Crude oil prices rose towards $110 on Tuesday (Oct. 29), supported by worries of potential supply disruption on the U.S. East Coast, being battered by Hurricane Sandy, although fears of weaker demand from the storm-hit region capped gains.
Reuters reported that U.S. refinery and pipeline companies will begin assessing the storm damage, hoping their flood defenses and on-site power would allow operations to resume swiftly.
But even if refineries escape unscathed, any damage to the vast network of oil terminals, pipelines and trucking facilities in the region could complicate supply logistics.
Brent crude for December rose 13 cents to $109.57 a barrel in early trading, recovering from a fall to $108.75 earlier in the session. U.S. crude for December was up 40 cents at $85.94.
U.S. gasoline futures were little changed at $2.7530 a gallon, after climbing more than 5 cents on Monday on expectations of tighter supply.
“The shutdown of refineries basically means that there are breaks in the supply chain,” said Michael Hewson, senior markets analyst at CMC Markets. “(This) means there will be a little bit of scarcity, so that can still underpin prices.”
Fuel supply into the region ground almost to a halt with the closure of two-thirds of the region’s refineries, its biggest pipeline and most major ports.
The price of oil tumbled below $90 on Wednesday for the first time in nearly seven months as U.S. supplies continue to grow.
The Associated Press reported that benchmark U.S. crude fell $2.14, or 2.3%, to $89.71 per barrel. The price hadn’t been below $90 per barrel since Nov. 1.
The government said U.S. oil supplies grew last week by 900,000 barrels and hit the highest level since 1990. Analysts expected supplies to grow by 750,000 barrels.
The price of oil and other commodities tend to fall as more supplies become available.
Concern about the strength of the global economy, particularly Europe, also contributed to Wednesday’s decline and is a large reason that oil has plunged nearly 15% in May. Analysts are predicting the European economy will continue to slow. Meanwhile, China’s government is mulling steps to reverse a slowdown in the Chinese economy. In the U.S., the pace of hiring has tailed off.
Tensions with Iran drove up oil prices earlier this year as traders prepared for a disruption to supplies from OPEC’s second-largest producer. Now, analysts say Iran may be allowed to keep exporting oil this year as it negotiates with the West and allays concerns about its nuclear program.
Meanwhile, Saudi Arabia has been delivering more oil to world markets.
Pump prices in the U.S. have followed oil lower. Retail U.S. gasoline prices were flat at $3.678 per gallon on Wednesday, according to auto club AAA, Wright Express and Oil Price Information Service. The nationwide average for a gallon of regular unleaded has dropped by 25.8 cents since peaking in the first week of April. Gasoline is 16.5 cents per gallon cheaper than it was the same time last year.
Brent crude, which helps set the price of oil imported into the U.S., dropped to a new low for the year. It lost $2.64 to $105.77 per barrel in London.
The month-long slide in gasoline prices likely will continue in the coming weeks, providing more relief for shell-shocked motorists heading into peak driving season.
USA Today reported that nationally, gasoline averages were $3.80 a gallon — about 12 cents below this year’s peak and nearly 20 cents below 2011′s $3.99 a gallon. Gasoline prices have now fallen 18 straight days and 25 of the past 28.
“We can expect the U.S. retail average to flirt with $3.75 a gallon shortly and expect to pay 10 to 25 cents a gallon less in the next couple months,” says Tom Kloza, chief analyst for the Oil Price Information Service.
Crude oil prices fell sharply in early Friday (May 4) trading after the Labor Department reported weaker than expected job gains last month. That roiled Wall Street and the commodities market. Benchmark West Texas crude oil sank 4% to $98.52 a barrel, its biggest one-day drop of 2012 and the first time crude had fallen below $100 since February.
Weaker-than-expected economic news in the U.S. and Europe has helped push prices lower for several weeks. So have supply problems at U.S. refineries and easing tensions in the Middle East, where a possible showdown with Iran had driven speculators to push crude oil prices up sharply since the start of the year, spurring some forecasters to predict gasoline would surge well above the record $4.11 a gallon average set in July 2008.
But with consumption down, sustained global economic weakness and rising production up — the Energy Department said earlier this week that U.S. production was at its highest levels since 1999 — this year’s price run-up ran out of steam six weeks before the peak of summer driving season.
Lowest prices: the Midwest, where gas could fall below $3.50 a gallon. Highest: the West coast, where prices could remain closer to $4 as supplies are tight .
