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Energy prices slide as employment numbers dip

By PABLO GORONDI, Associated Press Writer Pablo Gorondi, Associated Press Writer 1 hr 6 mins ago
Energy prices fell for a second consecutive day Friday as the U.S. reported a sharp plunge in jobs.

Crude and gasoline price have risen sharply for more than a week with economic data suggesting that manufacturing activity has accelerated across the globe.

Yet if the job picture remains gloomy, it is unlikely that higher energy prices can be sustained.

Benchmark crude fell 35 cents to $82.31 per barrel on the New York Mercantile Exchange after closing down 52 cents on Thursday.

U.S. companies shed 85,000 jobs last month, more than expected, and the numbers would have been worse if more people had been looking for work. Many have left the labor force because they can't find work.

On Friday, UPS, the world's largest package delivery company, said it would cut 1,800 management and administrative jobs.

Nearly 15.3 million people in the U.S. are unemployed, with an increase of 3.9 million people during 2009.

That has slashed demand for gasoline and in many households where one or two parents have lost jobs, people are putting on another sweater rather than turning up the heat.

Even with nasty winter storms raking the country, the Energy Information Administration reported Wednesday that heating oil supplies had fallen by a paltry 300,000 barrels.

Still, gasoline prices have risen steadily for weeks and that isn't making it any easier for consumers. Oil prices have risen over the past two weeks on the anticipation that a healing economy will increase demand and gasoline prices have tagged along.

The national average price for a gallon of gasoline this week raced by the top price for all of last year and continued to rise overnight.

A gallon rose almost 2 cents to $2.725 to end the work week, according to AAA, Wright Express and Oil Price Information Service.

In other Nymex trading in February contracts, heating oil fell less than a penny to $2.1776 a gallon and gasoline also lost less than a cent to $2.1326 a gallon. Natural gas futures fell 12 cents to $5.685 per 1,000 cubic feet.

In London, Brent crude for February delivery fell 45 cents to $81.06 a barrel.

Balerboy, thanks for all this info, nice to read....

your welcome.

.Oil rises above $83 amid strong China demand. By ALEX KENNEDY, Associated Press Writer Alex Kennedy, Associated Press Writer Mon Jan 11, 12:33 am ET
SINGAPORE Oil prices jumped above $83 a barrel Monday in Asia amid signs of strong Chinese demand for crude and rebel attacks on Nigerian supplies.

Benchmark crude for February delivery was up 80 cents to $83.55 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. On Friday, the contract rose 9 cents to settle at $82.75.

China said Sunday that oil imports rose 14 percent last year to a record high in December, part of a 56 percent surge in overall imports last month. The better than expected Chinese figures helped investors brush off Friday's disappointing U.S. jobless report, which showed the economy lost 85,000 jobs in December and the unemployment rate was steady at 10 percent.

Crude prices have spiked 20 percent in the last month as a rash of cold winter weather in parts of the U.S., Europe and Asia boost demand for oil products such as heating oil.

Supplies were also threatened in Nigeria, where unidentified gunmen attacked a Chevron Corp. crude oil pipeline, cutting production by 20,000 barrels a day, a company spokesman said Saturday.

In other Nymex trading in February contracts, heating oil rose 2.28 cents to $2.22 a gallon and gasoline gained 1.97 cents to $2.18 a gallon. Natural gas futures were down 16.4 cents to $5.59.

In London, Brent crude for February delivery rose 69 cents to $82.06 a barrel on the ICE Futures exchange.

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Oil Rises to a 15-Month High on Cold Weather, Weaker Dollar By Grant Smith and Yee Kai Pin

Jan. 11 (Bloomberg) -- Crude oil rose to a 15-month high as the cold snap stoked demand for heating fuel while a sliding dollar heightened crudes appeal for hedging inflation.

Oil advanced a second day after a government report yesterday showed that crude imports to China, second-largest energy consumer, climbed to a record 203.8 million metric tons last year. Russia failed to agree on oil supplies to Belarus for 2010 during talks in Moscow on Jan. 9, raising the prospect of a disruption to European imports.

Oil continues to trend higher this morning as cold weather and a weaker dollar trigger speculative buying, said Christopher Bellew, senior broker at Bache Commodities Ltd in London. But once the weather in the U.S. improves, plentiful supplies of physical oil may soon weigh on prices.

Crude oil for February delivery rose as much as 92 cents, or 1.1 percent, to $83.67 a barrel in electronic trading on the New York Mercantile Exchange. Thats the highest since Oct. 14, 2008. It was at $83.43 a barrel at 9:50 a.m. London time.

Futures have risen in 11 of the past 12 sessions as freezing temperatures in the U.S., Europe and Asia boosted heating fuel demand. More cold weather is forecast for China in the next two days.

The cold snap has done its part in eating away at the distillates stockpiles, but really its the industrial demand that the market is going to be focusing on, said Toby Hassall, commodity analyst at CWA Global Markets Pty in Sydney.

Fuel Inventories

U.S. stockpiles of distillates like heating oil fell for a fourth week even as imports and refinery output increased, an Energy Department report on Jan. 6 showed. Inventories including heating oil and diesel were at 159 million barrels in the week ended Jan. 1, the lowest since July.

Negotiations between Russia and Belarus broke down because of disputes over customs duties and the re-export of refined oil products from Belarus, Russian Energy Ministry spokeswoman Irina Yesipova said by telephone. The countries had planned to sign an agreement on supplies before Jan. 1.

U.S. retail sales expanded 0.5 percent in December, based on the median forecast from 57 economists surveyed by Bloomberg News before a Jan. 14 Commerce Department report. Industrial production probably rose 0.6 percent, another report may show.

