Oil Down $2, Speculators Bet on Kerry Win

Yahoo ^ | Nov 01, 2004 | Richard Mably

[Tumbleweed_Connection]

LONDON (Reuters) - Oil prices fell heavily on Monday, taking U.S. crude below $50 on speculation that a U.S. election win for Senator John Kerry (news - web sites) could ease the geopolitical friction that helped fuel this year's record-breaking rally.

U.S. light crude fell as low as $49.40 a barrel before retracing by 1745 GMT (1:45 p.m. EST) to $49.70 a barrel, down $2.06. U.S. crude has spent nearly a month above $50, peaking a week ago at $55.67.

London Brent lost $2.28 to $46.80 a barrel.

Energy analysts said a win for the challenger Kerry in Tuesday's U.S. poll could mean lower crude prices than if President Bush (news - web sites) is re-elected. Opinion polls put the two neck and neck.

"Under a Kerry administration we'd likely have a much more interventionist SPR (Strategic Petroleum Reserve) policy," said Jamal Qureshi, market analyst at PFC Energy in Washington.

"And when you look out a bit further, Bush is more likely to be aggressive in the Middle East, particularly in Iran."

The Bush administration continues to add oil to the Strategic Petroleum Reserve despite high prices.

Kerry says he would stop filling at current prices to keep more crude on the market. That difference is important for the world oil market now suffering a shortage of light, sweet crude, which makes up about 40 percent of the SPR.

MANUFACTURING

PFC is forecasting an average U.S. crude price of $43 a barrel in 2005 should Kerry win, compared to $48 a barrel in the event Bush triumphs. It sees $52 on average in the first quarter 2005 under Bush compared to $45 under Kerry.

PFC says a Bush win could stoke nervousness about U.S. policies in the oil producing Middle East while Kerry is seen as more likely to work through conventional diplomatic channels.

A Kerry victory could also mean more financing for renewable energy source and trigger a push for tighter mileage standards for gas-guzzling sport utility vehicles.

The senator backs a 10-year, $30 billion energy package that includes $10 billion to build cleaner coal-fired power plants and $10 billion to help U.S. auto makers retool to build more fuel-efficient cars.

Traders also are wary of economic data that shows signs higher energy costs are eating into economic performance, curtailing oil demand growth.

A Reuters survey released on Monday showed growth in manufacturing slowed from the euro zone to Japan in October.

The surveys of manufacturers around the world showed a fall in manufacturing for the euro zone, the world's second largest economic bloc, signaling the slowest growth in 10 months.

"Primarily we suspect this is an oil price-induced global downturn which is hitting export growth," said Chris Williamson, chief economist at NTC Research, which compiles the data for Reuters. "Secondly, there has been some evidence of demand cooling in China."

China's surprise decision last week to raise interest rates is thought unlikely to have a major impact on fuel demand from the world's second biggest user, partly because retail prices remain heavily subsidized.

Also undermining oil on Monday was last week's improvement in U.S. Gulf of Mexico output from September's Hurricane Ivan. Production rose nearly 100,000 barrels a day last week to over 80 percent of the normal 1.7 million barrels daily.

In addition, producer Shell said on Monday it would delay engineering work on its 150,000 bpd Gulf of Mexico Mars platform from November until the first quarter of 2005.

[Cold Heat]

Geeez!

I can't imagine what Kerry would do for speculative oil markets.

Unless, the attacks might increase due to a weakness in the admin.

[San Jacinto]

OMG! What a load of horsecrap! I said a week ago that oil would drop in price the day after the election because those who have driven the prices up would turn loose on election day as it no longer serves their purpose. Stock market will also rise as a result. Yhis does not depend on election outcome.

The writer of this piece has to be a kerry shill or a bleeping idiot.

[Pyxis Veritas]

I predicted this exact movement in the oil futures market two months ago. The speculators ran up the price of oil to hurt the Bush administration. I predicted that you would see the price of oil drift downward the week before the election. The first to sell the oil futures will stand to benefit more from the higher prices. The downward movement in the market should not be viewed as an endorsement of Kerry. It is simply the predictable acts of those who were aiming to hurt Bush and then make some money as well.

