged at 28 million barrels a day. OPEC's next scheduled meeting is on Dec. 14 in Abuja, Nigeria. The group is responsible for about 40 percent of global oil output.

``Remember it's Venezuela and Nigeria that made the announcement, neither of whom has much credibility,'' said Kyle Cooper, director of research at IAF Advisors in Houston. ``The fundamentals look poor. Supply is there and the demand is not.''

U.S. inventories of gasoline and distillate fuel, a category that includes heating oil and diesel, probably rose last week, according to a Bloomberg News survey. Crude oil, gasoline, heating oil, diesel and natural gas supplies in the week ended Sept. 22 were above the five-year average for the period, the Energy Department said.

``Inventories are really comfortable,'' Evans said. ``The accumulation on the product side is particularly important because that means the fuel is close to the consumer. There is less worry about a refinery or pipeline outage with these inventories.''

Brent crude oil for November settlement declined $2.03, or 3.3 percent, to close at $60.45 a barrel on the London-based ICE Futures exchange.

FT - October 3 2006

Oil falls as hurricane threat receeds - By Chris Flood


Crude oil sank below the $59 a barrel level on Tuesday, extending Mondays sharp falls amid growing confidence that this years hurricane season will end without a major storm.

Colorado State University, the leading academic forecasters, said on Tuesday that no more major hurricanes will form in the Atlantic this season.

Following hurricane Katrina last year, the US goverment sold 11m barrels of oil from its strategic stockpiles but it is to delay buying replacement supplies, making more crude available for refineries providing winter heating oil.

Ahead of the latest US weekly inventories data, due out on Wednesday, traders saw high existing levels of US crude and distillate stocks as reasons to drive oil prices to their lowest since February.

ICE November Brent traded $1.81 lower at $58.63 a barrel after it hit a low of $58.37. Nymex November West Texas sank to $58.84 before recovering to trade $1.83 lower at $59.20 a barrel.

The impact of Venezuela and Nigerias recent proposals to cut oil output by a total of 170,000 barrels a day was played down by analysts.

Mike Wittner, global head of energy market research at Calyon, said Nigeria and Venezuela were usually early advocates for production cuts but they had little usable spare capacity, so the burden would fall on Saudi Arabia, with some help from Kuwait and the UAE.

Saudi Arabia is rumoured to be trimming output already, reflected in lower tanker volumes in September, but it is likely to proceed cautiously ahead of the US mid-term elections, as energy prices have become a campaign issue.

A warm winter could potentially drive US crude prices temporarily below $50 a barrel, according to Francisco Blanch, commodity strategist at Merrill Lynch. With US and European distillate inventories already at high levels, a mild winter could reduce distillate demand by 245,000 barrels a day compared to normal. This would force heating oil prices lower and also have a knock-on impact on gasoline prices.

Opec may not be able to prevent a price collapse, as non-Opec crude producers are likely to be able to bring a significant amount of new capacity on stream, said Mr Blanch.

Nymex November heating oil fell almost 5 cents to $1.6550 a gallon, with distillate stocks expected to have risen 1.3m barrels last week. Nymex November unleaded gasoline fell just over 4 cents to $1.4650 a gallon, with stocks forecast to have risen by 0.9m barrels last week.

Gold fell 2.1 per cent to $592.70 a troy ounce as oils retreat put precious metals under pressure. Silver dropped 3.6 per cent to $11.05, while platinum sank 2.4 per cent to $1,120 a troy ounce.

Trading volumes for base metals were light due to holidays in China. Copper sank 2.4 per cent to $7,340 a tonne, while nickel fell 1.5 per cent to $28,800 a tonne.

Oil bounces back
Kuwait says it may follow OPEC members Venezuela and Nigeria in production cuts; inventories on tap.
October 4 2006: 9:25 AM EDT
LONDON (Reuters) -- Oil rose above $59 a barrel Wednesday after Kuwait said it may join other OPEC countries in cutting output if prices continue their three-month slide.

Kuwait's announcement offset expectations for a further rise in U.S. distillate and gasoline stockpiles, which helped prices dip to an eight-month low earlier in the session.

U.S. crude climbed 36 cents to $59.04. London Brent rose 42 cents to $58.91, after hitting this year's low of $57.78 earlier in the session.

Oil's 25 percent drop from its mid-July peak of $78.40 prompted OPEC President Edmund Daukoru on Tuesday to call on other OPEC members to follow the lead set by Nigeria and Venezuela in cutting exports.

But an OPEC source said Wednesday that other producers were unlikely yet to publicly pledge to trim supplies.

Kuwait's oil minister said it may take action if prices fall further below $60 a barrel.

"Kuwait may voluntarily lower (oil output) in order to maintain the market's stability," Sheikh Ali al-Jarrah al-Sabah told Reuters in an interview.

"The current situation with prices and the big retreat that has taken place is uncomfortable for OPEC nations," he added.

Pressed on price, he said $60 a barrel for U.S. crude was comfortable but $50 was worrying.

Venezuelan President Hugo Chavez said the price of oil should not fall below $60 a barrel, while the country's energy minister said markets were oversupplied by 500,000 barrels.

"What's frightened OPEC is the speed of the price decline - and it's easy to rationalize because stocks are high. There is definite cause for concern," said energy consultant Geoff Pyne.

"But oil at $60 is still high in absolute terms, so it's a difficult political decision for some producers to cut supply - especially Saudi Arabia."

Brimming U.S. stockpiles
U.S. data, set for release at 10:30 a.m. ET, are expected to show a 1.5 million barrel build in distillate stocks, according to a Reuters poll of analysts.

If the forecast holds, distillates such as heating oil will have risen for the past two months.

Gasoline supplies are seen up 700,000 barrels, while crude stockpiles are expected to fall 500,000 barrels.

Japan, the world's third-largest energy consumer, also has healthy heating oil stocks, which are at the highest level since last November.

"Inventories are huge - sentiment is completely bearish," said Tetsu Emori, chief commodities strategist at Mitsui Bussan Futures in Tokyo.

But given a risk of further supply disruptions and higher winter demand, some analysts expect a rebound.

"I would think anything below $60 is a buying opportunity so on a technical perspective, prices would see a rebound soon," said Gerard Burg, a commodities analyst at the National Australia Bank.

Oil price forecasts raised for 2007 on rising demand

Wednesday, October 04, 2006

Oil analysts are raising their price estimates for next year in anticipation of increased demand that may outpace the development of new deposits.
Crude oil will average US$64 a barrel in New York in 2007, according to the median forecast of 29 analysts surveyed last week.

That is US$2 (HK$15.60) higher than predicted at the end of the second quarter. Analysts failed to predict the rise in oil throughout a five-year rally during which prices tripled.

"We see a very tight market continuing into next year," said Kevin Norrish, a director of commodities research for Barclays Capital in London. Barclays expects oil next year to average US$76.70 a barrel, the highest forecast in the survey.

"The recent fall in prices is due to short-term factors," he said. "We're looking for fairly strong global growth, and we don't see capacity expanding by much."

Benchmark oil futures touched a record US$78.40 a barrel July 14 on the New York Mercantile Exchange on concern that fighting between Israel and Hezbollah in Lebanon would spread through the Middle East.

Prices fell after fighting ended in Lebanon and the Gulf of Mexico storm season passed without a repeat of last year's hurricanes, which crippled oil production and refineries.

Oil's climb from less than US$20 a barrel at the end of 2001 has been driven by the failure of producers to generate new supplies fast enough to keep pace with rising demand, especially in China.

Analysts are betting that trend will continue. They forecast oil would be US$58 a barrel at the start of 2006, according to the median in a survey last December. So far, crude oil has averaged US$68.26, higher than any prior year.

"We just haven't seen dramatic increases in supply," said James Rollyson, an analyst at Raymond James Financial in Houston. Raymond James is predicting US$70 oil next year after forecasting US$58 at the beginning of this year.

Oil consumption worldwide rose 9percent to an average 83.8 million barrels a day between 2000 and 2005, led by China and the United States, according to the US Energy Department. Global oil supply rose 8.6 percent to 84.5 million barrels.

Prices surged during the first half as Iran, the fourth-largest oil producer, pushed ahead with nuclear fuel enrichment, heightening tensions with the US.

Talks in Berlin between Iran and European Union officials aimed at breaking the deadlock over the atomic program produced some progress.

Oil will average US$65.50 a barrel in the fourth quarter, according to the median estimate in the survey.

Analysts in June said oil would average US$67.65 a barrel during the third quarter. Prices averaged US$70.60 during the past three months, a record.

Strategists who forecast a drop in prices next year say a slowing US economy will coincide with increased output.

US economic growth slowed to a 2.6 percent pace in the second quarter, three percentage points lower than the first three months of the year, the Commerce Department said on September 28.

"We're very pessimistic about the US and global economy next year," said Eoin O'Callaghan, an analyst with BNP Paribas in London who expects oil to average US$59.80 next year.

Rising fuel stockpiles in the US, which is responsible for 25 percent of global energy use, helped cause the decline in prices in the third quarter.

Spot prices are cheaper than futures for oil delivered later in the year, a market condition called "contango."

This has led to increased inventories, but it may end in coming months, said Adam Sieminski, chief energy economist at Deutsche Bank Securities AG in New York. He expects oil to average US$61 a barrel in 2007.

BLOOMBERG

FT - October 4 2006

Oil struggles to recover from recent weakness - By Chris Flood


Oil markets struggled to stabilise on Wednesday as news of a bigger-than-expected increase in US crude inventories offset a threat by Kuwait to join other members of the Organisation of the Petroleum Exporting countries in cutting output if crude prices weakened further.

Sheikh Ali al-Jarrah al-Sabah, Kuwaits new oil minister, said crude production could be reduced to maintain market stability and that the country was in negotiations with other Opec members about voluntary cuts in output.

Kuwait is the first Gulf state to move but Saudi Arabia raised its official selling price for November crude for delivery to Europe by more than $1 a barrel yesterday which is expected to reduce shipments further.

Momentum in favour of action among Opecs members is growing following Nigeria and Venezuelas recent moves to cut production by a total of 170,000 barrels a day.

After a decline of more than $4 a barrel in the previous two sessions, crude prices remained choppy with the release of the latest weekly US inventories data. Crude stocks rose 3.3m barrels, well above the consensus market forecast for a 0.5m barrel decline. Nymex November West Texas Intermediate fell to as low as $57.75 a barrel before recovering to trade 4 cents higher at $58.72 as barrel.

ICE November Brent sank to $57.70 a barrel, its lowest level this year, before recovering to trade 14 cents higher at $58.57 a barrel.

Nymex November heating oil edged up 1 cent to $1.6640 a gallon after distillate stocks rose 200,000 barrels compared with the consensus forecast for a 1.5m barrel increase.

Nymex unleaded gasoline firmed 1 cents at $1.4714 a gallon after a rise of 1.2m barrels in gasoline stocks compared with the consensus market forecast for a 0.7m barrel increase.

Source: Globe and Mail - 4 October 2006

Commodity bear market begins now: Merrill


Commodity prices are due for a "protracted bear market" after speculators drove prices artificially high in recent months, Merrill Lynch & Co.'s chief investment strategist said Wednesday.

"We commented early last month that the level of speculation in commodities was at an all-time high," said Richard Bernstein in a report. "Despite September's pullback in overall commodity prices, the level of speculation has actually risen!"

Merrill was not the only brokerage betting that the commodity space is getting riskier. An RBC Dominion Securities analyst turned bearish on the Canadian oil field services sector Wednesday, urging investors to view companies working in the field with caution, given the sharp drop in natural gas prices.

"In light of further risks to gas prices, exploration and production spending, and pressures on service pricing and margins created by potentially lower activity levels and more capacity, defensiveness and caution should continue to be the main theme over the next 6-9 months," RBC's Angela Guo wrote in a note.

Merrill's Mr. Bernstein measured the level of speculation in the market by comparing spot prices of commodities that trade exchange-listed futures with spot prices of commodities that do not. He believes that speculation is more likely to occur in the futures markets than in the physical markets.