Exports in China, the worlds fastest-growing major economy, climbed 17.7 percent in December from a year earlier, the first increase in 14 months, the customs bureau said on its Web site yesterday. Imports jumped 55.9 percent.

Asia has obviously performed well throughout this recession, Hassall said. Beyond the short term, the global economy, and the U.S. in particular, the largest consumer of oil, is in the early stages of a recovery, which suggests that demand is on the mend.

Investment Appeal

The dollar dropped to a three-week low against the euro on signs Asias economic growth is gaining pace, bolstering the investment appeal of commodities. The U.S. currency slid as much as 1 percent to $1.4535 per euro, the weakest since Dec. 17, from $1.4409 in New York on Jan. 8.

Chevron Corp., the second-largest U.S. energy producer, said the Makaraba-Utonana pipeline it operates in southern Nigerias Delta state was breached on Jan. 8, shutting in 20,000 barrels a day of crude oil production.

Nigeria, which vies with Angola for Africas top oil producer, is the fifth-biggest source of U.S. crude imports. Attacks by armed groups in Nigerias oil-rich delta region have cut the countrys output by more than 25 percent since 2006.

Brent crude oil for February settlement rose as much as 88 cents, or 1.1 percent, to $82.25 a barrel on the London-based ICE Futures Europe exchange. It was at $82.04 a barrel at 9:52 a.m. London time.

Oil Pushing Toward $90 A Barrel In Coming Months - Citigroup



By Brendan Conway, Of DOW JONES NEWSWIRES

NEW YORK -(Dow Jones)- Citigroup analysts said Monday they expect oil prices to push toward $90 in coming months and read good news into the trend for companies including Chevron Corp. (CVX) and BP PLC (BP).

Citigroup Global Markets analysts upgraded their Chevron and BP investment ratings to buy from hold after the firm's oil analysts targeted oil's per-barrel price around $80 in the long term, up from $65.

"In the medium term we expect prices to push toward $90/barrel, though we are less optimistic about 2010" as a whole, analyst Faisel Khan wrote. The firm expects that trend to push the stocks higher, raising its Chevron price target to $97 per share from $78 and the BP target to GBP6.80 from GBP6.

Chevron was singled out as "the most levered name to oil" in the analysis. Its stock has "the greatest valuation sensitivity to changes in oil prices" versus its peers, the analysts wrote.

Many Wall Street equity analysts expect oil prices to rise in 2010, and many have favorable outlooks on oil stocks. But Citigroup's sector call appeared to grab some attention in the market Monday. Chevron shares rose 1.2% to $80.40 in premarket trading. BP PLC was also up.

Besides Chevron and BP, Citigroup raised its investment outlook for Petrobras Petroleo Brasileiro (PBR), to buy from hold.

-By Brendan Conway, Dow Jones Newswires; (212) 416-2670; brendan.conway@ dowjones.com

Oil falls below $82 on warmer weather expectations By ALEX KENNEDY, Associated Press Writer Alex Kennedy, Associated Press Writer Tue Jan 12, 12:24 am ET
SINGAPORE Oil prices fell below $82 a barrel Tuesday in Asia on expectations a frigid cold spell in parts of the U.S., Europe and Asia will ease in coming weeks, weakening crude demand.

Benchmark crude for February delivery was down 61 cents to $81.92 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange.

On Monday, a weakening U.S. dollar helped push the contract to a 15-month high near $84 a barrel before it settled down 23 cents at $82.52.

Crude prices have jumped from $69 a barrel a month ago as cold winter weather, especially in the U.S. Northeast, boosted demand for oil products such as heating oil. Forecasters now expect those freezing temperatures to rise the rest of this month.

"The bullish impetus off of the dollar weakness was largely offset by warmer Northeast temperature expectations for the next couple of weeks," Galena Illinois-based Ritterbusch and Associates said in a report.

The euro fell slightly against the dollar in early Asian trading Tuesday and the dollar was steady against the yen.

In other Nymex trading in February contracts, heating oil fell 1.7 cents to $2.16 a gallon and gasoline fell 1.32 cents to $2.13 a gallon. Natural gas futures were up 2.6 cents at $5.48.

In London, Brent crude for February delivery fell 64 cents to $80.33 a barrel on the ICE Futures exchange.

Oil May Rebound From $78, End Losing Streak: Technical Analysis By Yee Kai Pin

Jan. 13 (Bloomberg) -- Crude oil may rebound from its current three-day losing streak, possibly reaching as high as $87.20 a barrel, as long as prices dont fall below $78, according to Societe Generale SA.

Oil is pulling back because its relative strength index shows prices have advanced too rapidly, said Stephanie Aymes, a commodity technical analyst at Frances second-largest bank by market value. Futures ended a 10-day climb on Jan. 7, the longest rally since February 1996.

The 14-day RSI is at resistance, which means that we cannot rule out a pause to the retracement at $78 before turning back up, London-based Aymes said in e-mailed comments.

Crude oil extended its decline in New York after Chinas central bank moved yesterday to restrain lending, fanning concern demand in the worlds second-largest energy consumer may be curbed. The contract for February delivery was at $79.83 a barrel in electronic trading on the New York Mercantile Exchange, down 96 cents, or 1.2 percent, at 11:13 a.m. Singapore time.

Aymes identified $87.20 a barrel as the top of an ascending channel for February futures. Oil this week has fallen before reaching that target because a trend line joining the RSI highs since June coincides with a reading of 70, which indicates prices have risen too quickly.

Before any approach to $87.20 a barrel, a level last surpassed Oct. 9, 2008, traders may exit positions at $86.65 and $85.30 to protect profits, Aymes said yesterday in a separate note to clients.

