Posted on 12/03/2004 8:59:04 AM PST by Ernest_at_the_Beach
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U.S. crude oil futures fell by $1 to $42.25, while London Brent fell $1.15 to $39.
Over the past three sessions, prices have fallen nearly $7, the fastest fall since January 1991, during the first Gulf War.
Since October's record peak of $55.67, prices have sunk by more than $13 and U.S. prices are back to levels last seen in September, while Brent is hovering around prices hit in July.
The renewed sell-off on Friday followed U.S. Labor Department data showing only 112,000 new U.S. jobs were created in November -- the weakest performance since July and well below Wall Street economists' forecasts.
The indication of slowing U.S. economic growth suggests falling demand for oil, which has already sunk in value as high OPEC production rebuilds inventories and high fuel costs bite into demand.
But more bullish analysts say growth in the United States is still robust and a sudden snap of cold weather would revive concerns about thin stockpiles.
"I still think the States is doing well economically, especially if you consider that we had $50 oil last month," said Edward Meir of Man Energy.
"Not that much has changed. Things could turn around quite quickly if we get a cold snap."
SYNCHRONISED GROWTH
Oil's rally this year was driven by synchronised economic expansion in the United States and China. This generated the fastest fuel demand growth in a generation, running down inventories and squeezing spare capacity.
While the supply cushion remains relatively low, mild weather in the U.S. Northeast -- the biggest regional heating oil market in the world -- and higher output from refiners coming out of maintenance has soothed worries about supplies of winter fuels.
This week's sell-off was triggered on Wednesday by a U.S. government report that showed distillate stocks, including heating oil and diesel, rose by 2.3 million barrels, helping to narrow the supply deficit compared with last year.
Overall crude stocks are already well above last year's levels as OPEC oil nations produce at the highest rate in 25 years.
The Organisation of the Petroleum Exporting Countries is to meet in Cairo on December 10 to decide output policy for the first quarter of next year.
Some members want the output spree to continue, though the cartel's second biggest producer Iran has advocated a clampdown on production above official quotas to avoid a winter stock-build.
OPEC's reference crude basket fell to $35.42 a barrel on Thursday from $38.03 the day before, OPEC said on Friday.
The fall takes OPEC's crude to just $3.50 a barrel over the top of the $28-$32 target, identified by OPEC's President Purnomo Yusgiantoro on Friday as an acceptable range for the cartel's crude.
Other ministers have indicated a basket price around $30-$35. The current target is $22-$28 a barrel, but most officials have said this range is now outdated.
The basket, made up mostly of heavy high sulphur crudes, is valued at a large discount to benchmark low sulphur grades like Brent and U.S. crude.
Where's the editor?
And this is from the UK ,....the home of the king's English.....
You are applying a basic discretionary economic model to a more complex situation. If you don't believe me switch to milk in order to drive your car to work the next time a gallon of gas exceeds milk costs. And that is not what I asked anyway.
Then how come heating oil is selling at 30% more than last year.
Understandable, but you only covered one end of the scenario. It is the contrast between the two ends that makes me suspicious.
Sigh. I suppose we can't expect much from Reuters these days.
I'm not sure if this makes any sense to an economist, but think of it this way:
If you found out the price of gas was GOING to go up, what would you do? Fill up your tank. When the price of gas goes up, you still have a full tank purchased at the cheap price.
Now say you know the price of gas is going to go down. You hold off refilling until the price drops.
This would mean that you are buying before a price increase, and after a price drop. Thus, the gas station would lose money whenever the price of gas is volatile.
"But I don't do that," you're going to say, "I don't know when the price of gas is *going* to go up."
Precisely. The gas stations raise the price of gas when their costs WILL go up, not once they HAVE gone up, preventing drivers from profiting from price volatility.
The fact that this corresponds with the lag I described earlier works out well economically. If these effects did not cancel each other out so cleanly, perhaps you would see other mechanisms for balancing them better, like cars with 30-gallon gas tanks.
In larger-scale sales without such a balancing effect, the system has had to create to product suppliers from losing money due to volatility. Refineries will contract for millions of gallons and price volatility could be devestating to their suppliers. Picture storing a million gallons of gas right before a price hike, or allowing a million-gallon tank to run almost dry while you wait for a price break! Futures are sold precisely as an insurance against price volatility for suppliers.