A surge in gasoline prices earlier this year sparked talk of $5 a gallon by this summer, but prices at the pump have been ticking lower in April, and it appears they’ll continue falling as the driving season approaches.
CNN Money reported that this rosy scenario is prompted by the fact that the price for one of the most common types of gasoline futures traded in New York has dropped 30 cents, going from over $3.40 a gallon at the beginning of April to $3.10 a gallon Wednesday.
Futures contracts are financial instruments that buyers and sellers of large amounts of gasoline — or any commodity — use to set prices. Analysts say the current drop in gas price futures should begin to appear in gas prices at the service station over the next few weeks.
“We’re certainly going to see prices move lower at this point,” said Stephen Schork, publisher of the industry newsletter the Schork Report. While retail prices are expected to move lower, Schork said the decline might not be as steep those seen in the futures markets.
The main reason for lower gasoline futures prices is the declining cost of Brent crude and other crude oil that gasoline is made from.
Brent crude has dropped from over $125 a barrel in early April to under $120 currently, largely a a result of tensions easing with Iran over its nuclear program. Recent signs of a slowing global economy have also helped push down prices.
Gasoline prices at the pump have begun a similar decline. While much hype was made earlier this about how gas had run up further and faster than any time before and may even reach a new all-time high of over $4.11 gallon, prices have been slowly declining since touching $3.95 a gallon at the beginning of April. Gas prices currently sit at $3.84, according to AAA.
“If we don’t have any supply issues or refinery outages, we’ve seen the highs for the summer,” said Schork.
Efforts by some of the world’s biggest oil buyers to coordinate the possible release of emergency reserves and an intervention by Saudi Arabia sent crude prices tumbling on Wednesday (March 28), raising the prospect of relief for Europe’s flagging economies and American motorists facing pump prices of almost $4 a gallon.
Financial Times reported that as France’s energy minister, Eric Besson, confirmed his country was in talks with the U.S., U.K. and Japan to release billions of barrels of oil on to the market, Saudi Arabia’s influential oil minister said Riyadh would do all it could to bring prices down.
Writing in the Financial Times, Ali Naimi said: “The bottom line is that Saudi Arabia would like to see a lower price. It would like to see a fair and reasonable price that will not hurt the global economic recovery.”
Soaring energy prices, driven in part by tensions over Iran’s nuclear programme, are threatening a fragile US recovery and the re-election prospects of US President Barack Obama.
While the discussions are at a preliminary stage and none of the countries involved has decided yet to go ahead with a release, three officials familiar with the talks said action was likely in the next three months.
After meeting with initial opposition from Germany, which maintains the world’s third-largest oil reserve, Washington has turned to Paris, London and Tokyo for support. “France is favorable to the suggestion,” Besson said.
Such action, if agreed by the four countries, could send oil prices sharply lower. Brent crude on Wednesday fell by about $2 a barrel to $123.53. A sharp jump in reported U.S. crude stocks also contributed to the slide.
Oil prices rose Monday (Feb. 20) after Iran cut exports to Britain and France, raising worries that higher gas prices may follow suit.
CNN Money reported that Iran’s oil ministry said Sunday it would stop exporting oil to French and British companies. The announcement came just days after Iran threatened to cut supplies to some European Union (EU) countries in retaliation for sanctions put in place by the EU and United States.
U.S. crude for April delivery jumped nearly 2% to $105.08 per barrel.
Prices are already up nearly 9% from the start of the year. According to motorist group AAA, the national average price of $3.56 a gallon marks the 13th consecutive increase.
The price of unleaded gasoline in the U.S. will likely hit a nationwide average of $4 by this summer, said Dan Dicker, oil trader and author of “Oil’s Endless Bid.” The last time prices topped $4 was 2008 and Dicker said there’s a one in three chance that gas could reach $5 a gallon.
If gas prices do head to those lofty levels, that could put a crimp in the economic recovery as consumers will likely cut down on spending if they have to pay more to fill up their cars.
Oil prices fell sharply today (March 15) on deepening fears about Japan’s economy after its nuclear crisis worsened following a devastating earthquake and tsunami, the Associated Press reported.
Potentially dangerous levels of radiation have been reported leaking from a crippled nuclear complex in the disaster area. More than 10,000 people are thought to have died after the earthquake and tsunami hit Japan on Friday.