"By our reckoning, commodities' prices are now about 60 per cent above what could be explained by fundamental supply and demand," the Merrill report said.

Its research suggests that September's drop in commodity prices might "only be the beginning" of a long-term drop in prices.

"We find it amusing that a consensus has now formed that housing is speculative and overdue for an extended pullback, yet many commodities have appreciated much more than housing has, and have done so in a shorter period of time," Mr. Bernstein said.

"Housing is speculative, but commodities are purely a fundamental story? We disagree."

The report comes a day after Merrill's U.S. sector strategist Brian Belski downgraded the U.S. energy sector to "underweight." He predicted the energy sector will underperform the stock market over the coming months.

RBC took a closer look at investing in the companies that provide products and services for the major oil and natural gas companies. The sector has provided another way for investors to profit from the boom in the resource sector.

But the price of natural gas the most common U.S. home heating fuel has dropped nearly 25 per cent since August 1 to its lowest level in nearly two years as North American inventories swelled on the extended warm weather. The drop in natural gas has forced some companies such as Canadian Natural Resources Ltd. to slash their natural-gas drilling plans.

RBC's Ms. Guo said a new look at the risk-reward profile of companies in the oil-field services sector triggered wide-spread downgrades in the sector.

Akita Drilling Ltd., Trinidad Energy Trust, Mullen Group Income Fund, Pason Systems Inc., CHC Helicopter Corp., and Flint Energy Services Ltd. were all downgraded to 'underperform.' Ensign Energy Services Inc., Precision Drilling Trust, Calfrac Well Services Ltd., Trican Well Service Ltd., Cathedral Energy Services Income Trust, and Total Energy Services were all cut to 'sector perform.'

Although the sector looks cheap now, there is no compelling reason to pick up the stocks, Ms. Guo said, nothing that a lack of near-term positive catalysts and continued uncertainty on earnings estimates will likely keep the sector depressed.

"As a dramatic measure of maximum risks should the oil price fall significantly due to macro economic reasons, while the gas price dips further due to a warm winter, applying the historical trough trailing multiples to the stocks would imply an average downside of 24 per cent for the sector from current levels."

Ms. Guo left her 'outperform' recommendations on Savanna Energy Services Corp., Enerflex Systems Ltd., CCS Income Trust and ShawCor Ltd., saying the stocks were already either oversold or more defensive in nature.

The last four companies have a more "favourable" relative risk-reward profiles when compared with the rest of their peer group and could be purchased by "value-oriented investors seeking exposures to the sector," she said.

Market report: Wednesday close
Mickey Clark, Evening Standard
4 October 2006


As crude prices briefly slumped to their lowest of the year, one long-term bull, UBS, appeared to be taking a more cautious stance on prospects. The broker has downgraded Tullow Oil, 9p lower at 358p, from neutral to reduce while slashing its target price from 375p to 330p.

Burren Energy, 15p off at 818p, remains a buy but has seen its target cut from 1065p to 1030p, along with Cairn Energy, down 61p at 1775p, which UBS has trimmed from 2600p to 2450p.

Venture Production, down 19p at 703p, which recently benefited from news of a new drilling campaign in the North Sea, remains a buy with its target increased from 1010p to 1040p.

UBS has also begun coverage of Premier Oil, 7p cheaper at 1010p, with a buy rating and a 1300p target while Dana Petroleum, 44p lower at 1126p, is rated at neutral with a 1240p target. UBS says Dana and Tullow have strong reserves of oil, but warns this is already factored in to their share prices.

BP bounced back to trade 1p higher at 570p after initially being marked lower following a disappointing trading update. That spike in BP, which has a big weighting in the Footsie 100 index, enabled the rest of the market to rally from opening falls.

The Times - October 05, 2006

Opec plans cuts


Opec, the oil cartel, has agreed informally that it needs to cut production by at least one million barrels a day, or 4 per cent, to boost the falling price of oil. Most cartel members back a voluntary reduction and the deal could be ratified as early as the groups mid-December meeting in Abuja, Nigeria. Opec is going to defend a price floor for its oil of $50-$55 a barrel, one Opec official said.

Bloomberg - Oct. 6

Oil Falls on Speculation Saudi Hasn't Agreed to Any Output Cut - By Hector Forster


Crude oil fell on speculation Saudi Arabia, the world's largest producer, hasn't agreed to participate in any output cut by the Organization of Petroleum Exporting Countries.

OPEC President Edmund Daukoru said yesterday there is no formal agreement among member countries to lower output. This week, he urged members to lower production before the group's next scheduled meeting in December, and started the process with a cut from his own country, Nigeria.

``Saudi Arabia seems not to agree on any cutback plan until oil falls below $55,'' said Makoto Takeda, an energy analyst at Bansei Securities Co. in Tokyo. ``Prices are likely to turn downward and test Wednesday's low. We haven't found a bottom yet.''

Crude oil for November delivery fell as much as 43 cents, or 0.7 percent, to $59.60 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It traded at $59.74 at 12:53 p.m. Singapore time.

Prices declined to $57.75 a barrel on Oct. 4, the lowest in more than seven months.

Crude oil may rise next week on speculation a growing number of OPEC members favor cutting production to bolster prices. Fifteen of 34 analysts, traders and brokers, or 44 percent, said prices will gain next week, according to a Bloomberg News survey.

Brent crude oil for November settlement dropped as much as 27 cents, or 0.5 percent, to $59.73 a barrel on the London-based ICE Futures exchange.



OPEC Output

Nigeria and Venezuela said last week they will cut output by a combined 170,000 barrels a day.

``The consensus that we can all agree on is that the market is very soft,'' Daukoru said by telephone from Abuja, Nigeria. ``It's more or less a free fall.''

OPEC, which may meet this month to debate a cut, may slash production by at least 1 million barrels a day, Algeria's state- owned news agency said yesterday. OPEC will hold an emergency two-day meeting starting Oct. 18 at its headquarters in Vienna, Algiers-based Algerie Presse Service said.

``I do not think they were ready for prices to fall as fast and as far as they actually had,'' said Jonathan Barratt, a founder of Sydney-based Commodity Broking Services. He predicts prices to rise as high as $68 in winter before retreating to the $50-a-barrel level.



Commodity Prices

September's decline in oil and other commodity prices may be the start of a ``protracted bear market'' after speculation by investors pushed prices too high, Merrill Lynch & Co. said.

Speculation has lifted prices 60 percent higher than they should be, given supply and demand levels, Richard Bernstein, Merrill's chief investment strategist in New York, said in an Oct. 3 report.

Morgan Stanley, the world's biggest securities firm by market value, said yesterday the commodities ``supercycle'' isn't over and prices may rise because of production shortages next year.

Global commodity supplies, which are three to five years behind demand, may test record lows in 2007, the New York-based bank wrote in a report yesterday.

``The next leg upward in the commodities cycle'' will happen in the next six to 12 months, it said.

dai oldenrich, like the thread and the metals one. Thanks.

Thanks Eddie. I only post factual up-to-date articles as you can read a wide range of differing opinions on many BBs. Glad they are helpful. Dai.

FT.COM - October 6 2006

Crude lower, commodity weakness continues - By Kevin Morrison


Oil prices fell about 5 per cent this week in spite of planned production cuts by the Organisation of the Petroleum Exporting Countries and the prospect of sanctions against Iran, Opecs second largest producer, by the US.

Prices remained weak in afternoon trade on Friday even after the US said there might be an announcement next week to discuss possible sanctions against Iran over its nuclear ambitions.

Edmund Daukoru, Opec president, said on Friday that he hoped the oil cartel could reach a consensus on Monday on a planned production cut of 1m barrels a day.

Some Opec members have already starting trimming supplies. Saudi Arabia, the worlds largest oil exporter, has cut output by 200,000 barrels a day over recent months.

ICE Brent for November delivery retreated 74 cents to $59.26 a barrel in late afternoon London trade. This left prices down about 5 per cent on the week, and almost 25 per cent below their peak of $78.60 a barrel touched in early August.

November West Texas Intermediate fell 76 cents to $59.27 a barrel on the New York Mercantile Exchange, leaving it down almost 6 per cent on the week.

Kevin Norrish, energy analyst at Barclays Capital, said the oil price had continued to slide because the market was confused by the Opec announcements, which had so far mainly come from the Opec president rather than the secretariat.

The fact that Opec wants to make cuts at this juncture implies that Opec wants a basket price of about $60 to $62, which means about $65 to $67 for WTI, and this is positive for fundamentals, said Mr Norrish.

UK spot gas prices recovered to 12.25p per therm after dropping into negative territory in the week after gas started flowing from the new Langeled pipeline in Norway.

The drop in oil prices has been mirrored by a slide in gold prices. Bullion fell $1.85 to $567.00/$567.75 a troy ounce on Friday, down 5.2 per cent on the week and 22.3 per cent below its 26-year peak of $730 in May.

Oil has become a key barometer of inflation expectations and gold is also an indicator of inflation expectations, so it is no great surprise that there is a relationship between the two. It is a surprise that golds relationship with oil is stronger at the moment than the dollar-gold relationship, said Robin Bhar, metals strategist at UBS.

The weakening dollar provided no support to gold, but gold found support when oil prices rose briefly this week after the initial Opec announcement, said Mr Bhar.

Reuters - Fri Oct 6, 2006 11:59 PM - By Vivianne Rodrigues


A rally in U.S. stocks that pushed the Dow industrials to a record may stall next week as signs of an economic slowdown curb the appetite for equities just as the third quarter's earnings season gets under way.

This week, the blue-chip Dow Jones industrial average hit a record closing high and an all-time intraday high for three days in a row in a rally driven by a sharp drop in oil prices and expectations that the Federal Reserve will not raise interest rates in the near future.

The rally also propelled the Standard & Poor's 500 Index to fresh 5-1/2-year highs more than once.

But on Friday, weaker-than-expected September employment data, following a White House forecast for slower GDP growth late on Thursday, brought the rally to a halt and may drag stocks lower in the week ahead, analysts said.

"We had a long run in equities and we're probably due for a sell no matter what the news is," said Elliot Spar, market strategist at Ryan Beck & Co., in Shrewsbury, New Jersey. "If the economy is going to go down, then you have to worry about earnings momentum."

Investors will scrutinize corporate profits next week, Spar said, as the earnings season heats up, with Alcoa Inc., Costco Wholesale Corp. PepsiCo Inc. and General Electric Co., slated to report.

Trading may be lighter than usual on Monday as the U.S. bond market will be closed in observance of the Columbus Day holiday. The U.S. stock market will remain open.


BEWARE OF THE JINX MONTH

For the week, stocks rose -- with the Dow up 1.5 percent, the S&P 500 up 1 percent and the Nasdaq up 1.8 percent.

The Dow average closed at record highs three times in the week, with an intraday high on Thursday at 11,870.06, its highest level since Jan. 14, 2000. On Thursday, the S&P 500 closed at 1,353.22 and peaked intraday at 1,353.79 -- with those levels marking the highest since Feb. 5, 2001.

For the year to date, the Dow is up 10.6 percent, the S&P 500 is up 8.1 percent and the Nasdaq is up 4.3 percent.

After stocks broke new ground last week, some investors may be more cautious during the rest of October, known as "the jinx month," according to the Stock Trader's Almanac, because of stock market crashes in 1929 and 1987.

Volatility may increase early this week, traders said, with the possibility of a nuclear weapon test by North Korea over the weekend.

"If they do go ahead with the test, the stock market may get a bit more skittish," said Tim Smalls, head of U.S. stock trading at brokerage firm Execution LLC in Greenwich, Connecticut. "It's just one thing we don't need right now."

The White House said on Friday that it had no new information to disclose about whether a nuclear test was being planned, but said North Korea should not carry out the test.

On Friday, U.S. crude oil for November delivery settled at $59.76 per barrel -- down 5 percent for the week. NYMEX crude is down 24 percent from its record set in July.


EARNINGS ON FRONT BURNER

On Tuesday, the third-quarter earnings season kicks off for blue chips with Alcoa reporting results, followed by General Electric on Friday.

