Picking up the price pace
This week may be an interesting one; will we see $150/barrel this week?
Last week was a quiet one in terms of daily price extremes – a sort of psychological integration period, cooling off a bit.
This Monday AM (6-16-08), crude jumped $5.00 to a new high before the open.
LONDON, June 16, 2008 (Reuters) — Oil surged to a new record high on Monday of nearly $140 a barrel, propelled by weakness in the U.S. dollar which offset the bearish impact of plans by Saudi Arabia to boost output.
U.S. light, sweet crude for July delivery was up $3.74 at $138.60 a barrel by 1317 GMT, after falling as much as $1.40 a barrel, or about 1 percent, earlier in the session.
U.S. crude set a record high of $139.89 a barrel.
London Brent crude was up $3.05 at $138.16.
Prices leapt as the dollar fell after publication of data from the New York Federal Reserve that showed manufacturing in the state of New York contracted in June for the fourth time in five months.
“Prices rose sharply in three minutes. U.S. manufacturing data was weak, so it is pressuring the dollar down,” said Mike Wittner, energy analyst at Societe General. SOURCE
News effecting today’s price jump include:
- Norwegian oil company StatoilHydro ASA (STO) said Sunday that it shut down oil production at a North Sea platform after a fire broke out. The company said that the fire was quickly extinguished on the Oseberg A platform and no one was injured during the incident.
- June 16 (Bloomberg) — China was a net importer of gasoline for the first time in May as rising oil costs discouraged refiners from processing crude into fuels, and in preparation for the August Olympic Games.
Gasoline imports reached 338,572 metric tons in May, the highest in at least 29 months, while exports were 160,000 tons, the Customs General Administration of China in Beijing said in an e-mailed statement today. SOURCE
Oil contracts are up this Friday and there is an oil summit in Jeddah (LINK), this weekend to hash out the next set of terms.
Saudi Arabia’s invitation to producers and consumers to meet in Jeddah this weekend is in response to the growing protests from consumers over record oil prices that could threaten the health of the global economy.
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Saudi Arabia is the only member of OPEC with the spare capacity to boost supplies quickly and significantly. It could pump around 2 million bpd more than it does. SOURCE
In advance of this, the Saudis are releasing conflicting statements that they will raise output by either 200,000 or 500,000 bpd (barrels per day).
Just last month, the Saudis raised their output by 300,000 bpd with little fanfare (not sure how that played into the whole Bush begging visit).
It seems, not really surprisingly, that OPEC and more particularly the Saudis are allowing what looks like internal disarray to leak into the media as there are various reports that OPEC may be splintering on some level.
While they are reaping record profits, the Saudis are concerned that today’s record prices might eventually damp economic growth and lead to lower oil demand, as is already happening in the United States and other developed countries. The current prices are also making alternative fuels more viable, threatening the long-term prospects of the oil-based economy. SOURCE http://www.nytimes.com/2008/06/17/business/worldbusiness/17oil.html?_r=1&ref=business&oref=slogin
I do not get the whole meme that the Saudis are increasing output because they are worried about a degradation in demand over the long term.
It seems intuitive, especially for a group like the Saudis who must have pondered this for some time, that demand destruction will be the norm as supply lessens, demand increases, and prices increase. Do they actually think that the world will be able to get it’s act together to switch away from fossil fuels? I think this is a false flag crafted for the average American.
The scenario for oil depletion must, on most levels and estimations, include the chaos of the destabilizing of countries over high fuel prices.
Is it a cynical assumption on my part that the Saudis will remain relatively secure (until some tipping point where the US and other players decide to appropriate their remaining oil stocks) and that the rising price of oil will compensate the lowered demand/lowered supplies?
If you feel this is not the case, please drop a comment and share your thoughts.
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