POST YOUR OIL NEWS, Clips here


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http://seekingalpha.com/article/117315-using-dbo-uso-and-oil-to-play-crude-oil

wierdly wti March is down 47 and april 147 not sure why convergence like this occurs

Tue, Feb 3 2009, 17:02 GMT
http://www.afxnews.com



By John Kemp


LONDON, Feb 3 (Reuters) - Perhaps the most significant development in financial markets over the last month has been the steepening of the yield curve for U.S. Treasury debt.


Like other indicators based on market expectations, the yield curve is not an infallible guide to the future. But the shift suggests investors are beginning to brace for higher inflation rates between 2010 and 2012, with rising commodity and energy prices likely to drive the increase.


Curve steepening represents a balance between intense demand for security and liquidity in the short term, matched by longer-term concerns about the cost of bank rescues and fiscal stimulus, and possible emergence of inflation as a result of all the liquidity being pumped into the banking system .


Investors are increasingly convinced liquidity will remain too high for too long, with the Fed hesitating to end emergency programmes until there are firm signs of recovery. Whisper it quietly, but there is also widespread suspicion the Fed would welcome a modest increase in inflation as one way to ease the burden of debts which built up during the late 1990s and early 2000s.


In recent weeks, officials have considered committing the central bank to an inflation target, but seem to have rejected the idea for now. One reason is probably that it would fuel suspicions about the central bank's willingness to tolerate faster inflation, pushing bond rates up just when the Fed wants them to come down. But the other is lack of agreement on what the target itself would be.


For fifteen years, central banks have defined their loosely worded "price stability" objective as an inflation rate of about two percent. But there is nothing special about this number either in economic theory or the operating statutes.


Most economists have expressed a preference for low but positive inflation. But there is no specific reason to prefer a rate of two percent rather than three percent or four percent.


Arguably, disinflationary forces in the late 1990s caused the major central banks to set inflation targets that were artificially low and over-ambitious. Policymakers and investors became obsessed by minute changes in the measured inflation rate (down to tenths of a percentage point), blinding them to mounting signs of instability elsewhere.


So the Fed and other central banks could probably tolerate an increase in inflation to three or even four percent in the medium term, and still label it "price stability", if it would help stabilise the banking system and promote a strong and sustained recovery.




A DISTANT MIRROR


It might seem odd to be writing about inflation and rising commodity prices amid the worst slump in the global economy since the 1930s. But past experience and economic theory both point to a sharp rise in inflation and commodity prices as part of a strong cyclical recovery during the three years from 2010 to 2012.


Popular perception of the Great Depression is one long unending slump lasting a decade from the stock market crash in 1929 and ending with outbreak of the Second World War. Nothing could be further from the truth.


While the whole decade was grim, the depression was actually two separate downturns (1929-33 and 1937-39), both deep, punctuated by one of the strongest cyclical upswings on record (1934-37).


This cyclical pattern (wrenching declines in output and prices, followed by equally spectacular recoveries) was fairly typical of the economy's cyclical behaviour before the rise of post-1945 Keynesian demand management.


The chart here (https://customers.reuters.com/d/graphics/CYCLE2.pdf) illustrates the deep cyclical swings that characterised the pre-war economy, with more detail on its behaviour during the 1930s here (https://customers.reuters.com/d/graphics/CYCLE3.pdf).


Between July 1929 and July 1933, manufacturing output in the United States declined at an average rate of 7.1 percent a year. Wholesale prices fell 6 percent. What seared the "Great Contraction" of 1929-1933 into popular consciousness was not the speed of decline but the fact it went on for four long years, seemingly unendingly, and culminated in the spectacular nationwide banking failures of early 1933, in which more than 8 percent of all U.S. bank deposits became frozen in suspended banks.


But once the economy stabilised in early 1933, a powerful cyclical recovery got underway. From July 1933 to the next peak in July 1937, output surged by an average of 9 percent a year, while wholesale prices rose 6 percent.


By the July 1937, wholesale prices had reversed about three quarters of their previous decline and were fast approaching levels that had prevailed at the end of the Roaring Twenties.


Crucially, reflation was driven by raw materials. Between 1933 and 1937, steel prices rose 40 percent. By 1937 billet was more expensive than before the crash. The price of copper halved between 1928 and 1933. But by 1937 it had risen almost 90 percent, and was fast approaching the pre-slump level.


