Oil soars to settle above $133

Source: CNN Money

Futures surge after a government report shows a surprise drop in crude and gasoline stockpiles.



NEW YORK (CNNMoney.com) -- Oil prices shattered records Wednesday - shooting over $133 a barrel - after the government said crude and gasoline stockpiles decreased last week, surprising analysts who were expecting an increase.

U.S. light crude for July delivery settled at $133.17 a barrel, up $4.19, on the New York Mercantile Exchange. Prior to the 10:30 a.m. ET report, oil was down 29 cents to $128.69.

"There is a tremendous amount of fear and greed driving this market," said Stephen Schork, publisher of industry newsletter The Schork Report. "This is a runaway train. I don't think the fundamentals justify the runup."

Earlier Wednesday, oil prices soared past $130 a barrel for the first time amid continuing supply concerns and a weakening dollar. The contract retreated just before the government data were released.

Read more: http://money.cnn.com/2008/05/21/markets/oil_eia/index.htm?postversion=2008052115

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Meanwhile the Oil Execs cry how it's not their fault and all a matter of the fundamentals of the market. It's all a case of supply and demand. Just ignore the fact that they're demanding repeated record profits at the expense of the food you your table. :mad:

In my little corner of Appalachia...
Yesterday evening's price: 3.67
This afternoon's price: 3.76

Not what you'd call a good trend, but what else is new?

looks good to me...:cry:

Taxes is adding over 78 cents per gallon and cities are seeing their gas tax revenue increase. It is time to repeal gasoline taxes as a percentage of the price and fix it at a set price per gallon.

Cheap out here is 3.89, at least they aren't basing the prices in Euros or we would be really up the famous creek.

yet prices are up.

the capital to pay for it.
Americans have not yet figured out
that they are not the only people on the planet
and that their government has sold their interests
to the highest bidder.

Put a fork in us, we're done.

BHN

cause we're in for a hell of a ride. Thanks to bush not having any kind of strategic plan other than to help oil companies and his rich friends.... That's not even working out so well.

That part of the reason their industry/economy/development is doing so well that we contribute to it by purchasing goods and services from them.

And we (they), all have nukes. There goes one trump card out.

Oil prices climbed to their highest level ever, reaching over $108 per barrel this week. And Americans are feeling this price spike at the pump, with gasoline averaging $3.22 per gallon. An analysis released by the investment firm Goldman Sachs suggested that oil prices might soar to $200 per barrel. Does this make sense?

Not really. Although U.S. crude oil inventories have fallen, gasoline inventories are at their highest since March, 1993, notes Tim Evans, an energy futures analyst at Citigroup's Futures Perspective. World oil production was up 2.5 percent in the first quarter of 2008 over the same period in 2007 while world oil consumption rose by just 2 percent. In fact, world production is projected to be 3.3 percent higher in the second quarter and 4.1 percent higher in the third quarter than the same periods a year ago. On the other hand, world demand is projected to rise by just 1.6 percent over the next six months.

In fact, demand is falling in some countries. According to economist John Kemp at the commodities firm Sempra Metals, the U.S. consumed 4 percent less petroleum in January 2008 than it did the year before. Evans agrees, noting that the U.S. demand for petroleum products began falling off last July. Interestingly, this drop in U.S. oil consumption began before crude prices turned vertical and before we began to see weakness in the broader economy. Even China's thirst for oil is abating somewhat. Its demand for oil, which once rose at 10 percent per year, has now dropped to 6 percent per year. In addition, world surplus oil production capacity has gone from a very tight 1.5 million barrels per day a couple of years ago to more than 3 million barrels today, says petroleum economist Michael Lynch.

http://www.reason.com/news/show/125414.html

& China produces 4.4% of world oil, making its open market needs comparatively minor.

US demand in Jan was down 4% from the year before, Chinese demand increase dropped from 10% to 6%. US changes affect the market more than Chinese ones. World demand in total rising ~1.4%/year. This level of increase is actually low by historic measures.

http://www.marktaw.com/culture_and_media/politics/GlobalOil.html

The U.S. being 26% of world oil, it also produces much of the world's economy. It figures that it would use more. Spread that number across the U.S. economic reach and it is not more the consumer than other nations

didn't know that economy is a product. So what else does US produce besides economy?