[Shermy]

I don't see the connection.

It's utter disinformation. Like the "Iran" line - they pump the same whether we yell at them or not.

The article's purpose is for tomorow's headline for the sheeple: "Gas Prices Lower With Kerry".

[1stMarylandRegiment]

Also undermining oil on Monday was last week's improvement in U.S. Gulf of Mexico output from September's Hurricane Ivan. Production rose nearly 100,000 barrels a day last week to over 80 percent of the normal 1.7 million barrels daily.

As an afterthought, we think that the restoration of nearly 90% of the production lost to Hurricane Ivan might have an additional small positive effect. But we really think the Kerry win will make the world a happy place again. Really. We do. Oh, and oil prices will decline.

Folks, the US had added 164,000 barrels A WEEK to the SPR since the decision to fill it to the top (with a few loans to smaller producers during IVAN). The restoration of 100,000 barrels a DAY from GoM is a BIG deal.

China buys low-grade crude - stuff that we can't refine anyway. We import more refined product today than ever - because the EPA won't let us build refineries.

Our oil problem is a refined product problem, not a crude problem. That is how the environmentalists want it - they want the price of gasoline as high as they can get it to force us out of our SUV's and into hybrids.

[mlocher]

I don't see the connection.

the connection, unstated, is that a kerry presidency will stall the united states economy. the economy will require less oil since less people will have to go to work. therefore, oil prices will fall.

[Born Conservative]

High oil prices = Bush's fault. Wouldn't ya know this was from Reuters...

[claudwitz]

With a drop in the futures contracts by such an amount, it does appear the futures could have been manipulated by a 'short squeeze.' It's certainly not an uncommon event and occurs on our exchanges more than one would like to think. It's generally accomplished by a group of traders, a house and/or marketmakers tacitly in cahoots, artificially inflating demand for contracts or issue(s), then selling the contracts/issue(s) short on the downside. Soro's is an expert on the currency markets in such tactics.

The problem, as with the embargo's and manipulation of supply by OPEC, the tactic has a very nasty backlash. When the price's were as high as they were, owners of non-affected contracts ie, those they've take possession of or holders of large inventories, will reissue and sell new contracts - a short - not buying at the higher price. Production facilities themselves, will look to alternative sources, tailor production for decreased inventory stocks and/or switch to product streams. The oil producer is then hurt by lack of demand and drastically falling revenues.

Those worst hurt by such tactics are those whose inventories are run on a mostly JIT, 'just-in-time', principles, those with small inventories and those unable to switch product streams, 3rd world developing countries.

Another vote by our Euro and Arabian islamofascists? It wouldn't surprise me, it certainly wouldn't be the first occurrence. But as those that were up-to-no-good later found out the consequences were like Russian roulette, the game where you merrily say, 'Shoot Yourself.'

[1stMarylandRegiment]

With a drop in the futures contracts by such an amount, it does appear the futures could have been manipulated by a 'short squeeze.

A short squeeze occurs when those who have sold short are forced to BUY in order to cut their losses, thus driving prices higher, which makes their losses larger, which causes more buying - see the viscious circle? - until the "buying to cover shorts" is exhausted. Shrewd squeezers start this process by aggressive and targeted "buying attacks" on securities or commodities that are heavy large short positions.

At the point that the short covering is exhausted (shorts have covered all positions) , the shrewd squeezer would sell the "attack" positions <|;.

Think of a short squeeze as a margin call in a RISING market, the opposite of a margin call in a declining market.

If you are suggesting that short covering was exhausted today and shrewd squeezers are now selling, then you are very insightful.

[FrankRepublican]

UK bookies are picking Bush to win:

They picked the Australian elections last month that was a "dead heat" in the polls. They are more accurate than pollsters. Even the lefty UK Guardian said the bookies were picking Bush to win.

The bookmakers have not wavered.

http://www.realclearpolitics.com/Presidential_04/RCP_Markets.html