We reduced the bullish conviction to neutral, the note said.

If downside support at $78 a barrel is breached, a decline to $77.95 and $76.80 is possible, Aymes said. In that scenario, prices will still remain within the ascending channel, she said.

Balerboy,

I presume/hope that MoneyAm holders or potential holders of shares in all oil companies follow this thread. I hold FKL so as yet I look in fairly regularly just to keep an eye on things for the future, as no doubt those in Des, Rkh, Fogl, etc also do.
I would just like to add my thanks for your hard work on this thread. It is much appreciated.
It also shows you are not talking to yourself.

Regards Greek.

I always talk to myself, which is the first sign's...... then I talk to cynic and then know it's confirmed..:))
I'm no good at the maths/science of share dealing, only gut feeling from charts and the abundance of info gleaned from all the people on here, though after trading now for 5 years have learnt the hard way that not all that is printed is in everyone's interest and consequently invested in some duffers. But thats the learning curve.
So the little bits of news I come across, I hope is useful to others and am glad it's a way I can contribute to the board. cheers BB

Technical Analysis: Crude Oil fades its recent break-out13-01-2010 11:00

China's decision to raise interest rates and raise its reserve requirements for its banks has fuelled speculation that the Chinese central bank is wary of a forming asset bubble in its markets.

This paring back of stimulus has in turn put the skids under commodity prices which had been rising rapidly on expectations that China would lead the world into recovery.

Oil broke above its previous highs last week, which should have been the pre-cursor to a move towards $89.00, however this news has seen Oil slip back below its previous highs at $82.00 and has also slipped below $80 as well, hitting a low of $79.63 today.

The recent cold snap in Europe and the US has also helped lift oil prices recently, while this afternoon we should see the latest weekly crude oil and gasoline inventory data.

This data is notoriously volatile, but it could provoke a sharp move higher, if it shows a significant deficit.

The oil price should find some support at the $79 area while a fall below that could see a re-test of the channel break out support around $77.00.

Despite the slide back in oil prices a small fall is not necessary a bad thing for any global recovery as it will contrive to keep manufacturing costs low.

If the oil price rises too high at some point manufacturing costs will rise which would then push inflation higher and run the risk of choking off any recovery.

By TIMOTHY WILLIAMS
Published: January 13, 2010
BAGHDAD A wave of American companies have been arriving in Iraq in recent months to pursue what is expected to be a multibillion-dollar bonanza of projects to revive the countrys stagnant petroleum industry, as Iraq seeks to establish itself as a rival to Saudi Arabia as the worlds top oil producer.

Since the 2003 American-led invasion, nearly all of the biggest reconstruction projects in Iraq have been controlled by the United States. But many rebuilding contracts are expected to be awarded as soon as this month for drilling hundreds of new wells, repairing thousands of miles of pipeline and building several giant floating oil terminals in the Persian Gulf, and possibly a new port.

The contracts will be administered either directly by the Iraqi government or as part of Baghdads oversight of international oil companies that have signed agreements during the past few months to develop the countrys most promising oil fields.

There are misgivings, however, about Iraqs ability to adequately monitor contracts that could total $10 billion over the next five years. The concerns have been heightened by the prominent role expected to be played by American companies that have been criticized in the past by United States government auditors and inspectors for overcharging by hundreds of millions of dollars, performing shoddy work and failing to finish hundreds of crucial projects while under contract in Iraq.

Among the companies that have started sending workers and equipment to the country or have plans to are Halliburton, Baker Hughes, Weatherford International and Schlumberger, all Houston-based oil-services companies, and several construction and engineering giants, including KBR, Bechtel, Parsons, Fluor and Foster Wheeler.

Halliburton and its former subsidiary KBR, as well as Bechtel and Parsons, have been singled out for criticism by the Special Inspector General for Iraq Reconstruction for their previous work in Iraq.

The new contracts will put the companies into direct contact with an Iraqi government that has frequently acknowledged its own challenges in dealing with corruption and cronyism, and that has a lack of experienced managers, adequate enforcement and efficient auditing systems.

The companies deny intentional wrongdoing in their dealings in Iraq and say that their experience there and in other oil-producing countries in Central Asia gives them an advantage.

KBR has historic experience on previous oil and gas production projects ranging from Azerbaijan to Kazakhstan, Heather Browne, KBRs director of corporate communications, wrote in an e-mail response to questions. Our pursuit of additional contracts in the region is based on this experience in addition to KBRs work on Project RIO (Restore Iraq Oil).

During a conference call with industry analysts in October, David J. Lesar, Halliburtons chief executive, said that he had visited Iraq and that the company was already doing a limited amount of work on oil wells there.

I think you see everybody trying to establish a base there, and were no exception, Mr. Lesar said. Clearly, a great future there and one we will participate in in a big way.

But others questioned the Iraqi governments capacity to police the companies. These are for-profit concerns and they are trying to make as much money as they can, said Pratap Chatterjee, former executive director of an anticorruption group, CorpWatch, and author of a recent book about Halliburton. What the Iraq government needs is a good system of transparency and accountability, and for someone who knows what theyre doing to oversee the work. Otherwise, they are going to be taken for a ride.

During the past several months, Iraq has signed 10 production contracts with international oil companies as it tries to increase its oil output from a relatively static 2.4 million barrels a day to as much as 12 million barrels a day within six years. Officials said they hoped to drill at least 430 oil wells during the next two years.

The planned work will require new pipelines, including as many as three undersea lines, floating terminals, water treatment facilities, pump stations, oil storage tanks, power plants and possibly a new Persian Gulf port that might be needed to handle the increased oil exports.