But if I may take a wild guess, producing "economy" could mean printing dollars, ie. US debt? From what I hear, demand for that product has been going down...

$13.8 trillion which is approximately 25% of the world's GDP: $54.3 trillion (both are 2007 IMF estimates).

of that (as of 2006), the production of "goods": manufacturing, construction, oil and gas drilling, mining, and agriculture amounts to just shy of 20%, 68% is composed of real estate and financial services, wholesale and retail sales; transportation; health care; legal, scientific, and management services; education; arts; entertainment; recreation; hotels and other accommodation; restaurants, bars, and other food and beverage services. The government makes up the rest.

Now, compared to top 5 GDP producer's manufacturing number: EU ~22%; Japan 25%; China 49%; India 28.4% and, finally the World 32%.

Without U.S. consumption, there is less production and GNP in other countries. That is pretty basic stuff. If the U.S. did not consume so much, other countries would have lower economic output. That is not opinion, just fact. Not sure where your surprise comes from if I am reading your correctly.

and moreover, US consumerism is debt consumerism. What I can't understand how anyone can think that consumerist wasting of limited resources is a good thing.

Where is that 4% drop in January sourced? Anyways, monthly numbers not important and should not be given too much importance, lot of monthly fluctuation based on weather etc. If US consumption was really dropping at annual pace of 4% that would mean that US is allready in severe depression - and not just sliding into one.

I've seen 2.1% drop in US consumption the first quarter 2008 mentioned, which gives a slightly better and more credible picture.

OK then, let's round up a bit and say that China consumes 10% and US 25%, Chinese consumption growing by 5% and US consumption dropping by 2%. To make calculation really easy, lets say US uses 100 barrels and China 40 barrels.
100 - 2% = 98 barrels
40 + 5% = 42 barrels

This extremely simplified calculation turns out to be a zero sum game, China just got two barrels from US, with total of 140 in the game between the two, ie. about 3% of the chips in the game.

Let's speculate that China keeps on gaining two barrels from US annually, wich would mean they are on par with 70 barrels each after 15 years.

But as we know, world demand rising by any percentage when oil available for market (net exports) is going down since 2005 spells you know what: demand-supply gap called Peak Oil.

So lets assume a gentle slope of only 2 barrels dropping from the game annually, taken from the US pile together with the other 2 chips going to China's pile. 40 barrels less in 10 years, 80 barrels less in 20 years, leaving only 20 barrels (20% or current US consumption) for US consumers in 2028, and 80 barrels for China. Starts to sound relatively equal per capita consumption. :)

On the per capita part and as a side note/question, it would seem to me more realistic to compare development Chinese populations to U.S. developed populations for proper consumption comparisons. China has many many people that do not participate in developed lifestyle consumption and that is not buy choice. They would if they could.

In other words, if you took China's lower middle, middle, upper middle and upper classes (put the number at 500 million and compared consumption to the U.S. 300 million, what would the result be?

Is that a fair calculation to make?

Global demand (the one that matters) is up, up up. There is a world beyond US borders, in case you didn't know.

It's up ~1.48%. Demand growth has been slow the past 3 years.

http://www.worldwatch.org/node/5666#notes

because they are not flooding the market with oil from the Strategic Petroleum Reserve. In fact, they continue to bloat the SPR as a signal to all those hedge fund boys that it's perfectly all right to drive the price of spot market futures up because nobody in this government is going to queer the deal by using the SPR as it was designed to be used.

If you want to know why the price of spot market futures is nearly twice what it should be, look at all those hedge funds and other commodities speculators.

They're doing the same thing in grain markets, too, you know.

We get screwed and Bush and his buddies laugh all the way to the bank!

The SPR is about 700 million barrels. A little more than a month's supply for the US. If we're talking globally, which is the way oil prices are set, it's more like about 8 days' worth.

Look, the explanation for high prices is not complicated and it's not insidious. Supply can't keep up with demand. Prices reflect the shortfall.

We're a nation of addicts, and we've got to get past the denial narratives, accept the fact that the world is entering a steep energy decline, and start dealing with it.