Consumer prices rose half as fast (3.4 percent per year) as producer ones (6.4 percent per year). But the surge in steel, especially in 1936 and the first half of 1937, was enough to convince Fed officials policy needed to be tightened.


Senior officials were particularly worried rising materials prices would intersect with the large amount of excess liquidity in the banking system to fuel even further price increases in future. The Fed estimated U.S. banks were holding around $3 billion of potentially inflationary "excess reserves". So the central bank set out to drain the system, hiking reserve requirements three times in the space of less than a year, from 13 percent to 26 percent.


The direct result was previously excess reserves were "absorbed" and suddenly became required ones. The indirect one was a massive crippling contraction in credit. Subsequent observers have accused the Fed of killing the recovery, tipping the economy into a renewed and vicious recession from which it did not fully recover until the onset of war.


For a full discussion of the cyclical credit and commodity dynamics of the 1930s see the chartbook here (https://customers.reuters.com/d/graphics/DSTMIRROR.pdf).


Bernanke is unlikely to want to repeat the error. If commodity and energy prices begin a strong recovery in 2010-12, the Fed will almost certainly deflect calls to raise interest rates and withdraw excess liquidity, claiming it is a one-off realignment rather than ongoing inflation.


Experience in the 1930s as well as more recently, suggests the Fed will accommodate raw materials prices rather than risk ending the expansion prematurely. Liquidity conditions will remain highly favourable to commodity-driven reflation.


The full-impact of second round effects of the recession (as job losses and fear dampen consumer spending, and investment falls) have yet to be felt. But downturns do not last forever. The average business cycle contraction in the United States has lasted 17 months. Only one contraction in the modern era (1929-1933) lasted more than two years, and that was compounded by policy errors that led to the almost total evisceration of the banking system, which have not been repeated.


With the banking apparently stabilising, albeit on central bank life-support, and the current downturn starting in December 2007, it is reasonable to assume the cyclical trough will occur sometime in H2 2009.


Once activity has hit the trough, past experience suggests a powerful rebound, driven by the need to rebuild depleted inventory along the supply chain, and accompanied by a resurgence of raw materials prices.


While commodities are unlikely to regain frothy peaks recorded in the first half of this year, the normal recovery pattern makes it quite conceivable they will regain the relatively high levels reported in 2006 and 2007 (ie crude oil prices of $60-100 per barrel) by 2012-2013.


In a policy environment that will prioritise growth and jobs, the Fed could easily re-label an inflation rate of 3 or even 4 percent as consistent with stable prices, noting it is a recovery from a low base, and tighten only slowly, even as raw materials prices climb.

Opec warns of demand dive
News wires

World oil demand will contract more than expected this year due to the deepening economic crisis, Opec said today, an outlook that may bolster the case for further supply cuts.


Opec said global demand will fall by 580,000 barrels per day in 2009 to average 85.13 million bpd. Its previous forecast was for demand to contract by 180,000 bpd.

Oil use is falling this year and in 2008, the first drop in more than 20 years as recession triggered by the banking crisis spreads through all continents. Crude prices have fallen below $40 a barrel from a record near $150 last year.

"World oil demand continues its steep decline from last year and is expected to follow this strong negative pattern at least for the first three quarters of the year," Opec said in its monthly report written by its economists.

Still, Opec's prediction of falling demand is less severe than that of the International Energy Agency, adviser to consuming countries, which said on Wednesday that consumption in 2009 would fall by 980,000 bpd.

Slumping demand is leading to higher oil inventories, which Opec said were likely to weigh on prices as demand slows for seasonal reasons later in the year.

A US government report on Wednesday showed crude stocks in the world's top consumer rose for a seventh consecutive week to 350.8 million barrels.

"The high and growing stock levels - particularly for crude oil-- are likely to continue to disrupt the overall stability of the market," the Opec report said.

"Their impact will become even more pronounced with the onset of low seasonal demand as well as the upcoming refinery maintenance period."

Opec now expects demand for its oil to fall "significantly" in 2009 by 1.7 million bpd compared to 2008. That is steeper than its previous forecast of a year-on-year fall of 1.4 million bpd.

