Better Fill up today

[frawin]

Nov-08 Crude is trading at $94.20, up $0.23, Nov-08 Natural Gas is trading at $7.44 down $0.041. 

[frawin]

Falling Oil Price Is a Positive Note Amid Turmoil

By JAD MOUAWAD

For the last year, rising oil prices have taken a toll on the economy, driving up gasoline and food costs, punishing airlines and automakers, and ripping a large hole in people's pockets.

But lately, nearly lost amid the chaos in the markets, oil prices have been dropping sharply from July's triple-digit peak. If that trend continues, as many analysts expect, it will put billions of dollars back into consumers' wallets and provide badly needed support for a battered economy.

Ben S. Bernanke, the chairman of the Federal Reserve, pointed to the drop in energy prices as "a positive note" in recent testimony to Congress, even as he warned of the many other stresses facing the economy.

Oil has been volatile in recent weeks, bobbing from $91 to $120 a barrel amid wild swings in the markets.

But with oil demand falling in most Western countries and growth weakening in some of AsiaR17;s booming economies, the trend is down. Crude oil futures closed at $93.97 a barrel, down $4.56, on Thursday and have lost 13 percent in the last week alone.

While consumers welcome the decline, which will reduce the nation's $1.3 billion daily oil import bill, oil producers are wary. Mexico said it might have to cut its budget next year as petroleum revenue dropped. Countries like Russia and Venezuela, which have been riding a wave of energy-fueled nationalism, could be forced to scale back their ambitions and energy projects that require enormous financing could be delayed.

These difficulties could prompt the Organization of the Petroleum Exporting Countries to step in forcefully to stem the slide in prices, analysts said. Saudi Arabia, the oil cartel's most powerful member, has signaled it wants to see oil fall below $100 to bolster the world economy, but it is unclear how low the Saudis and other producers will let prices fall.

Whatever OPEC tries to do, a growing number of experts say that a combination of weaker global growth and slumping demand is likely to keep pushing oil prices down in coming months.

R20;The fall in oil prices is equivalent to a new stimulus package for consumers," said Lawrence J. Goldstein, an energy analyst at the Energy Policy Research Foundation. He calculated that each drop of $10 a barrel in the price of oil lowered the nation's annual bill by about $70 billion. That is $230 for every American.

Gasoline now sells at $3.60 a gallon on average nationwide, according to AAA, down from its record of $4.11 a gallon in July, although prices are higher in some states because of lingering problems from Hurricane Ike. Experts say that if oil prices stayed from $75 to $100 a barrel for a while, that would likely push gasoline under $3.50 a gallon.

A result of record energy costs is that Americans have drastically cut back on their driving this year, reducing their gasoline usage at the fastest pace since 1983.

As prices peaked, oil consumption fell by 6 percent in July to its lowest level in five years, while the number of miles driven dropped the most since 1979, according the latest statistics from the Federal Highway Administration. For industrialized countries, which account for about 60 percent of global oil demand, consumption could fall by 1.3 million barrels a day this year, the steepest decline since 1982, according to analysts at Bernstein Research. That would more than offset the growth in consumption from developing nations like China, the analysts said.

R20;A study of the 1980s reaffirms our pessimism about oil demand in 2008 and 2009," the Bernstein analysts said in a recent research note. "Recent data suggests we may finally be reaching the point of negative demand."

Many analysts agree. Merrill Lynch said on Thursday that oil prices could fall as low as $50 a barrel in a global recession. Lawrence Eagles, an oil analyst for JPMorgan Chase, said: "This is the weakest fundamental situation we've had since 2002."

Oil prices are still high by historical standards. Many businesses had not managed to raise their prices enough to compensate for this summer's oil spike to more than $145 a barrel, and they say the high prices are still causing problems.

R20;We get excited when prices break below $100 a barrel, but we are still in a high feedstock and hydrocarbon environment," said Rich Wells, the vice president for energy at Dow Chemical.

Automakers have appealed for government aid as consumers shun their gas guzzlers, a problem worsened lately by a credit squeeze for potential car buyers. The Ford Motor Company said this week that its United States sales had dropped 34 percent in September. Automakers like General Motors and Toyota, also reported sharp sales declines.

Oil costs are a big reason the global airline industry has lost money in all but one year since 2000. Fuel costs amounted to 14 percent of airlines' expenses in 2000 but are forecast to reach 40 percent next year, the International Air Transport Association says.

R20;Our industry is like Sisyphus,R21; Giovanni Bisignani, IATA's chairman, told an industry conference in Istanbul this summer. "After a long uphill journey, a giant boulder of bad news is driving us back down."

A sustained drop in oil prices could lead to a new wave of mergers in the energy industry. Given the sharp increase in prices in recent years for everything from drill rigs to steel pipes, costs in the industry have risen sharply. The cost of adding production is now $70 to $90 a barrel, according to JPMorgan and other analysts.
Any drop below that range may curb investment in new oil supplies. Already, some producers are feeling the pinch. Petro-Canada, for example, signaled recently that the cost of developing oil sands in Canada would not be economical below $100 a barrel.
R20;Prices are still searching for true value and no one is quite sure what that is," said Tom Bentz, an energy analyst at BNP Paribas in New York. "A lot will depend on how the global economic picture will shape up. We still have a world that is a scary place to live in."