"Earnings have been on the back burner, and they move to the front very soon," said Michael Panzner, vice president of sales trading at Collins Stewart in New York. "I have a funny feeling things haven't been particularly great."

S&P 500 companies are expected to achieve third-quarter earnings growth of 14.1 percent from a year earlier, according to Reuters Estimates. Meanwhile, pre-announcement activity for U.S. companies stayed negative for the week ended Sept. 29.


FOMC MINUTES, RETAIL SALES AHEAD

Next week's economic data could help investors assess the likely magnitude of consumer spending before the start of the holiday season as well as the Fed's view of the economy.

On Tuesday, the government releases its report on wholesale inventories for August. Economists polled by Reuters expect inventories to rise 0.7 percent, down from a 0.8 percent gain in the previous month.

Minutes of the Federal Open Market Committee's Sept. 20 meeting will be released on Wednesday and the Fed's Beige Book -- a survey of economic conditions in the Fed's 12 districts -- will follow on Thursday.

The international trade deficit for August, also due on Thursday, is forecast at $66.70 billion, down from $68 billion in July, according to the Reuters poll.

A slew of data is due on Friday, including import prices, retail sales and the University of Michigan's reading on consumer confidence.

Import prices likely shrank 1.2 percent in September, after a 0.8 percent gain in the previous month, according to the estimates of economists surveyed by Reuters.

Retail sales for September are forecast to rise 0.2 percent, matching a 0.2 percent gain in August, according to economists polled by Reuters. Excluding auto sales, September's retail sales are seen unchanged, compared with a 0.2 percent gain the previous month.

The preliminary October reading of the University of Michigan's consumer sentiment index probably will show a rise to 86.5 from 85.4 in September, according to the Reuters poll.

Bloomberg - 6 October 2006

Crude Oil Falls Amid Speculation OPEC Won't Make Proposed Cuts - By Mark Shenk


Crude oil fell on speculation that members of the Organization of Petroleum Exporting Countries won't follow through with production cuts.

``Lately OPEC hasn't had to do anything,'' said Bill O'Grady, an analyst with AG Edwards & Sons in St. Louis. ``It gets hard when they have to make sacrifices. Nobody wants to cut while the other guys continue to pump and reap gains.''

Nigeria and Venezuela said last week they would cut a total of 170,000 barrels a day to prop up prices. OPEC President Edmund Daukoru said in an interview yesterday that Saudi Arabia, Libya, Algeria, Kuwait and Iran may join in the cuts. Saudi Arabia would back a consensus by members on whether to reduce output and wouldn't oppose a meeting, Al-Hayat newspaper reported today.

Crude oil for November delivery fell 27 cents, or 0.4 percent, to close at $59.76 a barrel on the New York Mercantile Exchange. Prices touched $57.75 on Oct. 4, the lowest since Feb. 16. Futures have declined 5 percent this week and are down 24 percent from a record $78.40 a barrel on July 14 as tensions in the Middle East eased and fuel stockpiles increased.

Daukoru said today the group may reach a consensus by Oct. 9 on supply cuts of as much as 1 million barrels a day, Reuters reported. OPEC members remain undecided on whether to hold an emergency meeting on Oct. 18 and 19 in Vienna, he said, Reuters reported.


Proposed Meeting

``OPEC is likely to hold an emergency meeting Oct. 18 and 19 in Vienna if the members show readiness to carry out a substantial reduction in production of not less than one million barrels a day,'' the London-based daily said, citing an unidentified OPEC official. ``Saudi Arabia, as the largest OPEC member, supports any position on which there is a consensus.''

The group's next scheduled meeting is Dec. 14 in Abuja, Nigeria. The 11 members of OPEC, which produce about 40 percent of world oil, kept their output target at 28 million barrels a day at their Sept. 11 meeting.

``High inventories and falling prices are not a very good scenario for OPEC,'' said Francisco Blanch, senior oil strategist at Merrill Lynch & Co. ``I think $55 a barrel is probably a level they would want to hold onto, certainly $50 would get them quite nervous.''

U.S. crude oil, gasoline, heating oil, diesel and natural gas supplies last week were above the five-year average for the period, the Energy Department said on Oct. 4. The U.S. consumes 25 percent of the world's oil.

``The market is well supplied and it looks like economic growth will be slower in 2007 than in 2006,'' said Jason Schenker, an economist with Wachovia Corp. in Charlotte, North Carolina. The slowdown ``is being interpreted as bearish for energy demand.''


Iranian Talks

European Union talks with Iran on restricting the Islamic Republic's nuclear program have failed, U.K. Foreign Secretary Margaret Beckett said. The U.S. and EU say Iran's nuclear power program is aimed at developing weapons, which would put it in breach of treaty obligations and risk escalating tensions in the Middle East, source of almost a third of the world's oil.

The U.S. is pushing for economic sanctions to discourage Iran from acquiring nuclear arms. Russia, which has veto power as one of the five permanent members of the United Nations Security Council, yesterday reiterated its opposition to immediate sanctions.

www.thepost.ie - 08 October 2006

Rise of commodities unlikely to be sustained - By Eugene Kiernan


Commodities have garnered a lot of the financial market limelight in 2006. In the past 18 months, the prices of basic commodities such as aluminium, copper, lead and zinc have doubled in value.

Commodity prices have indeed run very hard. Since the end of 2001, base metal prices have soared about 270 per cent and oil prices have also risen. From $19 for a barrel of oil in 2001 to around $60 currently, we have seen a tripling in energy costs.

This move in commodities has generated a lot of interest and led many portfolio investors to consider commodities as an asset class to be included in pension funds. Base metals, as measured by the Bloomberg Base Metals Index, peaked in early May, slumped by over 20 per cent to mid-June, and then staged a slow recovery. They are currently 10 per cent below these recent highs today. As a pattern, it was not dissimilar to what we saw in many global equity markets.

Oil prices displayed a different pattern, rising to just under $79 for Brent crude in early August only to slide by 25 per cent in the weeks since. This decline has been partly responsible for the better feel to equity markets since mid summer. Do these short-term trends have any implication for investors? The commodity which attracts the most attention is oil. Energy prices have been dancing to a different beat in this most recent period. The most recent leg has been clearly downward. How have economies and markets responded to these gyrations?

Its not that economies have become immune to energy price increases, but they have learned to cope better.

Oil companies are an important part of many of the global stock markets today. In Britain, oil companies will account for about 20 per cent of all profits earned in the market. In the US, majors such as Exxon and Chevron account for 6 per cent or so of the S&P index.

Higher oil prices mean stronger cash flows for these companies, but volatile oil prices can hamper planning and indeed final customer demand. Senior management from the global players in this industry have always spoken about long-term pricing for oil being substantially below the level we approached in mid-2006. The key point from an investors point of view is that at oil price levels even lower than today, free cash flow in these companies will still be sufficient to fund developing the business and allow cash to be returned to share holders in healthy dividends or buy-backs.

This robust aspect of energy stock performance is clearly displayed when we look at how their share prices have done even as oil prices have plummeted. The energy sector has lagged other sectors of the market, but the fallout is not as severe as the fall in the energy price itself.

These are volatile times for commodity prices, but what recent moves may have shown investors is that the hyper growth rate that we have seen in commodity prices should not be extrapolated into the future. Oil shares and the oil price are not the same thing.

Oct. 9 (Bloomberg)

Oil Rises After Saudi, OPEC Members Agree to Cut Production - By Christian Schmollinger and Gavin Evans


Crude oil rose in New York after Saudi Arabia and five other OPEC members agreed to cut output by about 3.4 percent to stem a two-month slide in prices.

The six countries, including Venezuela and Nigeria, which promised to lower production on Oct. 1, will reduce supply by 1 million barrels a day, Levi Ajuonuma, spokesman for the Organization of Petroleum Exporting Countries, said yesterday. The 11-member group pumps about 40 percent of the world's oil.

``A 3 1/2 percent cut is quite substantial considering they said a month ago they wouldn't be making any,'' said Steven Rowles, an analyst with CFC Seymour Ltd. in Hong Kong. ``It really comes down to what Saudi Arabia is going to be cutting.''

Oil for November delivery rose as much as 74 cents, or 1.2 percent, to $60.50 a barrel in after-hours electronic trading on the New York Mercantile Exchange. North Korea's announcement today of its first nuclear weapons test failed to move the market because the country doesn't export oil, said Rowan Menzies, an analyst at Commodity Warrants Australia in Sydney.

Crude fell to a seven-month low of $57.75 on Oct. 4 as U.S. inventories rose and concerns eased about a standoff between the U.S. and Iran over the Middle East oil producer's nuclear program. OPEC usually increases output in the fourth quarter when global demand peaks because of heating-fuel use.

Oil traded at $60.16 at 1:07 p.m. Singapore time. Prices have dropped 23 percent from a record $78.40 on July 14.

In London, Brent crude oil for November settlement gained as much as 73 cents, or 1.2 percent, to $60.56 cents on the ICE Futures Exchange.

Demand in the fourth quarter will average 85.6 million barrels a day, up 2.2 percent from a year ago, OPEC said in a Sept. 15 forecast.



Quota Review

Saudi Arabia, Libya, Algeria, and Kuwait joined Venezuela and Nigeria, which announced their cut last week. The plan by the six countries represents a 3.4 percent reduction from last month's estimated output by OPEC.

OPEC President Edmund Daukoru urged member states Oct. 3 to lower production before the group's next scheduled meeting in December. Venezuela and Nigeria pledged to cut output by a total of 170,000 barrels a day.

The group agreed at a meeting on Sept. 11 to leave its output ceiling unchanged at 28 million barrels a day. The quota doesn't apply to Iraq, which pumped about 2 million barrels a day last month. OPEC may say today whether it plans to hold an emergency meeting to ratify the informal cuts that have been agreed, Ajuonuma said.



Winter Demand

OPEC didn't give details of the size of the cut by each country. Saudi Arabia is the world's biggest oil producer and accounted for about 31 percent of the group's output last month.

``This will put a floor in the market'' around $60 a barrel, said Gerard Burg, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. Further cuts may not be needed once falling temperatures boost winter heating demand in the Northern Hemisphere, he said.

North Korea said it detonated a nuclear bomb, hours after the Japanese and Chinese governments warned the communist country against proceeding with the test.

``The nuclear test, conducted under a scientific method and under specific calculations, did not cause any danger,'' North Korea's official Korea Central News Agency said today. It is the first time North Korea has announced a nuclear test.



Oil Bets

Rising stockpiles and falling prices prompted hedge-fund managers and other large speculators to almost eliminate their bets on higher oil prices last week, according to a U.S. Commodity Futures Trading Commission report.

Speculative long positions, or bets prices will rise, fell by 99 percent to 131 contracts in the week ended Oct. 3. That was the smallest long position in New York oil futures since March 24, according to commission data.

Oil stockpiles in the U.S., the world's biggest consumer, held 328.1 million barrels on Sept. 29, or 6.7 percent more than a year earlier, the Energy Department said last week.

Supplies of distillates, including diesel and heating oil, held 151.5 million barrels, 18 percent higher than a year ago.

``Inventories around the world, most notably in Europe and North America, are quite high already,'' National Australia's Burg said.

Oct. 11 (Bloomberg)

Oil Trades Near Eight-Month Low on Saudi Shipments, Inventories - By Gavin Evans and Hector Forster


Crude oil traded near an eight-month low on concern Saudi Arabia's decision to maintain shipments amid a seasonal drop in demand will increase global stockpiles.

Oil closed yesterday at its lowest since February after Saudi Arabia's state oil company told customers in Asia and Europe to expect no cutbacks in their November supplies. A U.S. government report tomorrow will probably show already above- average inventories in the world's biggest oil consumer gained 1.5 million barrels last week.

``Saudi Aramco seems to be quite happy at these sorts of levels'' for oil prices, said Peter McGuire, managing director of Sydney-based Commodity Warrants Australia said in an interview in Hong Kong. ``We could see oil move down to $55.''

Crude oil for November delivery was at $58.51 a barrel, down 1 cent, in after-hours electronic trading on the New York Mercantile Exchange at 12:05 p.m. in Singapore. The contract fell $1.44, or 2.4 percent, to close at $58.52 a barrel yesterday, the lowest since Feb. 16.