Investors worried about diminished demand for oil and other products in Japan, the world’s third-largest oil importer. However, Wall Street analysts expect that Japan will eventually increase imports of oil, coal and natural gas.
Royal Dutch Shell PLC said Tuesday that it will send liquefied natural gas and fuel oil to Japan to help meet power shortages. Japan produces about 28 percent of its energy from coal-fired power plants, but can also run some generators on LNG and even crude oil. Fifty-four nuclear reactors provide about 25 percent of the country’s power. Four of those reactors are in the nuclear plant that leaked radiation.
Benchmark West Texas Intermediate crude for April delivery dropped $2.73, or 2.7%, to $98.46 per barrel on the New York Mercantile Exchange after dipping below $97 a barrel earlier in the day.
Brent crude fell $3.17, or 2.8%, to $110.50 per barrel on the ICE Futures exchange.
The uncertainty over how long it could take Japan to recover triggered a sell-off in other commodities as well, as stocks markets fell around the world. Many investors bought assets considered to be safer to hold during uncertain economic times, such as the dollar.
The Dow Jones Industrial Average lost nearly 300 points before regaining ground. It was down 189 points in afternoon trading. The Standard & Poor’s 500 index and the Nasdaq composite index also were lower.
Meanwhile, the U.S. Dollar Index, which tracks the greenback versus other major currencies, rose nearly 1%.
Investors likely were buying the dollar because of its relative safety until there is more clarity about Japan’s future, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Oil, which is priced in dollars, tends to fall as the dollar rises and makes crude barrels more expensive for anyone holding foreign currency.
After a rise in oil prices like the world saw this month “we were due for a sinkhole day like this,” Kloza said.
Oil prices are still higher than they were in mid-February when uprisings in Libya shut down that country’s oil production and sent benchmark crude from about $85 a barrel to more than $105 a barrel last week, its highest level since September 2008. Libya produced only about 2 percent of the world’s crude. Prices rose however on concerns that unrest would spread to bigger producers like Saudi Arabia. Troops from Saudi Arabia and other Arab nations are in neighboring Bahrain to help keep order as anti-government protests continue there.
Kloza and Tom Bentz, director of BNP Paribas Commodity Futures Inc., think oil prices will fall further because of ongoing concerns about Japan.
Bentz speculated prices could fall as low as $95 a barrel in coming weeks. “It’s going to be a while before Japan is able to recover from this and the market is starting to price that in,” he said.
Gasoline pump prices across the U.S. fell slightly Tuesday for the first time in nearly a month to a national average of $3.556 per gallon. Prices are still higher than ever for this time of year. A gallon of regular is 42.8 cents more expensive than a month ago and 76.6 cents higher than last year.
It is interesting that once again the oil traders are looking for a run up in oil prices, Statistical Surveys Inc. General Manager Tom Walworth tells RVBUSINESS.com and RVBusiness magazine, for which the Grand Rapids, Mich,-based executive generates periodic policy statements.
We are currently looking at a very similar pace as we had in late 2007 and all of 2008. If you remember the stories in 2008, the world was running out of oil. The developing nations were using supply that they had not used in the past and this, we were told, justified the run up in fuel prices.
Yet, if you take a look at the accompanying graph, we started December of 2007 at a national average price of $3.11 per gallon. In January we went to $3.15 per gallon and by July we were at $4.16. Curiously, in December of 2010 the price for a gallon of gas was $3.11 per gallon. The January 2011 price was $3.14 per gallon.
Does this look familiar?
Let’s look at the rest of the story: By December of 2008 gas was at $1.67 a gallon. This was a 59% decline in gas prices from the high in July of 2008. How could this be when, only months earlier, we were running out of oil? The lack of supply and demand came into play with the price of spot crude at $145.31 a barrel. Every oil producer was pumping as much as they could, and the search for more crude was hot. The end result was the world found more crude, prices dropped and there was a glut of oil.
The search resulted in more oil off the coast of Brazil and Africa. Remember the big find that the United States had in North Dakota, in the Gulf of Mexico and in the Canadian oil sands of Alberta? These did not go away. They continued to produce oil as did other producers. Bottom line, the earth continued to produce ‘Black Gold.’
The fact of the matter is that we have enough oil to take us into the late 2000’s, and after that we have a large supply of natural gas to which conventional engines can be converted if and when that day arrives.
