Posted on 03/09/2005 10:19:29 AM PST by Jomini
Oil prices marched toward $55 a barrel on Wednesday, within sight of all-time highs, as late wintry blasts in the United States reignited demand and a tumbling dollar drew more speculators into energy markets.
Key U.S. government fuel stocks data due at 1530 GMT could provide the momentum to nudge prices to new highs, traders said.
U.S. light crude for prompt-month April delivery (CLc1: Quote, Profile, Research) traded up 21 cents to $54.80, less than a dollar below record prices of $55.67 hit in October last year. May and June delivery crude touched contract highs above that level on Tuesday.
Britain's Brent crude (LCOc1: Quote, Profile, Research) was up 28 cents at $53.12, having earlier brushed even closer to Tuesday's record high of $53.30.
"It is cold weather and a weak dollar that is encouraging market participants to push up the price," said Tetsu Emori, chief strategist at Mitsui Bussan Futures in Tokyo. "We have to look at the currency markets rather than the oil fundamentals."
Forecasters predicted the fresh U.S. cold snap to last into the weekend, boosting heating oil demand in the Midwest and the world's largest market for heating oil -- the Northeast.
That demand may strain U.S. heating oil inventories that are already 8 percent below last year, dealers said.
Analysts polled by Reuters expected U.S. distillate stockpiles, which include heating oil, to have fallen by 1.3 million barrels in the seven days to March 4, the seventh consecutive fall.
But analysts predicted crude oil stocks to rise for the fourth-straight week, climbing 1.8 million barrels and keeping a healthy surplus compared to the same period in 2004. Gasoline inventories, at their highest since 1999, were seen unchanged.
In Japan, gasoline stocks fell from a five-year high last week, but rose 11.7 percent on a year ago, industry data showed.
FUNDS FLEE FOREX, EYE TIGHT OIL
Strong demand growth and lower-than-expected production have put further pressure on world supply this year.
The rally has gathered pace as a steep fall in the dollar -- the currency of international oil trade -- spurred funds to switch money out of foreign exchange markets and into commodities such as energy, metals and coffee.
But so far there have been few signs that high oil prices are hurting economic growth.
"Oil prices appeared to have risen very much in dollar terms, but they have not risen much in terms of other currencies," South Korea's Deputy Finance Minister Bahk Byong-won said in a radio interview on Wednesday.
The New York Mercantile Exchange said an option with a strike price of $100 a barrel traded on Tuesday, the highest level thought to have traded on the exchange.
Plentiful crude stocks have convinced many members of the Organization of the Petroleum Exporting Countries (OPEC) production should remain steady after next week's meeting in Iran, despite prices soaring more than 20 percent in a month.
OPEC's own oil market experts expect a quota rollover.
"The market is well supplied now, but OPEC needs to be cautious because we're expecting demand to stay robust," an OPEC source said.
Indonesia, Iran, Venezuela, Qatar and Algeria have lined up against pumping more oil, and OPEC's President Sheikh Ahmad al-Fahd al-Sabah has said supply was adequate. However, Nigeria has called for action to stem rising prices.
Permitting foreign held treasury obligations to be used as leverage in attacking the dollar in this fashion should be reviewed. The $100 strike price option highlighted above tells you everything you need to know.
J
A large part of the runup in price is due to the weakness of the dollar. I'm wondering if that imminent destroyer of currencies, George Soros, is behind this?
Soros doesn't destroy currencies, he merely profits when government's destroy currencies.
If Americans need Senator's permission to meet our energy needs, then we are already on our knees.
What's behind this is a huge increase in demand without a corresponding increase in supply...coupled with fears that war will interrupt existing production. Soros and others like him are smart enough to profit from the situation...unlike most others who bury their heads in the sand or cry like infants.
Recent cold weather???
We were at 72 degrees the other day...normal average is around 36...OMG!!!Global Warming!!!!!
Nope, back to 34 today...
Been fairly typical to actually a few degrees warmer than usual around here this winter.
I'd bet more on a Soros type influence than the weather.
Prepare to strike Iran in June???!!!
There's plenty of supply. Don't pretend part of the problem isn't the weakening of the dollar. That's whistling past the graveyard.
Who cares about a weak dollar impacting the price of oil when we can still buy cheap t-shirts at Wal-Mart??
< /sarcasm>
Actually, I say watch for signs and get ready to short the sucker. While demand remains high, there is no current disruption to supply. In my experience, when the media and general public start hit their highest pitch about soaring oil prices, they start to fall.
Even worse, get ready for those stupid "reporting live from the gas station" MSM stories.
There was an analyst on CNBC this morning from the Univ of Houston who said we couold probably expect prices to hit $80 a barrel with the price stabilizing at the 50 to 60 range. I wonder how long the American voter will continue to give the enviros a pass on drilling in the gulf and ANWAR? Nukes anyone?
My heating bill demonstrates otherwise.....
SNORT...A barbarous relic.......I certainly don't have any in my safe or locked in a vault in Canada.
Does this mean you have become a supply sider? Read the article again. Oil isn't up in other currencies.
I contracted 1200 gallons last year and won't have used it all by seasons end myself.
but that imbalance does not exist - there is plenty of supply to meet demand, otherwise we would have shortages, and we don't.
its the speculation in the market, the hedge funds, et al, plus the weaker dollar that is driving it.
the administration could flush out the speculation if it wanted to - sell oil from the strategic reserve at $42 per barrel and announce a contract with the new iraqi government to replace it with oil from them at $40 per barrel, the $2 being "war reparations". the world price will drop on the news, the speculators will stop out of all their positions, which will drive the price lower - and eventually, an equilibirum will develop between actual suppliers and consumers of oil, as opposed to those using oil as a financial instrument.
In a world of competitive currency devaluation, it makes sense to use hard assets as a financial instrument.
Its only just begun.
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