The group has agreed at meetings since September to cut its oil output by 4.2 million bpd, equal to 5% of daily world demand, to combat the slump.

In January, the 11 members subject to production cut deals, all excluding Iraq, cut output by 965,000 bpd to 26.33 million bpd, according to data from secondary sources cited by Opec in the report.

Production remains above Opec's 24.84 million bpd implied target and the cutback indicates that Opec met 65% of its pledge to lower output, according to a Reuters calculation based on the producer group's data.

Opec oil ministers are next scheduled to meet to set policy on 15 March in Vienna.

Crude hits $43 as UAE cuts Asia supplies
News wires

Oil rose to $43 a barrel today after the United Arab Emirates announced deeper cuts in crude supply to Asia for April in a possible signal that Opec will cut output further at its next meeting in March.


Abu Dhabi National Oil Company (Adnoc), the main oil supplier in the UAE, said it will sell customers less of its flagship Murban crude oil and three other main grades in April than in March.

The move came as a surprise to traders, who had expected the UAE to keep April supply curbs largely unchanged.

US crude for April delivery was up 60 cents at $43.10 a barrel by 0937 GMT, after surging $2.54 on Wednesday.

London Brent crude gained 50 cents to $44.79.

Edward Meir, analyst at MF Global in New York, told Reuters the market was expecting further cuts in Opec production:

"Crude oil prices could work slightly higher from here, (likely in fits and starts), as we approach the Opec meeting, and as participants begin to discount another likely cut," he said.

"However, even if Opec was to go ahead with its cut, we have our doubts that prices will move substantially above the $50 mark; that seems to be a fair price for oil right now given the poor macro backdrop," Meir added.

US crude futures jumped more than 6% on Wednesday after US government data showed a larger-than-expected drop in gasoline stocks as demand rose on cheaper prices.

The US Energy Information Administration said gasoline stocks fell 3.4 million barrels in the week to 20 February, against a forecast for just a 100,000-barrel draw.

The data also showed a 1.7% rise in US gasoline demand over the four weeks ending 20 February, as low gasoline prices lured US motorists back on the roads.

This helped oil shrug off a drop in US equities markets, which fell after US President Barack Obama's first address to Congress shed little new light on how he plans to stabilise the economy and shore up banks.

European shares hit a six-year low on Wednesday but recovered on this morning.

Abu Dhabi's move to cut allocations may pre-empt a decision by Opec to cut more when the group meets in Vienna in March.

Reports this week have shown high compliance by Opec members on production cuts agreed last year to stem the slide in oil.

Opec has promised to cut 4.2 million barrels per day from its production levels in September and surveys suggest its members have implemented almost all of their cuts.

Venezuelan Finance Minister Ali Rodriguez, a former president of Opec, said his country expected to propose new output cuts.

Global energy consumption has collapsed as the financial crisis has thrown most major economies into recession, bringing oil prices down more than $100 since their peak in July.

Financial markets are awaiting data on US weekly jobless claims and January durable goods orders at 1330 GMT, which are likely to show slumping business investment and rising unemployment in the world's top oil consumer.

U.K. Stocks Fall, Led by Energy Producers

March 11 2009 -- U.K. stocks fell for the first time in four days, led by energy producers and utilities as Tullow Oil Plc reported a drop in oil and gas production and International Power Plc said lower prices will hurt profitability in 2009.

Tullow Oil lost 3.1 percent, snapping three days of gains, as crude oil fell. Cairn Energy Plc slid 4.2 percent after the company announced a share sale. International Power lost 4.3 percent as the company said it faced a near term challenge in the U.K. and the U.S.

The FTSE 100 Index dropped 16.52, or 0.4 percent, to 3,698.71 in London at 9:25 a.m., having gained 4.9 percent yesterday. The FTSE All-Share Index lost 0.4 percent, while Irelands ISEQ Index fell 1.6 percent.

After yesterdays stellar gains the market will do well just to consolidate, said London-based trader Paul Chesterton at CMC Markets. We saw a pull back in the oil price overnight and some weakness in commodity and energy stocks.

Tullow oil lost 2.3 percent to 794 pence. The company, which today posted a fourfold increase in earnings to 223.2 million pounds ($306 million), said oil and gas production fell 9 percent to 66,600 barrels of oil.