[pam]

I had to go to town today and gas was 2.99!! in a couple of places, most of the others it was like 3.05

[frawin]

Nov-08 Crude is trading at $89.85, down $4.03, Nov-08 Natural Gas is trading at $7.20 down $0.158.   

[frawin]

Oil Falls Below $90 for 1st Time in 8 Months on Demand Concern

By Grant Smith

Oct. 6 (Bloomberg) -- Crude oil fell below $90 a barrel in New York for the first time since February as the credit crisis deepened in Europe, adding to concerns that global economic growth will slow and reduce demand for fuels.

Oil dropped as much as 5.1 percent as European leaders pledged to bail out troubled banks and protect depositors. World markets are oversupplied, Iranian Oil Minister Gholamhossein Nozari said on Oct. 4, and Saudi Aramco, the world's largest state oil company, cut its official selling prices for exports to Asia and the U.S.

``With the stream of economic distress signals continuing unabated the oil market is betting that demand will really suffer,'' said Christopher Bellew, a senior broker at Bache Commodities Ltd. ``A further push towards $85 is looking highly likely in these feverish conditions.''

Crude oil for November delivery fell as much as $4.81 to $89.07 a barrel in electronic trading on the New York Mercantile Exchange. That's the lowest since Feb. 8. It was at $90.43 at 10:56 a.m. in London.

Futures have fallen 39 percent from the record $147.27 reached on July 11.

New York oil prices declined 12 percent last week as reports showed U.S. fuel demand the previous four weeks was the lowest in almost seven years and manufacturing shrank in September at the fastest pace since the last recession in 2001. The country's Labor Department reported a bigger-than-expected 159,000 drop in payrolls in September last week.

`Vicious'

``It is doubtful that the vicious downward decline we are seeing in most markets will end any time soon, even if credit markets start to thaw out,'' said Edward Meir, an analyst at MF Global Ltd. in Connecticut. ``In crude's case, we are still staggered by the fact that prices are well above where they were at this time last year, and so would not be surprised to see much sharper falls.''

The U.S. may fall into a recession, the International Monetary Fund said on Oct. 2 in its most pessimistic outlook for the world's largest economy since the credit crisis began last year.

Saudi Aramco trimmed the price of its Arab Extra Light crude by 30 cents to a discount of $3.40 a barrel below the West Texas Intermediate benchmark, the Dhahran, Saudi Arabia-based producer said yesterday in a faxed statement. The company also cut the price of its Arab Light grade.

The dollar rose to a 13-month high against a basket of currencies, reducing the investment appeal of dollar-denominated commodities. The euro fell as low as $1.3618 from $1.3772 in late New York trading last week, after Germany said it will guarantee personal bank deposits in a bid to stabilize the nation's banking system.

Brent crude oil for November settlement declined as much as $4.69, or 5.2 percent, to $85.56 a barrel on London's ICE Futures Europe exchange, and traded at $86.79 at 10:40 a.m. London time.



Last Updated: October 6, 2008 06:00 EDT

[Catwoman]

I actually saw $2.99/gal gas today!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!  Let's hope and pray it continues to fall!!!!!!!!!!!!!!!!!!

[pam]

Just got back from gettin gas for my truck, it was 2.85! Way out here!

[DanCookson]

I have read some really low bottom numbers Frank, somewhere in the 60-65 range.  What is your feeling?

[W. Gray]

Our gas today was still in the 3.30 to 3.40 range with one station asking 3.99.

[frawin]

Hi Dan, good question, if you look at the NYMEX all the way out to 2015, it is really a wild set of numbers. There is everything from $136.00 down to $70.00. I will make a really far out prediction, that we could see $50.00 oil. Having said that I want add that it depends on when how much worldwide consumption stops falling and/or  goes up and/or levels out and how soon the world economies level out and/or start improve. OPEC is very smart and they know that they have pushed the price over into the level that will destroy the world economies. They also know that they may not be able to depend on the Democrats to stop drilling in the major reserve areas in the US and they sure do not want us to have increased production and reduced dependence on them. Also thay can see that the price has started a big push to find alternate renewable sources of energy and smaller more efficent cars . My greatest concern is that if we have really low oil prices the world will go right back to their wasteful ways. I saw it after the embargo ended in the early 80s, people forgot very quick and went back to their wasteful ways.
Dan, if we have $50.00 to $70.00 oil it is going to stop a lot of drilling in the US, at least until Pipe, Tubing, Drilling Costs and completion costs come back down. With the drilling boom on and inflation due to high oil prices, we need $80.00 to $90.00 dollar oil to justify the deep expensive projects.  I probably said more than you wanted to hear but I am seeing more and more operators tell me they are curtailing projects both due to costs verses price and the fear of an unfriendly tax climate if the Democrats maintain control.