There will also be a need for new housing, roads and schools, and workers will need to remove unexploded ordnance from oil fields and shipping lanes, transport massive oil rigs and use extraordinary amounts of concrete and steel to reinforce the wells.

While American oil companies have enjoyed only modest success in winning oil development deals in Iraq, the numerous contracts signed in recent months have created an enormous backlog of work that leaves Baghdad with limited alternatives to Halliburton and the other American companies that dominate the oil industry services sector.

Iraq has little choice, said Joost R. Hiltermann, deputy program director for the Middle East and North Africa with the International Crisis Group, a nonprofit organization that aims to prevent deadly conflicts. It is desperate to increase its revenues, almost all of which derive from the sale of oil. But the government has little capacity to monitor the many companies that will be involved in rehabilitating its ailing oil industry, or indeed its own operations. This is a recipe for massive corruption, but for Iraqi policy makers the cost will be worth it, given the expected massive returns.

Government officials maintain, however, that Iraqs system of checks and balances will help it avoid the mistakes made by the United States.

There are procedures where if a company breaches a contract or makes errors, they will be blacklisted from working in Iraq, said Dr. Sabah A. Shibeeb al-Saidi, chief of the Ministry of Oils legal and commercial department in the petroleum contracts and licensing directorate. But if they are not blacklisted we will deal with them. We expect oil services companies to do many things in Iraq.

Neither Halliburton nor KBR is on the Iraqi government blacklist, and Mr. Saidi and other senior Iraqi government officials interviewed said they had never heard of either those companies or of other American ones that have become household names in the United States because of their work in Iraq.

Halliburtons former subsidiary, KBR, which was once run by former Vice President Dick Cheney, has won contracts worth more than $24 billion since the start of the war, giving it vast responsibility for reinvigorating Iraqs oil sector. Among many other criticisms of the companys performance in Iraq, Pentagon auditors found that KBR had overcharged the government by more than $200 million.

Kurds Boom in North Iraq Imperiled by Oil Dispute With Baghdad
January 14, 2010, 03:01 AM

By Ben Holland

Outside a newly built go-kart racetrack in Erbil, the capital of Kurdish-controlled northern Iraq, a poster urges would-be drivers to feed the need for speed.

Kurds are taking that advice to heart, racing ahead of the rest of the country in luring oil investment and rebuilding after decades of war and sanctions. They have hit a speed bump: a four-month standoff with Iraqi Prime Minister Nuri al-Maliki over how to share the countrys oil resources and where to draw internal boundaries.

The dispute, which led al-Maliki to refuse payments to oil companies hired by the Kurds, may threaten the boom that has given Erbil new homes, conference centers and underground fiber- optic cables. It may also jeopardize Iraqs stability as it approaches March 7 elections and the pullout of U.S. troops.

The tension could potentially escalate into live fire if al-Malikis government tries to weaken Kurdish self-rule, said David L. Phillips, a senior fellow at the Atlantic Council, a research institute in Washington. Sectarian violence will never break Iraq but ethnic conflict can.

Since the U.S. ousted dictator Saddam Hussein in 2003, the north has stayed largely free of the violence between Sunni and Shia Muslims in Arab provinces that has killed about 100,000 Iraqis, according to the Web site Iraq Body Count. That stability strengthened the hand of Kurdish leader Massoud Barzani and helped attract investors.



Early Contracts



The Kurdish oil ministry started awarding contracts to companies such as Calgary, Canada-based Addax Petroleum Corp., later acquired by China Petrochemical Corp., and Oslo-based DNO International ASA as early as 2002 -- the year before Husseins fall.

Now, those companies arent getting paid because of the dispute with Baghdad.

Al-Maliki, whose central government controls export pipelines and collects all oil revenue, has refused to turn over money pledged by the Kurds to their producers, saying the Kurdish government had no right to sign its own contracts.

The Kurds responded by halting exports in October. DNO and the other producers are supplying the domestic market.

Not repaying the Kurds is unfair and unreasonable and illogical, and hurts the whole of Iraq by cutting oil sales, said Falah Mustafa Bakir, head of the Kurdish governments foreign affairs department.



Oil Production



Oil output in Kurdistan, which the local authorities say could soar to 450,000 barrels a day by the end of this year, has slumped to 20,000 barrels instead, from a peak of 100,000 last year. Nationwide, Iraq produces about 2.4 million barrels a day.

A dispute over Kurdish borders adds to friction between Barzani and the Baghdad government. Barzani says Kirkuk, a province southeast of Erbil that produces about one-quarter of Iraqs oil, should be part of Kurdistan because it is majority- Kurdish in population.

A referendum on that question has been delayed for two years and, meantime, Barzani and al-Maliki have bolstered their military forces there. Kirkuk was omitted from the 15 oilfields offered by al-Maliki to investors last month.

If you dont have an agreement between Erbil and Baghdad then all these oil and gas fields cant be developed, said Gareth Stansfield, an analyst at the Chatham House research center in London. Theyve got each other by the throat and thats what makes it so dangerous.



Lots of Industry



Those dangers dont overshadow the current boom for those in the Kurdish region who recall Husseins chemical attacks in the late 1980s and the decade of poverty and international sanctions that followed.

A few years ago there was no money, no electricity, no banks, said Dara Jalil Khayat, head of the Erbil Chamber of Commerce. Now we have lots of industry and were working on setting up a stock exchange.

In the 1990s, when most Iraqi Kurds were living on United Nations handouts in an enclave protected by U.K. and U.S. warplanes, Baz Karim turned the offices of his family marble business into distribution posts for food and fuel.