Dollar's plummet greased by German newspaper report By Kate Gibson
CHICAGO (CBS.MW) -- A report in the Saturday edition of a German newspaper that states the United States does not plan to intervene until the dollar falls to at least $1.45 per euro sparked continued selling of the U.S. currency Friday afternoon, market observers said. "It was a green light to keep selling," said Sean Callow, currency strategist at IDEA Global. The dollar fell to a new record of $1.3459 per euro in late U.S. trade.
Yes, this does pertain to the price of oil, when ya think about it!!!
How would a German paper know?
Since that is nationwide , I would feel good if we got down just under $2.00..... Speaking of Southern California, Bay area might be a bit lower....
We need a daily check of Gas prices across the State....
You tell me? Have you ever played the game called "Gossip?"
ROFL!
Dumb question on my part!
I just paid $2.02 at Sam's Club in Folsom this AM!
You're blaming the wrong party.
Hmmm... maybe I need to shut down here and get out and look for some good prices and fillup.....
By Myra P. Saefong, CBS.MarketWatch.com Last Update: 3:50 PM ET Dec. 3, 2004
SAN FRANCISCO (CBS.MW) -- Crude futures closed under $43 a barrel at an almost three-month low Friday, logging a loss of 14 percent for the week amid rising U.S. distillate and crude supplies and growing expectations that OPEC won't agree to cut its output quota next week.
Natural-gas prices lost more than 21 percent for the week with traders reassured by overall U.S. stock levels.
"The lack of a snap back to the upside after the big Wednesday-Thursday drop [in oil prices] suggest that the market's rubber band hasn't just been stretched -- it's broken," Tim Evans, a senior analyst at IFR Markets, said in an afternoon update.
Crude for January delivery fell to a low of $42.05 per barrel on the New York Mercantile Exchange before closing at $42.54, down 71 cents for the session. It was its lowest settlement level since Sept. 10.
The contract lost $6.90 for the week, after closing last week at $49.44, on Nov. 24, before the Thanksgiving holiday.
Among the oil products, January heating oil fell 2.13 cents to close at $1.2359 a gallon, down 15.7 percent for the week. January unleaded gas lost 0.65 cent to end at $1.1349 a gallon, down 13.5 percent for the week.
Despite the losses for the week, oil prices could find support. OPEC may now have the "ammunition it needs to call for an across-the-board cut in production," said Kevin Kerr, president of Kerr Trading International. He added that members are "pumping more and making less [and] they hate that."
Cartel members will meet next Friday in Cairo to decide whether any changes to output are necessary to better balance supply and demand.
OPEC musings
Comments from Nigeria Thursday implied that the African nation is concerned a production cut would send the wrong signal to the market, according to Michael Fitzpatrick, an analyst at Fimat USA.
At the same time, however, Saudi Arabia has suggested that it hasn't ruled out an output cut, he said.
Also, OPEC President Purnomo Yusgiantoro said Thursday that the organization will likely decide to keep its current production quota of 27 million barrels, excluding Iraq.
Still, Iran and Venezuela have called on the cartel to cut production quotas when the Egyptian summit convenes. The market estimates that actual output is running about 1 million barrels above the current quota.
Oil prices could "recoil aggressively" under the slightest threat of an OPEC cut, or any other notable supply threat, Fitzpatrick said.
Contributing to price pressure this week were Wednesday's reports of higher distillate and crude supplies for the week ended Nov. 26. See full story.
Natural gas falls
Natural-gas futures posted a more than 21 percent loss for the week, with storage levels seen as more than adequate for now.
From here, Kerr believes prices will "see a bit more of a falloff," but then prices will "bounce once cold weather hits."
January natural gas closed at $6.796 per million British thermal units, down 1.5 cents for the session, and down $1.84 from last Wednesday's closing level.
It fell more than 8 percent on Thursday alone after the Energy Department said supplies for the week ended Nov. 19 didn't fall as much as previously reported. See full story.
Defying weakness among the energy futures Friday, energy shares edged higher, with the Philadelphia Oil Service Index ($OSX: news, chart, profile) leading the gains among the sector trackers. See Energy Stocks.
Gold futures closed near $458 an ounce, up more than 1 percent for the week following fresh lows in the U.S. dollar. See Metals Stocks.
The Reuters/CRB index, a broad measure of commodity futures markets, was up 0.2 percent at 284.4 points.
Somebody please gimme a break on this. All that happened is that those who artificially ran up the price, are now cashing out. It's the end of the year, December.
This week's sell-off was due to those who had run up the speculative price decided to cash out before the end of the year. There were no genuine external causes, anymore than Russian production was a reason for the increase.
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