OPEC, the Organization of Petroleum Exporting Countries, pumps about 40 percent of the world's oil, and wants to trim production by 1 million barrels a day to stem the slide in prices. The 11 member states produced about 29.6 million barrels a day last month, according to a Bloomberg survey, down from 29.9 million in July.

``We're going to consolidate around here,'' said Mark Waggoner, president of Excel Futures Inc. in Huntington Beach, California. OPEC has ``already started slowing down production. They're just trying to make it formal now.''

In London, Brent crude oil for November settlement was at $59.43 a barrel, up 9 cents, on the ICE Futures exchange at 11:59 a.m. Singapore time. The contract yesterday declined $1.20, or 2 percent, to close at $59.34 a barrel.



Formalize Cuts

Saudi Arabia, the group's biggest producer, notified refiners in Japan, India, Taiwan and South Korea that they will get the full volume of oil called for in annual contracts, refinery officials and traders said yesterday. Buyers in Europe will get the same as last month.

``History shows that OPEC deals only work when the Saudis are on board,'' Bill O'Grady, an analyst with A.G. Edwards & Sons in St. Louis, said yesterday. ``Allocating the cuts is always the problem.''

Saudi Arabia accounts for almost a third of OPEC's output. The country hasn't officially commented on whether it's taking part in any reduction in OPEC's supplies. Reuters news service reported Oct. 9 that Aramco told global major oil companies it would lower November supplies by 5 percent.

OPEC is trying to turn existing ``voluntary'' cutbacks by several members into a group-wide, formal accord. Nigeria and Venezuela have announced cuts totaling a combined 170,000 barrels a day. Saudi Arabia, Kuwait, Libya and Algeria, also agreed to informal cutbacks, a spokesman for OPEC President Edmund Daukoru's spokesman said on Oct. 8.



U.S. Inventories

Oil reached a record $78.40 a barrel on July 14 amid concern that fighting in Lebanon between Israel and the Islamic militia Hezbollah would spread through the Middle East. Prices have fallen 21 percent in the past two months as stockpiles rose and the end of summer vacations in the U.S. trimmed gasoline demand.

The pre-winter refinery maintenance will stem the recent surge in product stockpiles, Excel's Waggoner said. Crude oil inventories will then start being drawn down once refiners ramp up production in to two to three weeks.

``We're going to see builds across the board, but I don't think they're going to be huge'' this week, he said.

U.S. crude oil inventories held 328.1 million barrels on Sept. 29, 13 percent above the five-year average for the period. Stockpiles probably gained 1.5 million barrels last week, according to the median estimate from a Bloomberg News survey of 12 analysts.

Distillate supplies, including heating oil and diesel, probably gained 125,000 barrels, according to the survey, their ninth straight weekly gain. Stockpiles held 151.5 million barrels on Sept. 29, 19 percent above the five-year average.

Oct. 12 (Bloomberg)

Oil Trades Near Lowest This Year as OPEC Output Cut May Fail - By Hector Forster and Gavin Evans


Crude oil traded near the lowest level this year in New York on speculation OPEC will fail to cut production as demand growth slows and U.S. stockpiles rise.

Oil's 26 percent plunge from July's record prompted plans by the Organization of Petroleum Exporting Countries to lower output. Conflicting statements and a lack of details have led to skepticism that the group will lower supply amid an increase in U.S. inventories.

OPEC's ``just completely mismanaging their communication,'' said Tobin Gorey, commodity analyst at Commonwealth Bank of Australia Ltd. in Sydney. ``If they cut a million barrels a day of production that is going to affect the oil market.''

Crude oil for November delivery was at $57.71 a barrel, up 12 cents, in after-hours electronic trading on the New York Mercantile Exchange at 1:39 p.m. in Singapore.

The contract fell 93 cents, or 1.6 percent, to close $57.59 a barrel yesterday after reaching $57.37, the lowest since Dec. 27. Oil has fallen 3.5 percent this week.

OPEC's reductions will be made voluntarily on ``a member- by-member'' basis, Levi Ajuonuma, a spokesman for OPEC President Edmund Daukoru, said yesterday. The oil ministry of Saudi Arabia, OPEC's biggest producer, declined to comment on whether the kingdom will participate in the cut while Qatari Oil Minister Abdullah bin Hamad al-Attiyah said the group should trim current production by 1 million barrels a day.

The 10 members of OPEC with production targets pumped 27.63 million barrels a day last month, according to Bloomberg estimates. That's below the group's target of 28 million barrels a day.

In London, Brent crude oil for November settlement was at $58.74 a barrel, up 9 cents, on the ICE Futures exchange at 1:27 p.m. Singapore time.



Saudi Arabia

Saudi Arabia, the group's biggest producer, notified refiners in Japan, India, Taiwan and South Korea that they will get in November the full volume of oil called for in annual contracts, refinery officials and traders said Oct. 10. Buyers in Europe will get the same as last month.

``The Saudis have to show their contribution to any cuts and that's only likely if the price level is less than $55,'' said Kazunaga Maeno, an oil trader at Mitsubishi Corp. in Tokyo. ``All are waiting for OPEC's final comment.''

Oil reached an all-time high in July on concern there wasn't sufficient spare production capacity to replace any output lost if Israeli's conflict against the Hezbollah militia in Lebanon spread in the Middle East, source of a third of the world's oil.



Perverse Outcome

A ``perverse'' outcome of an OPEC output cut would be an increase in global spare capacity, Gerard Burg, minerals and energy economist at National Australia Bank Ltd. said in a report yesterday.

``However, the net effect of reduced immediate supply is likely to be higher prices in the short term,'' he said.

Oil has fallen the past three months as demand in the U.S., the world's biggest oil user, eased with the end of the summer vacation driving season and stockpiles rose.

``This is probably quite a reasonable price given where demand is and where inventories are,'' Commonwealth's Gorey said.

A U.S. Energy Department report later today will probably show the nation's oil inventories rose 1.5 million barrels last week, based on the median estimate from a Bloomberg News survey of 14 analysts. Stockpiles held 328.1 million barrels on Sept. 29, 13 percent more than the five-year average for the period.



55 Days

Stockpiles in the industrialized states of the Organization for Economic Cooperation and Development represent about 55 days of supply, the best pre-winter level for ``several years,'' the Paris-based IEA said in a monthly forecast yesterday.

World demand peaks in the fourth quarter when refiners make heating fuel for the Northern Hemisphere winter.

The International Energy Agency yesterday cut its world demand forecast this year and next for a second month, citing the effect of higher prices and slowing U.S. economic growth.

Consumption will average 86.2 million barrels a day in the fourth quarter, 100,000 barrels less than the agency forecast last month. Demand through 2007 will average 86 million barrels a day, down 200,000 barrels than the previous forecast.

New York oil futures are headed for their sixth weekly decline in seven.

Oct. 13 (Bloomberg)

Oil Rises as U.S. Demand Gains, Heating Fuel Stockpiles Drop - By Gavin Evans


Crude oil rose in New York after a report showed U.S. fuel demand increased for the first time in seven weeks and heating fuel supplies fell more than expected.

Oil rebounded from near a nine-month low yesterday after an Energy Department report showed U.S. fuel consumption gained 3.5 percent last week. Distillates stockpiles, including heating oil and diesel, fell 1.5 million barrels, 12 times the decline forecast in a Bloomberg News survey of analysts.

``We're close to the bottom,'' said Chris Mennis, owner of oil broker New Wave Energy in Aptos, California. ``The demand is very good for distillate and it's better than last year for gasoline. The seasonal decline was about what it should have been'' and the world economy remains strong, he said.

Crude oil for November delivery rose as much as 52 cents, or 0.9 percent, to $58.38 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $58.21 at 10:18 a.m. in Singapore.

Yesterday, the contract rose 27 cents, or 0.5 percent, to close at $57.86 a barrel, its first gain in three days. Futures touched $57.22, the lowest since Dec. 19, before the department's report.

The decline in distillate stockpiles left supplies at 149.9 million barrels of fuel, or 18 percent more than the five-year average for the period, the department said.



Winter Fuel

Distillate stockpiles and production dropped because refiners cut output for a third week as they carried out maintenance before demand surges. World oil demand peaks in the fourth-quarter when refiners make heating fuel for the Northern Hemisphere winter.

U.S. refiners used 89.2 percent of the plant capacity, last week, less than forecast and the lowest in five months.

``This scare will prove to be very short-lived,'' said Antonio Szabo, chief executive officer of consultant Stone Bond Technologies. ``I'm willing to bet that as early as next week, refineries will start making more heating oil.''

Oil inventories in the U.S., the world's biggest consumer, jumped 2.41 million barrels to 330.5 million last week, 14 percent more than the five-year average. An increase of 1.5 million barrels was expected, according to the analyst survey.

Stockpiles in the industrialized countries of the Organization of Economic Cooperation and Development represent about 55 days of supply, the International Energy Agency said in a monthly report on Oct. 11.



Price Slide

``We're still heading to $55,'' Ric Navy, a broker at BNP Paribas SA in New York, said yesterday. ``The market has been hit with a huge dose of reality in the last month. Crude, distillate and gasoline inventories combined are more than 70 million barrels higher than last year.''

Oil futures have tumbled more than $20 a barrel, or 26 percent, from the record $78.40 reached on July 14. Prices fell as Middle East tensions eased, U.S. gasoline demand slowed with the end of summer vacations and fuel stockpiles rose.

The slide in prices prompted the Organization of Petroleum Exporting Countries to seek a voluntary 1 million-barrel-a-day output cut from its members. OPEC, which produces about 40 percent of the world's oil, pumped about 29.7 million barrels a day last month, according to a Bloomberg survey.

There is ``no unity'' within OPEC for a cut and the group is unlikely to act before futures prices reach $55 a barrel, Stone Bond's Szabo said.

``There is not a serious over-supply in the market,'' he said.



China's Demand

While the fundamentals for oil are still bearish, some investors are buying now to avoid the risk being caught out when the market turns, New Wave's Mennis said.

``The bottom is not going to be $50,'' he said. ``If you buy it now you risk maybe five bucks. But that's better than buying it at $70.''

Rising demand from China may also support prices. China yesterday announced it imported 16 percent more crude oil in the first nine months of 2006 than a year earlier to meet rising energy demand in the world's fastest-growing major economy.

Imports climbed to 109.25 million metric tons (about 2.9 million barrels a day), the Beijing-based Customs General Administration of China said on its Web site yesterday.

Oct. 13 (Bloomberg)

Oil Climbs as Norway Shuts Two Platforms, U.S. Demand Increases - By Gene Laverty


Crude oil rose after Norway shut two offshore platforms for safety precautions and U.S. demand gained strength.

Statoil ASA and Royal Dutch Shell Plc today began closing the rigs, which represent almost 10 percent of output in the nation, the world's third-largest crude exporter. New York oil futures rebounded after touching a low for the year yesterday as the U.S. Energy Department reported fuel consumption gained last week, the first increase in seven weeks.

``The crude market is finally starting to pay attention to supply disruptions,'' said Peter Linder, an energy analyst and senior adviser with DeltaOne Capital Partners in Calgary. ``A number of events that would support much higher prices in the last two weeks have been ignored.''

Crude oil for November delivery rose 71 cents, or 1.2 percent, to close at $58.57 a barrel on the New York Mercantile Exchange. Yesterday, futures touched $57.22, the lowest since Dec. 19. The contract slipped 2 percent this week.

Brent crude for November settlement advanced 76 cents, or 1.3 percent, to $59.52 a barrel on the ICE Futures exchange.

Statoil and Shell are halting output of about 280,000 barrels daily at the Snorre A platform in the North Sea and Draugen in the Norwegian Sea. Norway's Petroleum Safety Authority ordered the closures because tests found that one type of lifeboat is not strong enough to be dropped from the platforms to the sea, affecting the ability to evacuate in emergencies.

Norway denied Statoil and Shell applications for exemptions from the regulations yesterday, though both companies continued to produce oil and natural gas.