No, it seems as if this run up in fuel costs is due to the ‘anticipation of a shortage,’ not to any real long term shortage. The manipulation of our fuel prices benefit a small group in the short term and will hurt our economy with rising unemployment – this, in an already weak economy.
You need to be concerned with the rising fuel prices. But history shows that this price spike – however severe it may get — should not be long term. Our suggestion: Don’t let the threatened fuel price increase take you out of the market for any fuel-burning product.
Statistical Surveys Inc.
Energy prices dropped today (Dec. 30) after the government said oil and natural gas supplies fell less than expected last week, The Associated Press reported.
Benchmark crude for February delivery lost $1.94 at $89.18 per barrel. It was the first time in a week that oil was below the $90 mark.
Oil has been surging for most of December as U.S. petroleum consumption ticked higher and traders looked forward to 2011, when oil is expected to touch $100 per barrel and perhaps go higher.
Rising oil prices have pushed gasoline pump prices higher. They were up again today. The national average for a gallon of regular hit $3.07, about six cents higher than a week ago and 45 cents more than a year ago. Drivers across the country pay a range of prices at the pump. In California you’ll pay about $3.32 a gallon. In New York gas goes for around $3.30 a gallon. The average is $2.91 in Texas and $2.82 in Colorado.
Some analysts think the national average will hit $3.75 by spring.
The price of benchmark crude tumbled today after the Energy Department’s Energy Information Administration (EIA) weekly supply report. The EIA said oil supplies declined by 1.3 million barrels last week. A drop in supplies often supports higher prices, but analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos., thought the drop would be bigger — around 3.2 million barrels.
Investors worried that the report showed demand for energy was not picking up, despite positive economic news. The Labor Department today said the number of people applying for unemployment benefits fell to 388,000, the lowest level in almost 2 1/2 years.
Meanwhile, Freddie Mac said a fixed-rate 30-year mortgage rose to 4.86%, the highest since May. That raised concerns about whether higher mortgage rates would slow the recovery of the housing market.
The EIA also released its weekly report on the nation’s natural gas supplies, which showed they shrank by 136 billion cubic feet. That’s less than analysts expected and a relatively small dent in total supplies of more than 3.2 trillion cubic feet, eight percent above the five-year average. Milder weather across most of the country over the next 10 days should reduce heating demand and keep a lid on natural gas prices.
Oil prices slid well below $60 a barrel today (July 10) as investors braced for company earnings reports next week that will provide clues on the strength of crude demand, according to the Associated Press.
While global appetite for crude over the next few months remains unclear, expectations are that it will increase by next year, with the International Energy Agency (IEA) predicting a 1.7% rebound in demand by next year.
Benchmark crude for August delivery was down $1.58 at $58.83 a barrel by afternoon European electronic trading on the New York Mercantile Exchange. On Thursday, the contract rose 27 cents to settle at $60.41.
Oil had bobbed near $60 a barrel the last two days after dropping from an eight-month intraday high of $73.38 on June 30 on investor concern that a rally since March wasn’t justified by weak global crude demand.
“All the focus is on demand,” said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. “The second quarter earnings season is going to be very important for crude.
“If we see disappointments there, people will say we’ve gone too far, too fast.”
The Paris-based IEA looked further ahead, predicting in its monthly survey that economic recovery in developing countries will help counter a two-year drop in oil usage sparked by the global recession.
It said global oil demand will increase by 1.4 million barrels a day in 2010 to 85.2 million barrels a day – a “strong rebound” that would be led by growth in developing countries.
The IEA left its forecast for 2009 oil demand unchanged, and still expects it to drop 2.9%.
Still the direction of the oil market remained unclear in the short run, with prices poised to rise substantially above – or fall precipitously below – the $60 mark.
“If the bulls are going to put up a defense, this is where it will occur,” wrote trader and analyst Stephen Schork, in his Schork Report. “If they succeed, then this support will act as a springboard for a second run at $75. If they fail, the path towards a $40-handle will be wide open.”
Prices were supported Thursday after aluminum maker Alcoa Inc., the first Dow Jones industrial average component to release earnings, reported a narrower-than-expected loss.
Results over the next few weeks from multinational mass market retailers – such as Colgate Palmolive, PepsiCo, and Johnson & Johnson – will help investors better gauge the strength of the global economy.
“These companies have a good feel for how demand is around the world,” Moltke-Leth said. “What they say is going to be important for the near-term outlook for oil.”