Now Karims Kar Group has about $1 billion in energy and building contracts, and is mulling a stock market listing -- maybe in two or three years, maybe in London, Karim said at Kars office, a villa in Erbils suburbs. On his desk is a model of its successor, a 13-story skyscraper being built in Erbil.

Kar is extracting oil from the Khurmala field west of Erbil. Last year it opened a refinery that Karim says will produce 75,000 barrels a day by year-end for Erbils growing fleet of private cars.



Tomato Paste



Investors from outside Iraq are seeking to profit in Kurdistan.

Andrew Eberharts Marshall Fund, a U.S.-based private equity firm, runs a tomato-paste plant near Erbil that it took over from the UN food program. Eberhart, a former U.S. Army officer and later a banker at New York-based Citigroup Inc., got interested after a Defense Department-sponsored trip to Iraq in 2007. Hes now looking at such opportunities as fast-food franchises and the dairy industry.

The level of institutional interest in the U.S. and the U.K. is picking up, Eberhart said. Theres plenty of really good opportunities there right now.

Oil Snaps Three Days of Declines on U.S. Earnings Optimism By Grant Smith and Alexander Kwiatkowski

Jan. 14 (Bloomberg) -- Crude oil rose for the first time in four days on speculation that improving U.S. corporate earnings and economic confidence worldwide will spur fuel demand.

Crude traded above $80 a barrel, shrugging off gains in U.S. crude and fuel supplies, as equity markets and confidence in the economy rose around the world. Global oil demand will increase by 1.7 million barrels per day next year, according to the Energy Department.

Were seeing the recovery, said Tobias Merath, head of commodities research at Credit Suisse Group AG in Zurich. Demand is still weak, inventories are still high, but theyre off the peak and starting to tighten. Sentiment is such that dips below $80 are seen as buying opportunities.

Crude oil for February delivery rose as much as 71 cents, or 0.9 percent, to $80.36 a barrel in electronic trading on the New York Mercantile Exchange. It was at $80.11 a barrel at 10:20 a.m. London time.

Prices rose with equities, as Europes Dow Jones Stoxx 600 Index climbed 0.7 percent to 258.63 at 10:10 a.m. in London. The MSCI Asia Pacific Index climbed 0.9 percent, and futures on the Standard & Poors 500 Index added 0.8 percent before a report forecast to show U.S. retail sales increased for a third month.

Stronger earnings reports from banks and other major manufacturers would be supportive for oil, said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. Theres no question that financials continue to be the main driver of oil pricing.

Bloomberg Confidence Index

The Bloomberg Professional Global Confidence Index gained to 66.6 this month from 58.9 in December, reaching the highest level since the series began two years ago. The index exceeded 50 for a sixth month, which means there were more optimists than pessimists.

Oil dropped a third day yesterday, settling below $80 a barrel for the first time this year, after a U.S. government report showed the countrys crude and product inventories increased last week.

The last few weeks of draw-downs had people optimistic that we were going to start to see this big supply overhang worked off, but it doesnt seem to be the case, said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne.

Distillate fuel stockpiles rose for the first week in five, the Energy Departments report showed. Supplies including heating oil and diesel increased 1.35 million barrels to 160.4 million.

Crude Stockpiles

Commercially held crude oil stockpiles rose a second week to 331 million barrels even as refineries processed more, while gasoline inventories climbed to 223.5 million barrels, the highest since March 2008.

The International Energy Agency will publish its oil demand and supply forecasts for this year in its monthly market report tomorrow at 9 a.m. in London.

Brent crude oil for February settlement rose as much as 67 cents, or 0.9 percent, to $78.98 a barrel on the London-based ICE Futures Europe exchange. It was at $78.74 a barrel at 10:19 a.m. local time. The contract expires at todays settlement. The more actively traded March future gained 33 cents to $79.15 a barrel.

The Commodity Futures Trading Commission will make proposals today on hard limits on the number of futures a single investor can hold. The so-called position limits may apply to energy futures on regulated exchanges such as the oil and natural gas contracts traded on the New York Mercantile Exchange.

JANUARY 14, 2010, 2:19 A.M. ET.OIL FUTURES: Crude Up Near $80, Seeking Cues From US Data

SINGAPORE (Dow Jones)--Crude futures rose Thursday, reversing three straight days of losses, as the market looks ahead to fresh U.S. economic data for more signs of recovery while worries about China's demand eased.

On the New York Mercantile Exchange, light, sweet crude futures for delivery in February traded at $79.96 a barrel at 0638 GMT, up 31 cents in the Globex electronic session after bearish U.S. oil stocks data dragged prices to a 2010 settlement low of $79.65.

February Brent crude on London's ICE Futures exchange, which expires at Thursday's settlement, rose 30 cents to $78.61 a barrel.

Asian equity markets were mostly higher Thursday on Wall Street's rally. Stronger-than-expected job gains in Australia also lifted sentiment. U.S. weekly jobless claims is expected to fall Thursday while December's industrial production data will be out Friday.

Oil prices have fallen in the past three days partly due to a "knee jerk" reaction to China's counter-inflationary measures, said Serene Lim, commodity economist at ANZ Global Markets.

Prices may rebound as "people realize that the Chinese were focusing on curbing the housing bubble" instead of aiming to reduce commodity demand, she said.

Gordon Kwan, head of energy research at Mirae Asset Securities, said China "will keep fairly loose access to credit for its strategically important sectors such as oil and gas so as to ensure sustainable economic growth."

On the supply side, "OPEC has already made it clear that it likes oil prices at around $80/barrel," he said in a note.