Decline From Record

Oil reached a record $78.40 a barrel on July 14 amid concern that fighting in Lebanon between Israel and Hezbollah would spread in the Middle East. Prices have fallen almost $20 a barrel in New York from the record as inventories rose and the end of summer vacations in the U.S. reduced gasoline demand.

Oil may fall next week on speculation the Organization of Petroleum Exporting Countries will fail to cut production enough to stem a slide in prices, according to a Bloomberg News survey. Nineteen of 41 analysts, traders and brokers, or 46 percent, said prices will fall. Twelve forecast an increase and 10 expected little change.

``The prices are relatively low and OPEC has said it wants to cut production,'' said Sandra Ebner, an economist at Deka Investment GmbH in Frankfurt. ``However, Saudi Arabia is not fully behind this measure. As long as Saudi Arabia does not make its wishes known, the markets will gamble.''



OPEC Vigilance

The OPEC crude oil basket price fell 6 cents to $54.19 a barrel yesterday. The daily price index is a weighted average of 11 crude blends produced by OPEC states.

``OPEC reaction when the price falls below $60 a barrel is a signal,'' said Antoine Leurent, an analyst with KBC Securities in Paris. ``The message is clear: Oil-producing countries won't just watch the price fall without reacting.''

OPEC will meet later this month to decide how to halt a drop in oil prices, Venezuelan Energy and Oil Minister Rafael Ramirez said in a televised interview. Ministers are agreed on the meeting and on a proposal to cut output by 1 million barrels a day, he said. Members are still considering whether the reduction should be from current output or from the group's official production target of 28 million.



Heating Oil

U.S. distillate stockpiles and production dropped because refiners cut output for a third week as they carried out maintenance before demand surges. World oil demand peaks in the fourth quarter when refiners make heating fuel for the Northern Hemisphere winter.

``Oil got a bump from the surprise drawdown of distillates last week,'' said Phil Flynn, vice president of risk management with Alaron Trading Corp. in Chicago. U.S. inventories of distillates, including heating oil, fell last week by 1.5 million barrels, 12 times the drop forecast in a Bloomberg News survey of analysts.

U.S. refiners used 89.2 percent of plant capacity last week, less than forecast and the lowest in five months. The decline in distillate stockpiles left supplies at 149.9 million barrels, or 18 percent more than the five-year average for the period, the Energy Department said yesterday.

Cold weather in the northern U.S. and a changeover to new fuel standards this weekend may also tax heating oil supplies, said Alaron's Flynn. Retailers are required to start selling ultra-low sulfur diesel next week.

Temperatures in the U.S. Midwest and Northeast will trail normal by as much as 12 degrees Fahrenheit (8 Celsius) through the weekend, according to MDA Federal's EarthSat Energy forecaster. The National Weather Service reported as much as 21 inches of snow had fallen around Buffalo, New York. The Northeast is the largest U.S. region where heating oil is used in furnaces.

Oil inventories in the U.S., the world's biggest consumer, jumped 2.41 million barrels to 330.5 million last week, 14 percent more than the five-year average. An increase of 1.5 million barrels was expected, according to Bloomberg's analyst survey.

Reuters - October 14 2006

OPEC to meet to discuss oil cut - Members of OPEC hope to remove excess oil from markets and put a floor under prices.


OPEC will meet in Qatar on October 19 to thrash out the details of a 1 million barrels per day cut in oil supplies and put a floor under prices, an OPEC official said on Saturday.

The gathering is likely to be far from straightforward even though all 11 members are united on the need to remove excess oil from world markets.

Iran and Venezuela, struggling to pump enough to meet their OPEC production quotas, do not want to cede market share to those -- such as top exporter Saudi Arabia and Algeria -- pumping beyond formal OPEC limits, delegates have said.

Oil prices have dropped by 20 percent since July to below $60 per barrel and the exporter group must act now to stem a "catastrophic" price slide, Edmund Daukoru of Nigeria told Reuters by telephone from the Niger Delta earlier on Saturday.

He said there was broad agreement the cut should be made from the average actual output level over the past 12 months, which is close to OPEC's existing production ceiling of 28 million bpd.

During that time, most member producers have been pumping at -- if not well beyond -- their individual OPEC quotas. But Indonesia and Venezuela have fallen well below theirs and Iran has had difficulty matching its limit.

"There is general agreement on the equity of using the average actual production over the past year ... It shows more equity to those who have put on more capacity over this period. It does not penalize them as much as it would have if we had used 28," Daukoru said.

"We will take one thing at a time and stabilize the market first. We are just taking practical measures. None of what we are doing is to make a permanent arrangement. What we are doing is just reacting to what is happening in the market."

"The time to do something is...now because we don't know where the floor of this drop will end. It would be foolish to wait till it gets to $10 before we do anything because that would really kill the capacity initiatives," he said.
Quotas

Some members of the group, such as the world's top oil exporter Saudi Arabia, have pumped far above their quotas this year to feed a surge in oil demand from Asia. Others, such as Venezuela and Indonesia, have been unable to meet their quotas due to capacity decline.

A cut from quotas would have spared Venezuela, Indonesia and -- to a certain extent -- Iran, from making a cut in actual supply.

Overall, the difference between average actual production by the 10 members with quotas and the existing ceiling was only about 50,000 bpd, Daukoru said.

Using actual production as a reference would mean that all members, excluding Iraq which has no quota, would be cutting output to stem sliding prices, Daukoru said. But he stressed that the group would not be setting new quotas.

"If we start debating quotas now, we will not be able to respond fast enough. If we start debating quotas now with prices the way they are, it would be foolish."

Analysts said OPEC would probably resolve the issue by publishing a table itemizing the volume to be cut by each of the 10 members, totaling 1 million bpd, but avoid specifying the new production limit for each country.

Oct. 17 (Bloomberg)

Oil Falls on Higher Supplies and Skepticism OPEC Will Make Cuts - By Mark Shenk


Crude oil fell for the first time in four days on forecasts that U.S. inventories rose and skepticism OPEC will cut production by 1 million barrels a day.

U.S. crude oil supplies probably climbed 1.5 million barrels last week, according to the median of forecasts by 14 analysts before an Energy Department report tomorrow. The Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world's oil, will meet in Qatar in two days to confirm the informal agreement to reduce output.

``We are shrugging off OPEC's production cuts,'' said Kyle Cooper, director of research at IAF Advisors in Houston. ``There are healthy inventories and any cut in production will increase spare capacity, which undermines the bullish case.''

Crude oil for November delivery fell $1.01, or 1.7 percent, to close at $58.93 a barrel on the New York Mercantile Exchange. Futures touched $60.54, the highest since Oct. 10. Prices are down 8.4 percent from a year ago.

OPEC members will gather Oct. 19 in Doha, Qatar, to ratify the agreement, Kuwait's oil minister, Sheikh Ali-Jarrah al-Sabah, said. Ministers are concerned that prices may plunge after declining 22 percent in the past three months as U.S. fuel stockpiles increased.



Wait and See

``We will be waiting to see what OPEC actually does; they may surprise us and come through with a credible cut in output,'' said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons Inc. in St. Louis.

Mohammed Barkindo, the acting secretary general of OPEC, said this week the group would discuss at the Oct. 19 meeting whether to cut actual production or to lower its output quota.

OPEC agreed at a meeting on Sept. 11 to leave its output ceiling unchanged at 28 million barrels a day. The quota doesn't apply to Iraq, which produced 2 million barrels a day last month. The group produced 29.64 million barrels a day in September, down from 29.8 million barrels a day in August, according to Bloomberg News estimates.

Signs of a slowing U.S. economy are also weighing on prices. Prices paid to U.S. producers fell last month by the most in more than three years and industrial production dropped, according to government reports released today. The U.S. consumes 25 percent of the world's oil.

``The economy is slowing down, which will hit consumption,'' O'Grady said. ``There won't be a sustained rise in prices unless OPEC makes real cuts, the weather cools or we get a geopolitical event.''



Iran's Nuclear Program

The European Union said its diplomacy is failing to curb Iran's nuclear program and the United Nations should act on U.S.- led demands for sanctions against the country. Iran has the world's second-biggest proved oil reserves and borders the Strait of Hormuz, a narrow waterway through which almost a quarter of the world's oil is shipped.

EU foreign ministers said the door is open for the UN Security Council to discuss sanctions against Iran for refusing to stop uranium enrichment, a process that can be used for nuclear power or bombs.

``It's unavoidable that the Security Council will now take up deliberations with the goal of a resolution and the first step on sanctions,'' German Foreign Minister Frank-Walter Steinmeier said at a meeting with his EU counterparts today in Luxembourg. French Foreign Minister Philippe Douste-Blazy said: ``The Iranians have refused everything. We have only one solution: to return to the UN Security Council.''

Iran defied an Aug. 31 Security Council deadline to suspend uranium enrichment. The U.S. has said it favors sanctions, while Russia and China have indicated their opposition to punitive action. The three countries, with France and the U.K., make up the permanent Security Council members



U.S. Inventories

Crude oil inventories in the week ended Oct. 6 were 14 percent above the five-year average for the period, the Energy Department said. Gasoline, heating oil and diesel stockpiles were also above the five-year average.

Brent crude oil for December fell 72 cents, or 1.2 percent, to close at $60.94 a barrel on the London-based ICE Futures exchange.

Oct. 18 (Bloomberg)

Crude Oil Rises as OPEC Meets Tomorrow to Decide on Output Cuts - By Christian Schmollinger and Hector Forster


Crude oil rose in New York before an OPEC meeting tomorrow that will decide on a plan to lower output by 1 million barrels a day.

Members of the Organization of Petroleum Exporting Countries, which pumps about 40 percent of the world's oil, are meeting in Qatar to stem a three-month slide in prices. The group will cut production by about 3.6 percent, Kuwait's Sheikh Ali-Jarrah al-Sabah said yesterday, rather than reduce quotas which some members can't meet and others ignore.

``It's got to come from the actual production, because if it's from the quotas nothing much would happen,'' said Rowan Menzies, commodity market analyst at Commodity Warrants Australia in Sydney.

Crude oil for November delivery rose as much as 32 cents, or 0.5 percent, to $59.25 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $59.12 at 12:47 p.m. in Singapore. Prices have tumbled 25 percent from an all-time high of $78.40 reached on July 14.

The contract fell $1.01, or 1.7 percent, to close at $58.93 a barrel yesterday. Prices reached a one-week high of $60.54 after Kuwait's Ali-Jarrah said OPEC will agree to cut output by 1 million barrels a day.

``Prices have been rising as OPEC is saying they will cut,'' said Mikikaru Amano, an analyst at futures broker Taiheiyo Bussan Co. in Tokyo. ``There are enough inventories and the supply-demand balance has weakened.''

In London, Brent crude oil for December settlement rose as much as 36 cents, or 0.6 percent, to $61.30 a barrel on the ICE Futures Exchange. It was at $61.20 a barrel at 12:09 p.m. Singapore time.



Demand Slowing

OPEC cut its oil consumption forecasts for 2006 and 2007 on Oct. 16, citing ``far from robust'' demand. Continuing daily output at September levels of 29.7 million barrels would increase stockpiles by 1 million barrels a day in the fourth quarter when they usually decline, the group said.

Oil fell to a 10-month low of $57.22 on Oct. 12 and has traded above $60 on only two days since.

``It's been trading somewhat side-ways for the last couple of weeks,'' said Mike Sander, a commodity broker at Altavest Worldwide Trading Inc. in Mission Viejo, California. ``If OPEC wasn't making these statements on production it would have gone much lower.''



Inventories Rising

An Energy Department report today will probably show the nation's above-average crude oil stockpiles rose for a third straight week, based on a Bloomberg News survey of 15 analysts.

U.S. crude oil inventories held 330.5 million barrels on Oct. 6, 14 percent higher than the five-year average.

Supplies probably gained 1.5 million barrels last week. Refinery utilization probably fell a fourth week to a five-month low of 88.8 percent as plant operators took advantage of weak pre-winter demand to carry out maintenance.

