Posted on 09/19/2005 11:52:42 AM PDT by Jomini
Crude-oil futures rebounded above $66 a barrel Monday amid worries that a storm gaining strength off the Bahamas could hit U.S. oil facilities in the Gulf of Mexico later this week.
The rise came as OPEC ministers met to discuss how to relieve price pressures in the oil market.
Benchmark light, sweet crude for October delivery rose $3.50, or more than 5 percent, to $66.50 a barrel in midday trading on the New York Mercantile Exchange, still more than $4 off its all-time high of $70.85 reached briefly on Aug. 30 after Hurricane Katrina hit the Gulf. Nymex crude had fallen $1.75 on Friday to its lowest closing price since Aug. 5.
Heating oil surged more than 18 cents to $2.02 per gallon, while gasoline rose more than 20 cents to $1.9870.
On London's International Petroleum Exchange, November Brent crude rose $3.13 to $64.94 a barrel.
"The main driver today is Tropical Storm Rita. We really can't afford to lose more production," said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.
In Florida, thousands began evacuating the Florida Keys as Rita built up speed off the Bahamas, about 430 miles from Key West. Rita, which strengthened Sunday into a tropical storm, had sustained winds of 60 mph and was forecast to be in the Straits of Florida between the Keys and northern Cuba on Monday, possibly as a Category 1 hurricane with winds of at least 74 mph, forecasters said.
Long-range forecasts showed the system moving into the Gulf of Mexico late in the week as a hurricane, then possibly approaching Mexico or Texas. But forecasters warned those across the U.S. southern coast, which is still recovering from the impact of Hurricane Katrina, that long-term predictions are subject to large errors.
If Rita strikes Texas, the biggest oil refiner in the country, it could spell serious disruption to the industry. Texas has 26 petroleum refineries with the capacity to pump a total of 4.6 million barrels a day, according to the U.S. Department of Energy.
About half of oil production and 35 percent of gasoline production in the Gulf remains blocked in the wake of Hurricane Katrina, according to the Minerals Management Service.
OPEC oil ministers, meanwhile, debated Monday whether to boost the group's official output ceiling or simply make available 2 million extra barrels a day from reserves.
OPEC President Sheik Ahmed Fahd Al Ahmed Al Sabah, who is also Kuwait's oil minister, said the group was considering whether to increase its current output ceiling of 28 million barrels a day by 500,000 barrels.
Previous OPEC pledges have done little to stabilize prices this year, which spiked on concerns that there is little spare crude left because of rising demand, but officials and analysts have also blamed high prices on the lack of refinery capacity to process products.
"The problem today is the shortage of products, not crude oil," Qatar's Oil Minister Abdullah bin Hamad al-Attiyah said.
Analysts have called OPEC moves symbolic as the cartel is already pumping more than its quota.
Supply concerns are likely to be raised as the Northern Hemisphere winter approaches, when demand for petroleum products such as heating oil, diesel and jet fuel rise.
Debased paper dollars cannot stand toe to toe with crude oil in the merciless world of the free market -- where excess monetary liquidity will always be punished in the form of higher prices. Crude will continue to crush the dollar as October becomes a month for the whole world to remember for a very long time.
J
Wow. Can I borrow your crystal ball?
Other than that, how's things?
BTW - I agree, unfortunately.
Speculators strike again. This is not about supply and demand.
Although he ended life on a down-tick (self-inflicted bullet to the head) Jesse Livermore was generally considered one of the sharper market watchers around. His analysis of the 1907 stock market crash ("Panic of '07") focused on the catastrophic effects on all markets of the 1906 San Francisco earthquake. His thesis focused on the idea that it was months before the true extent of the damage filtered through the markets and by the time it did the downward spiral could not be halted -- even by Treasury Department intervention in the bond market.
October 24, 1907 -- no buyers, none. By mid-November the Dow had lost 48% from its previous year's high.