Wednesday's weekly oil inventories data from the U.S. Energy Information Administration "looked bearish as stocks increased more than expected across both the crude and product spectrums," Jim Ritterbusch, president of trading advisory Ritterbusch and Associates, wrote in a note.

High U.S. prices have attracted distillate supply into the east coast and some floating storage may have been released to the market after the heating oil contango narrowed, he said.

Traders kept oil on vessels in a contango market where prices are higher in the future.

"A supply surplus of more than 25 million barrels has been restored against average levels in the process of assuring ample supplies through the balance of this winter and likely through the rest of 2010," he said.

However, ANZ's Lim said U.S. refinery runs have risen steadily past weeks to around 81%, indicating that crude oil stocks may fall soon.

Rising oil tanker freight rates is also likely to reduce floating oil storage, meaning "supply overhang may fall," she said.

At 0639 GMT, oil product futures were up.

Nymex reformulated gasoline blendstock for February--the benchmark gasoline contract--rose 38 points to 206.40 cents a gallon, while February heating oil traded at 88 cents, 210.34 points higher.

ICE gasoil for February changed hands at $642.50 a metric ton, up $6.50 from Wednesday's settlement.

.Oil slips below $79 amid stronger US dollar.
Associated Press Writer Pablo Gorondi, 23 mins ago
Oil prices dropped below $79 a barrel Friday amid a strengthening U.S. dollar and weak crude demand in developed countries.

By early afternoon in Europe, benchmark crude for February delivery was down 77 cents to $78.62 a barrel in electronic trading on the New York Mercantile Exchange. On Thursday, the contract fell 26 cents to settle at $79.39.

The euro was down to $1.4371 Friday from $1.4500 on Thursday, while the British pound dipped to $1.6273 from $1.6332. Investors often buy commodities such as oil as a hedge against inflation when the dollar weakens and sell when it strengthens.

Crude prices also fell on concerns demand from the U.S. and Europe remains weak.

Retail sales in the United States fell 0.3 percent in December, while economists had been expected an increase.

"The U.S. retail sales data ... was not as good as expected and put a cap on the global markets," said Olivier Jakob of Petromatrix in Switzerland.

Some analysts expect growth in demand from developing countries such as China will help make up for sluggish economic recoveries in rich nations.

Francisco Blanch, head of global commodities research for Bank of America Merrill Lynch, said 75 percent of the 2.3 percent growth in global crude demand this year will likely come from developing economies.

"I'm not saying demand from OECD countries is going back to the previous highs, but we've fallen very sharply and now we're stabilizing and coming up a little bit," Blanch told reporters in Singapore.

He expects crude to average $78 a barrel in the first half, $92 in the second.

A monthly report from the Paris-based International Energy Agency on Friday held steady its forecast for world oil demand this year, predicting a slight rebound in consumption led largely by developing economies in Asia.

"Oil demand recovery in the OECD is likely to remain sluggish, despite a bout of recent cold weather," the IEA said, predicting average global demand of 86.3 million barrels a day this year, or 1.4 million barrels a day more than in 2009.

In other Nymex trading in February contracts, heating oil fell 2.22 cents to $2.0607 a gallon and gasoline slid 1.28 cents to $2.0610 a gallon. Natural gas futures lost 5.6 cents to $5.532 per 1,000 cubic feet.

In London, Brent crude for February delivery fell 91 cents to $77.66 a barrel on the ICE Futures exchange.

Long read, but found the analysis useful:
Investing Specialists: Core Stock Investing
Have We Reached Peak Oil?
A look at the supply and demand side and what's likely to happen with prices.
Remember the summer of 2008, when oil was approaching $150 per barrel and topping the headlines? The oil story quickly faded to the background when the financial crisis hit full-steam that September; we had bigger things to worry about in terms of the potential collapse of the worldwide financial system. Meanwhile, the deepening recession greatly reduced demand for oil. The price per barrel fell precipitously.

About the AuthorPaul Larson is an equities strategist with Morningstar and editor of Morningstar StockInvestor, which seeks to purchase shares of quality companies at a discount to their intrinsic values. StockInvestor features two market-beating portfolios: the Tortoise and the Hare. Paul joined Morningstar in 2002, and he was the lead writer and editor for Morningstar's educational series of stock-investing books.Contact Author | Meet other investing specialists
But while the world is awash in an excess supply of oil at the moment, I am convinced that the supply/demand balance of oil over the longer term is a critical issue that bears watching.


Oil is so important because it is, at the moment, the primary source of transportation fuel, and transport costs affect the entire economy. Low oil prices cut the cost of doing business and help reduce geographic barriers, while high oil prices act as a "tax" on the entire system and force us to act more locally.


I recently sat down with a group of Morningstar's energy analysts to discuss the idea of "peak oil." In this article, I will define the issue and share the group's insights.


Peak Oil Defined
At its core, peak oil is the idea that we will reach a point at which the rate of oil production cannot be increased because of geologic limits such as the size of the planet's resource base and the impact of natural decline rates. There are other limits to the rate of production, including above-ground factors such as investment rates and geopolitics, that further constrain production levels. To use an analogy, when thinking about the maximum amount of milkshake one can drink in a certain amount of time, the size of the straw and the ability to suck matters just as much as the amount of liquid in the cup.


The idea behind peak oil is credited to a geoscientist named M. King Hubbert, who worked for Shell (RDS.A



Sponsored by:
RDS.A) back in the 1950s. In 1956 he published a paper that detailed a statistical method he developed suggesting that the rate of fossil-fuel production tends to follow a bell-shaped curve. The idea behind this is that after fossil-fuel reserves are discovered, production begins to increase exponentially until a peak production rate is reached; after that it begins to decline as depletion overcomes new discoveries.