Supplies of distillate fuel, a category that includes heating oil and diesel, probably declined 800,000 barrels from 149.9 million the prior week. Ten analysts expected a decline, three forecast a gain and two said that supplies were unchanged.

The Energy Department is scheduled to release its weekly report on petroleum inventories today at 10:30 a.m. in Washington.

Oil declined yesterday after U.S. industrial production fell in September, signaling weaker demand in the world's largest energy consumer, as crude stockpiles may gain for a third week.

Industrial production in the U.S., which uses about a quarter of the world's oil, fell 0.6 percent in September after being unchanged in August, the Federal Reserve said yesterday. Economists had expected a 0.1 percent decline.

October 20, 2006 - ASSOCIATED PRESS

Commodities may sink even further - By Ellen Simon


Commodities had a miserable third quarter and many on Wall Street say they have further to fall. That theory was bolstered when oil prices recently sank to their lowest levels for the year.

If commodities prices do sink further, it will be bad news for emerging markets and the investors who have poured billions of dollars into them over the past three years.

Commodities prices tend to have a domino effect -- lower oil prices often drag down gold prices, for instance. And lower commodities prices tend to push down stocks in emerging markets such as Russia and Brazil, which have a rich supply of oil and metals, respectively.

While many emerging markets continue to be on a roll, if the commodity bears are right, there may be plenty of pain to spread around.

While investors pulled $263 million out of gold and natural resources funds for the week that ended Oct. 4, they still have $26.9 billion in the funds.

Stephen S. Roach, Morgan Stanley's chief economist, wrote that the tidal wave of money that has flowed in recently has transformed commodities markets from good economic indicators to an asset like any other -- susceptible to hysteria and bubbles.

"Just as return-hungry investors chased these markets on the upside, they could well run like lemmings to get out on the downside," Mr. Roach wrote.

Merrill Lynch & Co.'s chief investment strategist, Richard Bernstein, agreed, saying that cheap money and heavy borrowing inflated prices in commodities. Those prices are now 60 percent above what could be explained by fundamental supply and demand, he wrote earlier this month.

Other factors that pushed prices higher, such as the U.S. housing boom and the Chinese economy, could also drive prices lower.

The decline in home construction has already hit the lumber market, where prices recently dropped to five-year lows. Metals used in home building, such as copper, are also facing price pressure.

Mr. Roach argued that a downturn for U.S. consumers could slow business for Chinese producers.

Less use in the auto industry should affect steel, aluminum, glass and rubber demand, wrote Tobias Levkovich, Citigroup's chief U.S. strategist.

If the strategists are right, investors who have seen impressive run-ups in markets such as South Africa, up more than 25 percent year to date, might consider taking some money off the table -- and away from all the other dominoes.

FT.com - October 19 2006

Oil firmer as Opec cuts output - By Chris Flood


Oil prices rose on Thursday after Saudi Arabia declared its support for a 1m-barrel-a- day cut in actual output by the Organisation of the Petroleum Exporting Countries at the cartels meeting in Qatar.

ICE December Brent rose 22 cents to $59.80 a barrel while Nymex November West Texas Intermediate gained 20 cents to $57.85 a barrel in choppy trade.

Until Saudi Arabias statement, it remained unclear whether Opec would cut from the official quota of 28m bpd or reduce actual output, which was running at about 27.5m bpd in September.

Saudi Arabia has been silent on the issue for the past two weeks but provided vital support to the cartels credibility on Thursday.

Ali al-Naimi, Saudi Arabias oil minister, said he supported a cut in actual production and also clearly signalled the possibility of a further 0.5m bpd reduction in December, when Opec will meet in Nigeria.

There is disequilibrium between supply and demand, said Mr al-Naimi: We are trying to bring the market back to normal equilibrium and the price will take care of itself.

Saudi Arabia will cut output by 0.3m bpd, limiting the effect on other Opec members such Iran and Venezuela, already struggling to reach their quota levels.

US natural gas prices were little changed after an increase of 53bn cubic feet in inventories, in line with market expectations. Gas in storage is well on track to beat the record 3,472bn cubic feet and the latest forecasts suggest a mild US winter is in prospect. Nymex November Henry Hub was fractionally higher at $6.834 per million British thermal units.

Oils strength helped the price of gold hit $600.30, its highest level for 17 days, before bullion retreated to $598.00, up 0.9 per cent on the day.

Aluminium rose 1 per cent to $2,741 a tonne, trading at the top of its range over the past four months. Technical analysts said this break above the $2,700 level could act as a catalyst for further gains.Aluminium Corporation of China - better known as Chalco - said the market for aluminia would weaken next year. Chalco would not say if it planned a further reduction in aluminia prices this year after three price reductions in recent months

Chinese aluminia output has risen by 53 per cent to 9.61m tonnes in the first nine months of the year and this has dragged international aluminia prices down by almost 50 per cent since early July.

Chalco has increased its aluminium production to try and mitigate the impact of falling aluminia prices. Chalco plans to operate 3.5m tonnes of aluminium production capacity this year from 2.6m tonnes last year as it tries to soak up rising aluminia output.

Chen Jihua, Chalcos chief financial officer, told Reuters in an interview that he expected global aluminium prices to fluctuate between $2,500 and $3,00 a tonne towards the end of the year.

Lead, zinc and nickel prices which all hit records earlier in the week remained firm just below those levels.

Barclays Capital said that, with market balances looking tight, further inventory draws were likely for base metals and new price highs could be expected to nickel, lead, zinc and aluminium in coming weeks.

Zinc rose 1.8 per cent to $3,950 a tonne. Stocks are at their lowest since 1991 and the global refined zinc market had a supply deficit of 236,000 tonnes in the first eight months of 2006, according to the World Bureau of Metal Statistics.

Nickel gained 2.8 per cent to $31,750 a tonne while lead firmed 0.7 per cent to $1,505 a tonne, but copper was unchanged at $7,650 a tonne. Tin added 1.6 per cent to $9,860 a tonne after reassurances that Bolivias new policies would not affect private mining investment.

FT.com - October 20 2006

Opec cuts output but prices fall - By Chris Flood



Oil prices were largely unmoved this week by the decision of the Organisation of the Petroleum Exporting Countries to cut output by a larger-than-expected 1.2m barrels a day, suggesting that the crude market may have found support close to the $60 a barrel level after falling more than 25 per cent in the past two months.

Opec agreed to cut output to 26.3m barrels a day, if fully implemented, on November 1. Saudi Arabia, the worlds biggest oil producer, warned a further production cut of 0.5m b/d day could be made in December when the cartel is due to meet in Nigeria as the oil grouping signalled its determination to defend crude prices about the $60 a barrel level.

ICE Brent for December delivery slipped 79 cents to $60.07 a barrel in mid-afternoon London trade on Friday, marginally higher on the week.

November West Texas Intermediate crude futures, which expired at the close of trade on Friday dropped 74 cents to $57.75 a barrel in late morning trade on the New York Mercantile Exchange, leaving it virtually unchanged on the week. Even the December WTI contract was relatively steady on the week at $60.33.

Opec needs to take action on quotas for it to have a lasting impact on price, said Michael Lewis of Deutsche Bank; Since 1993, the cartel has sanctioned ten official cuts in its quotas to defend the oil price. We find that quota reductions have been successful 70 per cent of the time in defending or pushing oil prices higher. However, this success rate falls significantly in an environment of weakening global growth, such as in 1998 and 2001.

Michael Shaoul, chief executive of Oscar Gruss, a New York investment research group, said oil markets were in a bearish mood as oil demand growth appeared to be slowing.

If Opec had announced a cut three months ago when the world was more concerned about Irans nuclear plans and the conflict in Lebanon, the oil price would have risen sharply. The reason [for] such a limp response [is] the fact that the oil market appears to be well-supplied, he said.

Gold briefly popped above the $600 a troy ounce level this week after a temporary rally in the oil price following the Opec production cut. Gold has tracked the oil price more closely in recent months since investors view the oil price as a measure of inflation a perception not universally shared.

The yellow metal slipped about $3 yesterday to $595.80/$596.80 in mid-afternoon London trade, up $6 on the week.

Many base metals reached new record highs or long- term peaks this week as a result of low inventories and firm demand. The most spectacular riser was tin, the smallest market on the London Metal Exchange in terms of trading volume and metal production.

The price of tin, which is mainly used for soldering in electronic goods, jumped more than 10 per cent on Monday to a 17-year high of $11,000 a tonne after a clampdown by Indonesia, which produces about a third of the worlds tin on smelters that operate without the proper permits.

After falling later in the week, tin was unchanged yesterday at $9,950 a tonne. CRU, the metals consultancy, said in a report for the International Tin Research Institute that world tin consumption between January and June 2006 was 189,300 tonnes, almost 30,000 tonnes higher than in the same period in 2005.

The three-month nickel price touched another record high of $32,550 a tonne on the London Metals Exchange, up 140 per cent this year and about 6 per cent higher on the week at $32,000. On Friday, the three-month LME zinc price moved within $2 of its record high of $4,010 a tonne earlier in the week, ending the day at $3,970, up more than five per cent on the week.

Even lead has turned from a laggard to a strong price-mover, reaching a record high of $1,545 a tonne on Tuesday before easing to $1,509.5 on Friday, up more than 1 per cent on the week.

The rally in the smaller base metals helped lift the copper price, which has been at the forefront of the three-year base metals price boom. Copper eased $15 to $7,646 a tonne on Friday but was up more than $180 on the week.

Wheat futures in the US continued to reach 10-year highs this week with the December soft red winter wheat contract touching $5.57 a bushel on the Chicago Board of Trade. It was trading at $5.10 on Friday.

Oct. 20 - (Bloomberg)

Oil Tumbles Below $57 on Skepticism OPEC Will Make Output Cuts - By Mark Shenk


Crude oil fell below $57 a barrel in New York for the first time this year as traders said OPEC members will fail to cut production by 1.2 million barrels a day as planned.

The 4.4 percent reduction starting Nov. 1 will be based on how much members were pumping last month, rather than quotas, United Arab Emirates Oil Minister Mohamed al-Hamli, who will become president of the group in 2007, said after members met in Doha, Qatar. Prices have plunged 28 percent from the record of $78.40 a barrel reached July 14.

``I'll be surprised if we see them cut even half the volumes promised,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``If prices stay at this level for a few weeks we'll probably see some of the weaker members such as Venezuela and Algeria forget about their pledges.''

Crude oil for November delivery fell $1.68, or 2.9 percent, to $56.82 a barrel on the New York Mercantile Exchange, the lowest close since Nov. 29. Futures are down 3 percent this week and 6.9 percent from a year ago. The November contract expired today. The more-active December contract fell $1.17, or 1.9 percent, to close at $59.33 a barrel.

``The OPEC announcement may help explain why the spread between the November and December contracts grew today,'' said Jason Schenker, an economist with Wachovia Corp. in Charlotte, North Carolina. ``OPEC's cuts may have an impact but we won't feel it until December at the earliest.''



Expected Reduction

OPEC's cutback was larger than the reduction that ministers had been talking about for the past two weeks and was endorsed by OPEC's biggest producer, Saudi Arabia, which will trim output by 380,000 barrels a day.

``We needed more to stabilize the market,'' Algerian Oil Minister Chakib Khelil said after the meeting. Members are ``unanimous'' that they need to ensure price stability, OPEC President and Nigerian Oil Minister Edmund Daukoru told reporters today in Madrid. OPEC ministers are concerned about falling prices and rising U.S. stockpiles, Abdullah bin Hamad al-Attiyah, Qatar's oil minister, said in a phone interview on Oct. 11.

``When we advertised 1 million, the market didn't respond, so something more had to be done,'' Daukoru said in an interview.

OPEC may need to cut an additional 300,000 barrels a day when the group meets Dec. 14 in Abuja, Nigeria, Venezuelan Oil Minister Rafael Ramirez said today.



Appropriate Cut

``The cut seems appropriate given the increase in stockpiles,'' said Aaron Kildow, a broker at Prudential Financial Derivatives LLC in New York. ``The most bullish thing to come out of the meeting was the announcement that they may cut again when they meet in December.''