The only good news from Hurricane Katrina is that the event acts as the very rare perfect intelligence indicator. If the opposition has the capacity to initiate a spectacular strategic/economic attack then they are forced to launch under Islamic strike doctrine. The exponential force multiplier garnered with Western emergency responses "stretched" to the limit opens the opportunity for a crushing "break" assault.
Under such a scenario oil would zoom to a hundred and the Dow would fall sharply. All this with the Iranian Oil Bourse slated to open in March and begin trading crude in Euros. Under no circumstances can this be permitted.
Then again, if no strike comes during the window of vulnerability it will be a near-certainty that Western intelligence structures have over-quantified the Qaeda threat. A strategic review will then be mandatory -- and many security operations may have to stand down or be eliminated.
Nothing like having a perfect intelligence barometer with a high-pressure system tracking west...
Thus with oil ready to charge north once more, the stock market entering its most vulnerable month and Ramadan right around the corner -- the stage is set for more intense pressure on the dollar. Then again, its not like many billions more can't be created with a few keystrokes...
J
bttt for later read.
"Debased paper dollars cannot stand toe to toe with crude oil in the merciless world of the free market -- where excess monetary liquidity will always be punished in the form of higher prices. Crude will continue to crush the dollar as October becomes a month for the whole world to remember for a very long time."
The economy between energy, Katrina and housing is already at a down-turn. Saying that we'll all remember October is somewhat obvious. In my opinion, oil is not going to go past $70 a barrel for a long time to come. The reason? If the American consumer sees $3.00 gas consistently we will all be screaming for biodiesel and ethanoland we'll get it. The arabs and big oil knows this also. We can be adequately fleeced for $60 a barrel and $2.25 a gallon for gas. It's a price American consumers proved can be tolerated.
Yes, it could be the threat of a hugh terrorist strike. If there is a terrorist strike of the nuclear type, that won't end the threat because there could be another. I suppose somebody is riding the crest of this wave--somebody always is right there. Whoever it is, is probably far nastier than any James Bond villain.
Yep, they couldn't allow the price to drop anymore so thanks to Rita, they have an excuse to start screwing the consumer once again.
"Then again, its not like many billions more can't be created with a few keystrokes..."
Exactly. An nuclear attack on America is now considered a "when" not an "if". When it occurs, our country has demonstrated we are woefully unprepared. Markets will mean nothing when the economy collapses, the shipping industry stops shipping food and people get hungry.
No surplus production capacity in crude=no cushion to stabilize prices=extreme volatility in energy prices=inability to make good investment decisions=stock market crash.
And that's without any action at all on the part of Islamic terrorists.
Wouldn't speculation be entirely about supply and demand? The speculators are bidding up futures in anticipation that supply will be affected, and that demand will remain constant.
Wouldn't speculation be entirely about supply and demand?
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Supposed to be. Even Steve Forbes has said that the market is wildly out of control and not responding to fundamentals.
We are paying for emergency level oil when demand is decreasing. We are at the point that if someone sneezes, oil goes up four to five dollars a barrel.
Rita has not even hit yet and with demand going down shouldnt prices be going down? Yes, they should - but they are not.
I hope the speculators will be happy when our economy is in shambles because of their irresponsibility.
It's easy to forget that N.O. is a critical port for both imports and exports; clearly, it isn't ready for full-scale operations yet. What happens as the grain harvests come in and need to be exported?
We may not have a dow crash, but per Mauldin's Bull's Eye Investing, we're badly overpriced.
As for oil...peak oil is here. We're going up from here. A lot.
Rita introduces uncertainty into the equation, and that'll drive the price up because the fear is not what today's gallon costs, but what tomorrow's might cost. The speculators are hedging that demand will remain at least constant. If it doesn't, if demand continues to decline, in the end they'll be the ones who ended up buying high and selling low, but that takes longer to play out than the reaction to potential uncertainty of supply.
Does anyone know how the harvest is going? Illinois and parts of Iowa have been declared disaster zones due to the drought, and I'm wondering how these shortages may effect the markets. Just pondering here.
I'm still waiting for anyone to take me up on a bet I proposed last month -- when I suggested that oil would be back down at $40 before it ever reached $100.
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