When you look at the history of discoveries, it's pretty clear that we've already found most of the obvious oil fields. In terms of oil reserves, discoveries peaked in the 1960s, and the rate of discovery dropped below our annual consumption in the late 1980s. Today, we're using more oil each year than we find.


2009 was a banner year for oil discoveries, with a lot of headlines being generated by finds in Brazil and the deep waters of the Gulf of Mexico. In fact, we saw discoveries on the order of 10 billion barrels of reserves, the highest rate since 2000 when the giant Kashagan field in Kazakhstan was discovered. However, the world is consuming around 83 million barrels a day, which equates to 31 billion barrels a year. So even in this banner year, we are barely replacing one third of the oil we consume.


Are We Running Out of Oil?
In a word, no. Yet we have essentially found all of the cheap oil. Since Colonel Drake first drilled for oil in Pennsylvania in 1859, the world has used about a trillion barrels of oil. Estimates vary widely, but there are at least another trillion barrels of conventional crude oil reserves and perhaps two or three times that much if you consider unconventional (and higher-cost) sources, such as oil sands and oil shale. We're not going to run out of oil overnight, but it's fair to say that the first trillion barrels we consumed were the cheapest, easiest-to-access reserves.


When you look back at the East Texas oil boom early last century, oil wells were being drilled a few hundred feet deep. In the deserts of Saudi Arabia and Iraq, giant oil fields are so close to the surface that you could practically stick a straw in the ground and strike oil. These big, easy finds were relatively inexpensive to develop.


But check out where we're looking now: The latest Gulf of Mexico discovery, Tiber, is a well drilled to a depth of 35,000 feet and lies beneath 4,000 feet of water. Think about that; the well is a mile deeper than Mount Everest is tall. It will likely take 710 years before this discovery produces anything. While this is a significant discovery, it certainly isn't cheap oil.


We have established that cheap oil might be a thing of the past, and it is clear that we are using more oil than we find each year. Yet how does this fit into the notion that oil production is peaking? The key thing to consider is that an oil well's rate of production declines over time.


As oil is pumped from a reservoir, the pressure in the well begins to drop and the rate of flow decreases. This process is called a decline rate. One can drill new wells in a field to balance the impact of declines, but as an oil field is developed and drained from multiple wells, it reaches a point at which the whole field goes into decline. We saw this play out with Alaska's Prudhoe Bay, in the North Sea, and in the Cantarell field in Mexico. Now we can aggregate oil fields and look at production curves for countries in the same way, and we see that 40 of the 54 oil-producing nations are past their peak oil production. In the United States, oil production peaked in 1970 around 9.5 mb/d, but today our production is about 5 mb/d.


Let's put oil-field declines in context. World oil production is roughly 83 million barrels per day. Various estimates place the underlying global decline rate somewhere between 4% and 8% per year. That means that each year we have to add about five million barrels of new production to keep production flat. Step five years out, and we have to replace 25 mb/d of production, or about three times Saudi Arabia's current production. That's a lot of new wells that need to be started just to offset declines.


Plus, this does not account for any growth in oil consumption. Absent global recessions, underlying oil demand is increasing by about 1% per year. This means that five years out we'd need another 5 million barrels of oil per day just to keep the current equilibrium. Frankly, we're not certain that we'll be able to reach that level of production.


Have We Reached Peak Oil?
It is hard to tell, and we do not know. No one will know for certain except by looking in the rear-view mirror. A couple of our analysts attended a conference in Denver put on by the Association for the Study of Peak Oil and Gas a few weeks back, and the precise timing of peak oil is of considerable debate. In our minds, the exact timing is less meaningful than the fact that oil production will begin to decline at some point within the next five to 10 years.

One enlightening analysis at the conference was presented by Rembrandt Koppelaar based on tracking announced oil megaprojects and layering anticipated production gains on top of existing world production. His analysis provides a best-case outlook that shows we can bring about 25 mb/d of new production online by 2016, assuming announced projects are completed on time and result in expected new production. His analysis suggests that we will get to roughly 90 mb/d in 2014. Incidentally, this is roughly the level of production an increasing number of oil executives are discussing as a production peak.


The Demand Side
We've talked a lot about supply issues, but demand is just as critical. Over the past five years we've seen China and other emerging economies bidding barrels away from industrialized countries. In fact, demand from the developed world (defined as the OECD countries) is down by about 4% since 2000, while China's demand is up 60% and India's is up 40%. On a net basis, world demand is up about 8%. In a very real way, the OECD countries have become one of the larger "suppliers" of oil to the market by reducing consumption.


Looking forward, we see this trend continuing, especially if fuel-efficiency measures as well as hybrid and electric vehicles gain traction here. Gasoline consumption in the United States accounts for about 12% of total world demand for oil, and any sizable reduction in gasoline use will free up barrels for the rest of the world. Our efforts to boost efficiency and reduce consumption will certainly affect the supply/demand balance. As Benjamin Franklin might have said, a barrel saved is a barrel earned.


China: The Wild Card
On the other side of the coin, most of the demand story is China. Formerly an exporter, China became a net importer of oil in 2000. It produces about 4 mb/d but now consumes roughly 8 mb/d. China has been responsible for 4 mb/d of new demand since 2000, about half of incremental demand over that period.


One item worth looking at is the rapid growth in China's car ownership. In March, car sales in China overtook those in the U.S. for the first time, and sales are averaging 1.1 million new units a month. This is roughly twice the level of 2005 car sales. A big driver here was massive government subsidies that make "cash for clunkers" look downright stingy. But the core story of increased affluence, increased urbanization, and the availability of consumer financing seems to give real legs to Chinese auto demand. Just think, here in the United States we have a little less than one car per person in the country, but China's ratio is a little over one in 10. It makes sense that both ratios will get closer to one another in the coming years.