Prices may fall next week on doubts the producer group will cut production enough to reduce excess supplies, according to a Bloomberg News survey yesterday, before OPEC announced its decision. Twenty-one of 49 analysts, traders and brokers, or 43 percent, said prices will decline. Fourteen forecast an increase and 14 predicted little change.

``A cut of 1 million barrels was factored in so it looks like they decided to cut more to get the market's attention,'' said Rick Mueller, an analyst with Energy Security Analysis Inc. in Tilburg, the Netherlands. ``I doubt there will be a dramatic up-tick in prices because inventories are so high and uncertainty about what the members will actually cut.''

U.S. crude oil inventories surged 5.02 million barrels to 335.6 million last week, the Energy Department reported Oct. 18. It was the biggest increase since March and left stockpiles 14 percent higher than the five-year average for the week, the department said. The U.S. consumes 25 percent of the world's oil.



Heating Season

``Demand should rise in coming weeks because of the approach of heating season,'' Kildow said.

Global consumption peaks during the Northern Hemisphere winter, when furnaces are stoked. The International Energy Agency, which advises 26 industrialized nations on energy policy, said OPEC's decision was ill-timed because demand will increase as the heating season nears.

``I think this cut comes at the worst time possible,'' IEA Executive Director Claude Mandil said today in a phone interview. ``I don't like the idea of OPEC trying to defend prices of $60 a barrel.'' That is not ``helpful'' to consumer nations and poorer countries, he said.

Brent crude oil for December fell $1.19, or 2 percent, to close at $59.68 a barrel on the London-based ICE Futures exchange.

The Times - October 21, 2006

Price of oil falls in spite of Opec cuts - By Carl Mortished, International Business Editor


The cut, that the cartel would reduce its output by 1.2 million barrels a day, was agreed by Opec ministers but failed to impress the markets. SCEPTICAL oil traders pushed down the price of crude oil yesterday, appearing to ignore an announcement by Opec that the cartel would reduce its output by 1.2 million barrels a day.

The cut, bigger than expected, was agreed by Opec ministers on Thursday night but failed to impress the crude oil markets. US light crude dipped 65 cents to $57.85.

The unscheduled meeting of the cartel in Qatar was intended to arrest the tumbling price of a barrel of crude oil, which has lost more than a quarter of it value since the price peaked at $78 in mid-July.

Saudi Arabia will shoulder most of the burden for the cut, which represents just over 4 per cent of the current output of about 27.5 million barrels per day. In an attempt to bolster the market impact of the agreed cut, Ali al-Naimi, the Saudi Oil Minister, pointed to further action. The is not the end of the road beacause we have another meeting coming up, he said. A further cut of 500,000 bpd is being mooted for consideration in December.

Opec is fearful that a glut of crude and oil products is building in the northern hemisphere, an oversupply that will prevent winter destocking and cause prices to tumble further.

Opecs move suggests a desire to maintain prices at a level of $60, well below recent highs but enough to allow Opec member states to keep cash flowing fast enough to avoid domestic political discontent.

FT.com - October 23 2006

Oil retreats towards lowest level this year - By Chris Flood


Oil prices fell by $1 a barrel on Monday, trading close to their lowest levels this year, amid scepticism that the 1.2m barrel a day cut in output announced last week by the Organisation of the Petroleum Exporting Countries would be fully implemented by the cartels members.

In the approach to last weeks Opec meeting, hedge funds were betting that crude prices would weaken further with the latest data from the Commodity Futures Trading Commission showing that speculative positions in crude moved to a net short position from a net long position in the previous week.

ICE December Brent fell $1 to $58.68 a barrel while Nymex December West Texas Intermediate dropped $1.04 to $58.29 a barrel.

Opec also suggested there could be a further output reduction of 500,000 b/d in December but some analysts pointed out that the cartels discipline in sticking to output targets in the past had been lax.

The market is highly sceptical that Opec will deliver the promised cuts in crude oil production, said Tobin Gorey, of Commonwealth Bank of Australia.

Saudi Arabia is expected to reduce output by 380,000 b/d, implementing almost one-third of the total Opec cut. Saudi Arabia has told core customers in Asia that supplies will be cut by up to 8 per cent from next month, removing 250,000 b/d from the market. However, some dealers believe those countries which are already operating below their quota levels (Venezuela, Indonesia and Nigeria) will not participate fully in the output cuts, potentially jepordising the new agreement.

The cuts include reductions from countries that are already struggling to meet their quota, immediately raising doubts they will be strictly adhered to, said Lucas Herrmann of Deutsche Bank.

Under pressure from oils weakness, gold fell 2 per cent to $583.70 a troy ounce but there was some evidence of physical demand improving after Indian gold imports soared by 123 per cent to 156 tonnes in the month ahead of the Diwali Festival.

Other precious metals shared golds weak tone, with silver at $11.62 a troy ounce. Platinum and palladium were at $1,067 and $315 a troy ounce, respectively.

The latest data from the Commodity Futures Trading Commission showed that speculative open interest (sum of long and short positions) for all four precious metals fell last week as investors reduced their exposure.

John Reade of UBS said positioning in precious metals was greatly reduced from its peak levels earlier this year but there seemed little sign of investors and speculators wanting to rebuild long positions.

Nickel rose 1.1 per cent to $32,400 a tonne after it hit a new record at $32,700 earlier in the session. Available nickel inventories, at 3,282 tonnes, are less than one days worth of global consumption and ongoing strike action is affecting French producer Eramets smelter in New Caledonia in the Pacific. Eramet is 60 per cent owner of Societe Le Nickel, which produces about 5 per cent of world nickel concentrate production.

Zinc retreated 1.1 per cent to $3,925 a tonne in spite of a fall of 2,500 tonnes in LME stocks. Further price appreciation is expected if stocks shrink below 100,000 tonnes from the current 122,400 tonnes level.

Tin added 2.5 per cent at $10,400 a tonne amid continued concerns about disruptions to supplies from Indonesia, where the government has shut about 20 small smelters that were operating without proper permits.

Copper was rangebound, just 0.2 per cent weaker at $7,545 a tonne while aluminium eased 0.4 per cent to $2,707.

Oct. 23 - (Bloomberg)

Oil Falls a Second Day on Skepticism OPEC Will Make Output Cuts - By Mark Shenk


Crude oil fell for a second day on skepticism that the Organization of Petroleum Exporting Countries will cut production by as much as members pledged last week.

OPEC's reductions will be ``significantly less'' than agreed, amid doubts some members of the group will act at all, the London-based Centre for Global Energy Studies said in a report today. OPEC, which pumps about 40 percent of the world's oil, said on Oct. 20 that members would collectively cut output by 1.2 million barrels a day to prop up prices.

``If OPEC is going to be an effective organization it will have to send a clear signal that it will follow through with these cuts,'' said Phil Flynn, vice president of risk management with Alaron Trading Corp. in Chicago. ``The Saudis are telling customers that they can expect less oil but we have yet to see any movement from the smaller OPEC members.''

Crude oil for December delivery fell 52 cents, or 0.9 percent, to close at $58.81 a barrel on the New York Mercantile Exchange. Futures are down 3 percent from a year ago. Prices have plunged 25 percent from the record of $78.40 a barrel reached July 14.

U.S. stocks surged, extending October's record-breaking rally, as falling oil prices bolstered speculation that consumer spending will sustain the economy. The Dow Jones Industrial Average reached a record, rising 122.79, or 1 percent, to 12,125.16 at 12:42 p.m. in New York.

CGES, which was founded by former Saudi oil minister Sheikh Zaki Yamani, said OPEC's determination to reduce supply shows the organization is trying to defend a price of ``at least $55 a barrel for its basket of crude oil grades.'' The OPEC basket price stood at $54.56 on Oct. 19.



Saudi Exports

Saudi Arabia will cut shipments to Japan, its largest customer, in November for the first time in more than two years after last week's decision by OPEC's members. Supplies to Japanese refiners will be reduced as much as 8 percent below contractual volumes, refinery officials said.

``I'm surprised that OPEC is being given such a hard time,'' said Bill O'Grady, director of fundamental futures research at A.G. Edwards & Sons Inc. in St. Louis. ``The news from Asia shows that the Saudis are on board, but doubts about other members remain.''

OPEC's Oct. 20 statement said 10 of its members, all except Iraq, would ``reduce production by an amount of 1.2 million barrels a day, from current production of about 27.5 million barrels a day, to 26.3 million barrels a day, effective 1st November 2006,'' adding that the decision would be subject to review at a Dec. 14 meeting in Abuja, Nigeria.



Reducing Shipments

``The Saudis immediately informed customers that they will reduce shipments and OPEC made it clear that they were open to a follow-up cut in December, which signals that they are serious about supporting prices,'' said Tim Evans, an energy analyst at Citigroup Global Markets Inc. in New York. ``OPEC production cuts don't have an immediate effect on the U.S. market.''

Supplies climbed 2.9 million barrels in the week ended Oct. 20, from 335.6 million the prior week, according to the median of forecasts by 10 analysts surveyed by Bloomberg News. The Energy Department is scheduled to release its weekly inventory report on Oct. 25.

Brent crude oil for December settlement fell 47 cents, or 0.8 percent, to $59.21 a barrel on the London-based ICE Futures exchange, the lowest close since Oct. 12.

FT.com - By Chris Flood


Oil prices staged a modest rebound on Tuesday, helped by news that the Abu Dhabi National Oil Corporation will cut crude exports by 5 per cent next month.

The reduction comes the United Arab Emirates implements the output cut announced last week by the Organisation of the Petroleum Exporting Countries.

Edward Meir of Man Financial said that for Opecs cutbacks to bite, the market would need to see a reduction in inventories or a resurgence in demand but neither appeared to be happening as yet .

ICE December Brent rose 35 cents to $59.56 a barrel while Nymex December West Texas Intermediate added 33 cents at $59.14 a barrel.

Francisco Blanch, commodity strategist at Merrill Lynch, said downside risks to oil prices were mounting as inventory levels were well above last year in both the US and Europe and spare production capacity (both Opec and non-Opec) was poised to expand significantly.

FT.com - October 31 2006

Oil falls as funds sell down exposure - By Kevin Morrison


Oil prices fell back below $60 a barrel, falling more than $2, on Monday after investment funds sold down their exposure before planned production cuts by the Organisation of the Petroleum Exporting Countries come into effect.

ICE Brent futures for December delivery dropped $2.03 to $59.05 a barrel in late afternoon trade in London. December West Texas Intermediate dropped $1.97 to $58.78 a barrel in early afternoon trade on the New York Mercantile Exchange.

Kevin Blemkin, energy broker at Man Financial, said fund selling had caused oil prices to fall.

Funds were early sellers this morning, and when Brent and WTI fell through $60 is brought in more sellers as some key technical support levels were broken, Mr Blemkin said.

Data from the Commodity Futures Trading Commission showed that speculators in the WTI contract had cut their long positions or bets on prices moving higher by more than 52,000 contracts, as more speculators betted on falling prices.

The fall in long positions came in spite of the pledge by Opec to cut exports. Saudi Arabia, the worlds biggest oil exporter, and the United Arab Emirates last week informed customers of supply cuts.

Oct. 31 (Bloomberg)

Oil Trades Below $59 After Plunging on U.S. Supply Forecasts - By Christian Schmollinger and Angela Macdonald-Smith


Crude oil traded below $59 a barrel after posting the biggest one-day decline in more than a year yesterday on forecasts that warm U.S. weather will curb demand and bolster stockpiles.

Higher-than-usual temperatures are expected in most of the U.S. from Nov. 6 until Nov. 12, the National Weather Service reported. U.S. crude inventories, already 12 percent above their 5 year average, probably rose 2.7 million barrels last week, according to a Bloomberg News survey.

``Crude oil inventories in the U.S. and all over the world are sufficient,'' said Tetsu Emori, chief commodity strategist at Mitsui Bussan Futures Ltd. in Tokyo. ``The oil price is losing momentum.''