The oil producer this week said it raised $2 billion in loans from 14 banks to fund developments and refinance debt.

BG Group Plc, the U.K.s third-biggest natural gas producer, fell 1.5 percent to 984 pence as crude oil fell in New York, extending yesterdays 2.9 percent decline, amid speculation a government report today will show U.S. inventories gained as demand weakened.

Shell Retreats

Royal Dutch Shell Plc, Europes largest oil company, declined 1 percent to 1,564 pence.

Cairn Energy dropped 4.2 percent to 1,792 pence as the U.K. oil and gas explorer in India said it plans to place up to 6.5 million shares to help strengthen the companys equity capital base.

International Power declined 4.3 percent to 196.1 pence. The British utility that produces electricity in 20 countries said the company faced challenges from weaker prices in the U.K. and the U.S.

There is some concern around the outlook in the U.S., Nathalie Casali, a London-based analyst at JPMorgan Chase & Co. said in a telephone interview today.

http://www.eia.doe.gov/pub/oil_gas/petroleum/data_publications/weekly_petroleum_status_report/current/txt/wpsr.txt

U.S. commercial crude oil inventories (excluding those in the Strategic
Petroleum Reserve) increased 0.7 million barrels from the previous week. At
351.3 million barrels, U.S. crude oil inventories are above the upper limit of
the average range for this time of year. Total motor gasoline inventories
decreased by 3.0 million barrels last week, and are in the lower half of the
average range. Both finished gasoline inventories and gasoline blending
components inventories decreased last week. Distillate fuel inventories
increased by 2.1 million barrels, and are above the upper limit of the average
range for this time of year. Propane/propylene inventories decreased last week
by 0.6 million barrels and are above the upper limit of the average range. Total
commercial petroleum inventories increased by 2.6 million barrels last week and
are above the upper limit of average range for this time of year.

Betting on big oil's comeback



By Mina Kimes, reporter



With crude down below $45 a barrel, it's hard to see the beauty in oil stocks these days. But with analysts forecasting a rebound in prices, now might be a good time to buy.

"Right now, the upsides in the oil sector far exceed the downside risks," says Fadel Gheit, an analyst at Oppenheimer & Co. "I am absolutely convinced that oil prices will rise."

After last year's $100 free-fall rocked expectations, that kind of confidence is surprising. But Gheit is not alone; a strong consensus is growing for a price rebound. While crude isn't likely to rocket back to the sky-high levels of 2008, even bearish analysts admit that oil can't stay below $50 for long.


As demand and prices drop, producers are drastically cutting back on spending, and OPEC is moving quickly to cut supply. The market is currently over-saturated, but when the commodities market sniffs out the coming deficit, prices will rise again, say analysts.

"We see oil consumption in 2010 being close to what it is in 2009, but production will be down," says Ed Maran, the co-portfolio manager of Thornburg Value Fund. "There's a potential for a shortage in 2011, and it's entirely possible that we could be back up to $100 oil."


Maran thinks demand will return when the global economy recovers, led by oil-hungry countries like China and India. The industry faces political headwinds from the new administration, but few analysts believe that alternative options will satiate the demand for energy in the near future.

Exxon: a league of its own

Exxon Mobil, the world's largest oil and gas producer, stands to benefit if prices rise, but it is also unlikely to suffer much if they don't climb in the near term. "If the economy recovers but oil prices don't exceed $60 -that's the perfect environment for Exxon Mobil," says Gheit. While other companies need higher prices to boost profits, Exxon can reap the benefits of a smaller boost.

Some analysts don't like Exxon's limited upside. Because of the company's massive market cap, it will only react so much to rising prices. Goldman Sachs' Arjun Murti compared it to U.S. Treasuries because of both securities' perceived safety.

"You won't see a lot downs - or ups - because Exxon is so widely held and has such diverse operations," says Allan Good, a Morningstar analyst. "If oil shoots back up, Exxon isn't the best company to take advantage of the upside."

At an analyst presentation on Thursday, Exxon said it plans to boost its spending to $29 billion in 2009. CEO Rex Tillerson highlighted the company's exploratory potential, but Gheit read something else between the lines. "They're going to make a large acquisition," he says. "It's going to happen soon."