Another component here is the fact that China subsidizes fuel prices, so Chinese drivers, who pay even less per gallon than we do in the States, are not very exposed to price increases. If oil prices spike, the price of gasoline goes up in the U.S., and there's a demand response (witness 2008). But this impact is muted in China. As long as China can maintain a measure of economic stability, auto demand there is likely to continue its upward trek.


Of course, the big question mark is whether China can maintain its scalding-hot economic growth in the face of much slower growth in the U.S., given that China is still export-driven. If China runs out of steam and its GDP drops to, say, 3%5% annual growth instead of the nearly 9% so far this year, quite a bit of oil demand would come off. China is the wild card.


What Happens to Oil Prices?
Whether or not prices keep escalating to ration tight supply remains the $64 billion question. We do think oil prices are likely to increase as oil supply begins to tighten again, but oil prices are tricky. To some extent, they reflect the state of the dollar. But, perhaps more importantly, high oil prices act as a tax on economies. When oil purchases begin to account for a material level of GDP, say, 4%6% like we saw in 2008, economies cannot really bear that tax, and demand responds strongly. We don't think that we're likely to see oil shooting past $200 a barrel. Instead, we tend to think that high prices will cure high prices and lead to reduced demand. Some analyses we've seen suggest that $100 oil is enough to trigger another recession in the U.S. So high prices are likely to throw countries back into recession and reduce demand that way, which will result in a lower oil price.


The trick is this: Companies need oil to be above $60 or so to bring new production online. So we're on a narrow plank between the price required to bring on new production and the price that throws us back into a recession. And as we continue to push the frontier and supply tightens, the price to bring new production online begins to increase and the plank narrows. What do we do when Houston requires $80 oil to add new production, but oil prices that high keep us at recession's edge? We're certainly in a box that will be painful, but not impossible, to get out of.

Crude Oil Falls as China May Curb Credit, U.S. Supplies to Rise.
By Ann Koh and Ben Sharples

Jan. 20 (Bloomberg) -- Crude oil fell in New York on concern China may step up efforts to curb credit growth and on a forecast stockpiles in the U.S. will increase.

Oil also pared some of yesterdays gains as the dollar strengthened against the euro, reducing the appeal of commodities as investments. Chinese regulators asked some of the nations banks to limit lending after banks lent a record 9.59 trillion yuan last year and stocks surged. U.S. crude inventories probably climbed for a third week through Jan. 15, according to a Bloomberg News survey before an Energy Department report tomorrow.

The speculation in stocks spooked the Chinese government, they dont want to create a bubble, said Gordon Kwan, head of regional energy research at Mirae Asset Securities Ltd. in Hong Kong. Oil price will drift between $78 and $82. If the dollar continues to rise, it will have an impact on oil in the second quarter.

Crude oil for February delivery fell as much as 82 cents, or 1 percent, to $78.20 a barrel on the New York Mercantile Exchange, and traded at $78.32 at 3:04 p.m. Singapore time. February futures expire today. The more-active March contract declined 72 cents, or 0.9 percent, to $78.60.

Yesterday, the February contract gained $1.02, or 1.3 percent, to settle at $79.02 a barrel. Trades were combined with those from Jan. 18 because of the Martin Luther King Jr. holiday in the U.S.

The dollar climbed to $1.4196 per euro as of 6:42 a.m. in London from $1.4288 yesterday in New York. It earlier strengthened to $1.4167, the highest level since Aug. 19.

Stockpiles Gain

An Energy Department report tomorrow will probably show that crude oil stockpiles climbed 2.5 million barrels in the week ended Jan. 15 from 331 million the prior week, according to the median of 11 analyst responses in a Bloomberg News survey. Gasoline supplies probably increased 2 million barrels, the survey showed.

Futures dropped 5.7 percent last week, the first weekly decline in five, after U.S. fuel supplies rose. Oil surged to $83.95 a barrel on Jan. 11 as cold weather in the eastern U.S. bolstered consumption of heating fuels and the dollar declined against the euro.

The market appears to have fully priced in the cold snap in the U.S., suggesting any improvement in weather conditions, likely off a cold base, will trigger selling, Mark Pervan, senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note.

OPEC Forecast

The Organization of Petroleum Exporting Countries raised its forecast for global oil demand this year by 20,000 barrels to 85.15 million barrels a day. Consumption will expand 820,000 barrels a day, or 1 percent, from 2009, according to the monthly report from OPECs Vienna-based secretariat released yesterday.

A surge in Chinas bank lending last month prompted the central bank to ask lenders to set aside more money as reserves. The government will probably continue tweaking the system this year, said Arjuna Mahendran, the chief investment strategist for Asia at HSBC Private Bank.

With the prospect of inflation starting to rear its ugly head, central bankers are now trying to tighten policy, Mahendran said in a Bloomberg Television interview from Tokyo. Monetary tightening is having the desired effect, which is to see that the stock market doesnt get too exuberant.

Brent crude oil for March settlement declined as much as 81 cents, or 1 percent, to $76.82 a barrel on the London-based ICE Futures Europe exchange. It was at $76.94 at 3:07 p.m. Singapore time. Yesterday, the contract rose 53 cents, or 0.7 percent, to end the session at $77.63.

It's my understanding that circa $78 puts petrol @ 1 a litre. At present pump prices, does that means BP/Shell are coining it?

I've noticed that the price at the pumps has risen whilst crude has been dropping.