Crude oil for December delivery traded at $58.42 a barrel, up 6 cents, in after-hours electronic trading on the New York Mercantile Exchange at 1:14 p.m. Singapore time. Yesterday, the contract fell $2.39, or 3.9 percent, to $58.36, the biggest one- day decline since Aug. 17, 2005.

Prices have fallen 25 percent from a record $78.40 a barrel reached July 14 when fighting between Israel and Hezbollah militants in Lebanon raised the possibility of supply disruptions from the Middle East. Since then, rising global stockpiles and a calm U.S. hurricane season have eased concerns.

``You get a forecast for warmer weather and down prices come,'' said Rowan Menzies, a commodity market analyst at Commodity Warrants Australia Pty in Sydney. ``The U.S. looks pretty well supplied as of today.'

In London, Brent crude oil for December settlement was up 5 cents to $58.73 a barrel on the ICE Futures exchange at 1:19 p.m. Singapore time.



U.S. Stockpiles

U.S. crude oil stockpiles unexpectedly fell in the week ended Oct. 20 when the Louisiana Offshore Oil Port, the largest U.S. import terminal, shut because of bad weather. The port, which was closed for about 70 hours, caught up on imports in about two days.

U.S. stockpiles of crude oil, diesel, heating oil and gasoline in the week ended Oct. 20 were higher than the five- year average for the period, the Energy Department said last week.

The forecast for mild temperatures in the U.S. Northeast is delaying the expected rise in demand as the coldest winter weather period approaches, said Andrew Harrington, an industrials analyst at Australia & New Zealand Banking Group Ltd. in Sydney.

``You'd be looking for late December-January to be the big cold period in the Northeast of the U.S. and we should start seeing some increase in demand heading into that period,'' Harrington said. ``It seems to be a bit slower in coming than usual. Some anticipation of that had been built in to the price and now we're seeing it being taken out again.''



OPEC Cuts

The decline in oil prices since mid-July prompted the Organization of Petroleum Exporting Countries, which produces about 40 percent of global supply, to agree to reduce output by 1.2 million barrels a day starting Nov. 1. OPEC ministers will review their cuts when they next meet on Dec. 14.

Saudi Arabia, the biggest oil producer, will definitely implement the 1.2 million barrel-a-day reduction in output that the group announced earlier this month, Khalid al-Falih, a senior vice president with state-run Saudi Aramco, said yesterday.

``There will be no delaying, no backpedaling,'' al-Falih said at a meeting with U.S. oil company officials in Washington.

Oil prices also fell yesterday because of waning concerns about the security of Saudi Arabia's Ras Tanura oil terminal, Menzies said.

Naval forces from the U.S.-led coalition were sent to protect the terminal after the threat of a terrorist attack from the sea, reports said.

Nov. 2 (Bloomberg)

Crude Oil Falls After Report Shows Increase in U.S. Inventories - By Christian Schmollinger


Crude oil fell in New York after a government report showed increased supplies in the U.S., the world's largest energy consumer.

Crude inventories rose to 334.3 million barrels, leaving supplies 12 percent higher than the five-year average for the week, the Energy Department reported yesterday. Demand for heating oil, diesel and gasoline remained near two-month highs.

``We're still waiting for winter to kick in because that's when the market gets interesting again,'' said Gerard Burg, economist with National Australia Bank Ltd. in Melbourne. ``Until the demand for heating oil picks up, we're in a bit of lull period.''

Crude oil for December delivery fell as much as 26 cents, or 0.4 percent, to $58.45 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It traded at $58.47 at 1:44 p.m. Singapore time.

Brent crude oil for December settlement fell as much as 21 cents, or 0.4 percent, to $58.77 a barrel on the London-based ICE Futures exchange. It traded 16 cents lower at $59.82 a barrel at 1:23 p.m. Singapore time.

U.S. oil inventories rose 1.9 million barrels, the department said. A gain of 2.6 million barrels was forecast in a Bloomberg News survey of 14 analysts.

Supplies of gasoline and distillates fell more than expected. Distillate stockpiles, including heating oil and diesel, fell 2.72 million barrels to 141.3 million, 13 percent above the five- year average. Gasoline supplies declined 2.8 million barrels to 204.6 million, 2.3 percent more than average.

FT.com - November 9 2006

Oil rises as distillate stocks fall - By Kevin Morrison


Crude oil futures rose by more than $1 a barrel on Wednesday after a bigger-than-expected fall in US distillate inventories, which includes diesel and heating oil.

Prices were also helped by comments from Saudi Arabia suggesting the market remained oversupplied with crude in spite of the recent 1.2m barrel-a day cut by the Organisation of the Petroleum Exporting Countries.

The weekly US crude and petroleum product inventory data showed distillate fuel inventories dropped by 2.7m barrels, but are just above the upper end of the average range for this time of year.

US crude inventories rose 400,000 barrels to 334.7m barrels, which is well above the upper end of the average range for the time of year. The report also said total petrol inventories declined by 600,000 barrels, but remain at the upper end of the five-year average range.

ICE December Brent added $1.01 to $59.49 a barrel in late London afternoon trade. December West Texas Intermediate gained 96 cents to $59.89 a barrel in early afternoon trade on the New York Mercantile Exchange.

US petroleum products also made large gains with the December Nymex Rbob gasoline contract gaining 4 cents to $1.5740 a gallon, and the December heating oil contract up 3.7 cents to $1.7180 a gallon.

Although the Opec cut only came into effect at the start of the month, US oil imports have already fallen, showing the global market is tightening. US crude oil imports averaged 9.8m barrels a day last week, down 306,000 from the previous week, and below the four-week average of 10m b/d.

can anyone tell me were i can get the price of oil from, the futures link on moneyam is all wrong....

Tonker, see the top of this thread. At the moment it is detailed as : LAST 59.59

Nov. 11 (Bloomberg)

Oil Falls the Most This Month After IEA Cuts Demand Forecast - By Mark Shenk


Crude oil fell the most this month after the International Energy Agency cut its demand forecast for the third consecutive month.

World oil demand this year will average 84.49 million barrels a day, 80,000 barrels a day less than estimated last month, the Paris-based agency said today. Slower growth in Chinese use of transport fuels, especially gasoline, was behind the revision, the IEA said. China, the world's second-biggest oil consumer, is still expected to drive growth this year and next.

``The IEA has cut its demand forecast for three months in a row, which could be the start of a trend,'' said Kyle Cooper, director of research at IAF Advisors in Houston. ``This is very different from 2004 and 2005 when we saw demand revised higher repeatedly. This may be evidence that these high prices are putting a lid on demand growth.''

Crude oil for December delivery fell $1.57, or 2.6 percent, to close at $59.59 a barrel on the New York Mercantile Exchange, the biggest decline since Oct. 30. Prices are up 0.8 percent this week and are 3.1 percent higher than a year ago. Futures have traded in a range of $56.55 to $61.79 for the past month.

Oil has plunged 24 percent from the record of $78.40 a barrel reached July 14 amid concern that fighting in Lebanon would spread through the Middle East, source of a third of the world's oil. Since then, the Lebanese cease fire, rising supplies and a calm Atlantic hurricane season have caused the price decline.



Demand Growth

World oil demand growth is expected to be 1.1 percent this year, less than the 1.2 percent in last month's report. Growth in 2007 annual demand was left unchanged at 1.7 percent, the IEA estimated. The agency was set up in 1974 to advise industrialized nations on energy policy.

The Organization of Petroleum Exporting Countries, which produces about 40 percent of the world's oil, will take less supply than it sought, the IEA said. The 11 members of OPEC, meeting on Oct. 20 in Qatar's capital Doha, said they would cut production by 1.2 million barrels a day starting Nov. 1, to check the decline in prices.

OPEC's crude oil production fell 340,000 barrels a day, or 1.1 percent, in October, to 29.37 million barrels a day, the IEA said. Between 600,000 to 900,000 barrels a day might be removed from the market as a result of last month's agreement, according to the agency.

``The problem with today's IEA report is the numbers we really want to see will be released roughly a month from now,'' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. ``We want to know how well they are abiding by the agreement.''

OPEC is next scheduled to meet in Abuja, Nigeria, on Dec. 14.



Warm Weather

Warm weather in the Northeast has reduced demand for heating oil in the region, which is responsible for 80 percent of U.S. consumption of the fuel. Home-heating use there will be 35 percent below normal through Nov. 17, said Weather Derivatives, a forecaster in Belton, Missouri.

``The market is still range bound,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``We are being pulled in two directions. The warm weather is bearish and the drop in product stockpiles is very bullish.''

U.S. diesel supplies dropped 2.92 million barrels in the week ended Nov. 3, the Energy Department reported on Nov. 8. Diesel inventories have plunged 12 percent in the past four weeks. Gasoline supplies slipped 584,000 barrels to 204 million last week, the report showed.

Brent crude oil for December settlement fell $1.61, or 2.6 percent, to close at $59.71 a barrel on the London-based ICE Futures exchange.

Nov. 17 (Bloomberg)

Crude Oil Trades Near One-Year Low on Doubts About OPEC Cuts -
By Hector Forster and Nesa Subrahmaniyan


Oil, set for its biggest weekly decline since October 2005, traded near a one-year low on speculation OPEC will exceed its production target.

Crude plunged 4.3 percent yesterday after Halifax, England- based consultant Oil Movements said November shipments by the Organization of Petroleum Exporting Countries will rise. OPEC last month agreed to cut output by 1.2 million barrels a day, or 4.4 percent.

``OPEC has to get their act together,'' said Anthony Nunan, deputy general manager for international petroleum business at Tokyo-based Mitsubishi Corp., Japan's biggest trading house. ``That's what the market's saying.''

Crude oil for December delivery fell as much as 27 cents, or 0.5 percent, in after-hours electronic trading on the New York Mercantile Exchange, to $55.99 a barrel, taking the decline this week to 6 percent, the largest drop since the week ended Oct. 7 last year.

Yesterday, the futures slumped $2.50 to $56.26, the biggest one-day decline since Aug. 17, 2005. The December contract expires today.



Oil Movements

OPEC's shipments rose 0.9 percent in the month to Dec. 2 to 24.8 million barrels a day from 24.6 million barrels a day in the four weeks ended Nov. 4, Oil Movements said in a weekly report yesterday.

Above-average temperatures will cover the northern third of the U.S. from coast to coast this winter as an El Nino weather pattern persists, the U.S. Climate Prediction Center said yesterday in a report that covers December through February. A warmer-than-normal winter in the region would reduce demand for fuels used to run household and commercial furnaces.

``The temperature situation in the U.S. is not helping,'' said Andrew Harrington, a commodities analyst at Australia & New Zealand Banking Group Ltd. in Sydney.

El Nino refers to the warming of the ocean surface off the western coast of South America. The phenomenon affects the jet stream, alters storm tracks and creates unusual weather patterns. A moderate to strong El Nino typically brings mild winters to the northern U.S.

FT.com - November 17 2006

Crude falls after natural gas data - By Chris Flood


Oil prices reversed early strength and retreated on Thursday after the release of the latest US weekly natural gas inflows added to record stock levels as winter approaches.

ICE January December Brent fell 77 cents to $59.84 a barrel. Nymex December West Texas Intermediate, due to expire today, dropped $1.08 to $57.68 a barrel, but there was more trading volume in the January WTI contract, down 80 cents to $59.92 a barrel.

Crude has been range trading since the start of October. The decline in crudes price volatility in recent months is in line with equities and bonds but contrasts with increased volatility for some metals and agricultural products.

Rangebound trading has led to the virtual disappearance of speculative long positions in the crude market. But Francisco Blanch, commodity strategist at Merrill Lynch, said the current stability of crude prices might not last long due to a strong outlook for demand growth in emerging markets, an energy investment shortage and weaker production growth from non-Opec countries.

Analysts at Barclays Capital said: The market is ultimately going to face over-tightening and the longer it takes before a more significant move up, the more vicious is likely to be the whiplash when they do start to move.

Nymex December Henry Hub fell 25 cents to $7.867 per million British thermal units after the Energy Information Administration said gas in storage rose 5bn cubic feet last week.

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sorry my posts were related to epic OIL