As the valuations of smaller companies drop, Gheit says Exxon could scoop up another producer at great discount. The company has enough money to buy any of its competitors - in combination - but would likely face regulatory opposition if went after another large producer.

Until then, Good says investors can take comfort in Exxon's $31 billion in cash. "Park your money there and get a nice return off of the dividend." The company is expected to raise its dividend soon to compete with companies like BP, which currently offers a whopping 9.5% yield.

Opportunities across the board

Other large stocks stand ready for a rebound. ConocoPhillips, whose shares have fallen 57% over the last year, has a price to earnings ratio of 9 versus Exxon's 13. The company has a large amount of refining exposure, which hurt its bottom line in 2008 because of rising oil prices and slowing consumption.

Maran says that ConocoPhillips was unfairly penalized because of its partnership with Lukoil and its expulsion from Venezuela. Investors are worried about political risk - an overreaction, he says, and one that's likely to change if more countries invite foreign companies in to revive their flailing economies.

Another big producer analysts say is undervalued is Petrobras, which discovered a series of mega-fields off of the Brazilian coast two years ago. Goldman's Murti recently wrote that Petrobras "may be the best positioned major oil company in the world for the next oil price upcycle."

It's still unclear how much the company's offshore find is worth, but Don Coxe, a longtime oil guru who now runs Coxe Advisors, likes what he sees. "Petrobras is a special story, and investors want to be a part of it," he says. "They could find $25 billion worth of oil down there."

For investors who are willing to dip their toes into less familiar territory, a variety of small, "beta" oil stocks could pop if prices go up. Gheit prefers Anadarko and Devon Energy for their strong exploration portfolios. While it's not wise to bet on acquisitions, he warns, they could be targets for companies like Exxon - when prices are this good, retail investors aren't the only ones eyeing oil stocks.



http://cnnmoney.mobi/money/archive/archive/detail/130649/full;jsessionid=C9D278E44BFC39B95F4F40EB76A45FC0#p1

US crude oil rallied above $47 on Monday, tracking earlier gains on Wall Street, and as traders cheered comments from Fed chairman Ben Bernanke that the US recession may finish by the end of the year.

Light, sweet crude for April delivery settled up $1.10 at $47.35 a barrel in New York. Earlier in the day, oil fell more than 3% to under $44 a barrel as traders mulled OPEC's decision on Sunday not to make further production cuts. Its next meeting is in May.

As the session progressed a weaker dollar and strengthening equities buoyed demand for the black stuff.

Reports of a militant attack on a Chevron oil pipeline in Nigeria also gave oil prices a lift. The sabotage could, it has been estimated, reduce output by 11,500 barrels per day.

US crude oil settled at a three month high on Tuesday after data showed housing starts surged 22% from Januarys figure despite expectations of a decline.

Its the first time housing starts have risen since last June. Meanwhile builder permits, which is a measure of builder confidence, also rose 3%, confounding expectations of a decline.

Separate inflation figures came in lower than expected. Oil traders cheered the days economic data and a day of gains on Wall Street.

US light crude oil for April delivery added $1.81 to settle at $49.16 a barrel. Oil prices were also pushed higher ahead of the expiry of Aprils contract.

Expectations that data out Wednesday will show an increase in weekly crude inventories also buoyed demand for oil.

Oil prices settled over $1 lower on Wednesday at the end of the Federal Reserves two day meeting in which the central bank said it would buy up to $300bn in treasury bonds over the next six months.

As expected interest rates were kept on hold at its record low.

US light crude oil for April delivery dropped $1.02 to settle at $48.14 a barrel.

Traders also mulled the weekly inventory report from the Energy Information Administration.

The data showed stockpiles of gasoline soared last week by 3.2m barrels, confounding expectations of a 2.1m barrel decline. The report also showed an increase of 2m barrels in crude inventories while distillates, used in diesel and heating oil, increased by 100,000 barrels.

when does the April contract close? or has it already?

Oil prices surged 7%, breaking clear the $51 barrier, after the government announced it would spend another $1 trillion to boost the economy.

The US Federal Reserve chief Ben Bernanke unveiled a $300bn treasury bond buy-back plan as part of a new $1.15trn package to rejuvenate the US economy on Wednesday.

The move continued to hit the dollar on Thursday, which has pushed higher the dollar-denominated crude.