Who's siphoning off the tanks?

Every damn time congress drags their sorry asses into congress, the price goes sky high that day. It's like they are rubbing their noses in it, and showing congress they can do what they damn well please. I am so pissed at the lack of backbone in this congress, and the way big corporations have taken over this country, and that includes our government. I wonder how many of those in congress are racking in the money from big oil while they sit and say there is "nothing we can do about it"? Both sides of the isle are guilty of taking money from these bastards, and no matter what they letter is in front of their names come election time, if the take big oil money they should be voted out of office!

"You'll buy oil and gas for this much, because you have no other choice...bahhhh!"


NATIONALIZE OIL

The Europe system is a good example for America to learn.

we have always been a wasteful nation, and now we are paying for it in more ways than one.

2016 futures are now up $9.00 over the front month. The oil market is now in continuous contango out to 2016, for the first time since 2005 or so. That means that oil traders have decided in the last two or three days that oil is going to be getting much more expensive in the future.

Oman 1M, a particular kind of crude oil whose price is used as a benchmark, jumped over $23 on the spot market today, from $123 to $143.69 a barrel. Other crude benchmarks did not do that.

This looks like the beginning of the Peak Oil gyrations that so many of us have been predicting.

It sounds really important and really interesting (likely in a very bad way) but I am almost totally lost. Could you please be so kind as to teach me? I really do want to know!

The cost of extracting oil was assumed to drop as time went on due to increases in discoveries, technology and investment. Even more important, it was expected that the increase in oil supplies would stay ahead of the combination of increasing demand, inflation and the interest rates on investments in oil production. As a result, futures traders would pay less for a contract coming due far into the future than one coming due soon, because the price of oil then should be lower than it is today. The technical term for a market in this condition is "backwardation".

The price of distant futures contracts relative to today is a barometer of oil buyers' sentiments about the state of the oil supply in the future. The fact that the market has suddenly switched from the traditional state of backwardation to one of prices rising over time (called contango) means that buyers have decided that oil is going to become more expensive over time. That basically means they have accepted that any growth in the oil supply will not keep up with rising demand for at least the next 8 years, so they expect that prices will continue to rise over that time.

Why the oil supply might not keep up with demand is the $64 trillion question. There are many possible explanations for it -- lack of investment, oil producers deliberately reducing supply to save some for later, producers deciding to satisfy domestic needs before putting oil on the export market, continuously accelerating demand in developing countries, a lack of cost-effective fuel substitutes etc. A growing number of us think that the biggest factor is that we have reached the moment of Peak Oil, where no amount of additional exploration or drilling will offset the natural depletion of existing oil fields.

I hope that helps.

Paul Chefurka

does the decreasing dollar contribute to this and the consideration of those countries who are ditching the dollar switching to Euro's. this would be cheney's nightmare right there wouldn't it?

I'm not sure, though, if there's an expectation on the part of oil buyers that the dollar will continue to weaken over the next few years. If there is, then yes, that would be a factor in oil futures.

Given how interconnected the world currency markets are these days, I really don't know if switching to Euros would affect the price of oil by much. It would certainly impact the US treasury, because foreign oil buyers would no longer need to invest in greenbacks first.

I think I might be starting to get it now!

...Americans are screwed.

What a difference an afternoon makes.

In the past few weeks, crude prices have went up by about $1 per day for every trading day. If it keeps at that pace, we'll be at $300 by Dec. 31st.

- Dick Cheney

"There is a tremendous amount of fear and greed driving this market," said Stephen Schork

....could it be the invisible finger of adam smith again? Is this any way to run an economy? Is this any way to run our government? Why do we tolerate corporate gambling with a commodity as vital as air? Why do we tolerate the wholesale abuse of working people and subject them to this needless hardship?....

....nationalize the oil industry and ration gas at affordable prices, it's the only patriotic thing to do!

We've run out of cheap oil.

We've run out of cheap oil.

We've run out of cheap oil.

We've run out of cheap oil.

We've run out of cheap oil.

There. Get it? Nothing bar *nothing* is going to stop oil prices from going up now.

unless we find a way to power the car with water.

is it pitchforks and torches time yet?