Crude prices surged $3.47 to $51.61 a barrel.

The lower dollar has also buoyed other commodities, including gold. The move by the Fed to pump more money into the system will also push inflation and that too is seen as a driving factor for gold, which is traditionally seen as a hedge against inflation.

Hopes of a US economic recovery pushed crude oil prices higher on Monday after proposals from US Treasury Secretary Timothy Geithner for a $1trn debt plan.

US light crude oil for May delivery rose $1.73 to end the day at $53.80 a barrel on the New York Mercantile Exchange.

Oil also tracked a strong session on Wall Street, with the Dow leaping almost 7%, its strongest gain since last November. Hopes of an economic recovery of course sparked hopes of a recovery in oil demand. Earlier in the session it rose to a high of $54.05.

Details of the governments plans to mop up banks toxic assets were enthusiastically received and optimism about an economic recovery ran high on Monday.

While oil prices rose on Monday, analysts expressed concern about the large amount of crude stockpiles, as shown in last weeks Energy Information Administration report. These excess levels of crude oil are expected to keep oil's gains in check.

US crude oil edged lower on Tuesday on rising expectations that weekly inventory data will show an increase in crude stockpiles while the strengthening dollar also added pressure.

US light crude oil for May delivery fell 18 cents to settle at $53.98 a barrel. Earlier in the session it fell to a low of $52.45.

Wednesdays Energy Information Administration is expected to show an increase of 1.1m barrels in crude stockpiles signalling demand for the black stuff is still weak as consumers grapple with the economic downturn.

Among precious metals gold prices fell once again as the greenback rose against major currencies. COMEX gold for May delivery fell $29.10 to settle at $924.70 an ounce.

The yellow metal also suffered some profit taking following last weeks gains.

US driving season starts mid-late May. Wonder what effect that might have this year.

Would have thought less consumption BA but there again, also a bit to far away to contemplate for me at the moment.

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Oil prices came under pressure on Wednesday but settled off earlier lows after the governments weekly report showed a much bigger than expected build in energy stockpiles.

The Energy Information Administration said crude inventories rose 3.3m barrels last week compared with expectations of a 1.4m barrels increase.

Gasoline inventories fell by 1.1m barrels in the week while forecasts had been for a decrease of 900,000 barrels. Meanwhile distillate, which is used in diesel and heating oil, fell by 1.6m barrels, bigger than the 200,000 barrels decline expected.

Some surprisingly strong US economic data lifted crude prices off the days lows. New home sales figures climbed 4.7% in February to a seasonally adjusted annual rate of 337,000. The Commerce Department said orders for US made durable goods rose 3.4% in February, its first rise in seven months.

US light crude oil for May delivery fell $1.21 to settle at $52.77 a barrel. Before the stockpile and economic data crude traded around 4% lower.

The worst US GDP data for 26 years sent investors scurrying for the safety of gold, pushing the April futures contract up to $940, up $4.20 on the day.

US GDP fell by an annual rate of 6.3% in the final quarter of last year, worse than the initial read of 6.2% but better than consensus forecasts from economists of a 6.6% fall.

Meanwhile, the appeal of gold as a safe asset was further enhanced by news that the total number of US unemployed rose to a record 5.56m, although the dollars strength limited the extent of golds gains.

The oil price was also on the rise, with the April contract rising above $54 a barrel, reversing Wednesdays losses when the Energy Information Administration revealed that crude inventories rose by 3.3m barrels last week.

US crude oil settled almost $2 lower on Friday, settling under $53 a barrel as traders took profit on the previous sessions gains.

US light crude oil for May delivery fell $1.96 to settle at $52.38 a barrel on the New York Mercantile Exchange.

A decline on Wall Street, weak economic data, higher than expected weekly crude stockpile data and a stronger dollar also pressured oil prices. Weak retail sales data from Japan and grim US employment data renewed concern about the global economic outlook.

Otherwise crude has enjoyed six straight weeks of gains on hopes that fiscal stimulus from the US and other nations will help stimulate demand for oil.

Among precious metals gold fell on Friday as the dollar strengthened against major currencies. Gold for June delivery fell $16.90 to end at $925.30 an ounce.

Nymex $48.25 heading down oil stocks rising, demand falling, time to get out of oilies?