Fire, Weak Dollar Fuel Record Oil Prices

NEW YORK — Crude oil futures swung wildly on Monday, rising to a record and then tumbling as investors wrestled with whether they should put stock in Saudi Arabia's promise to boost production. Retail gas prices rose to a record $4.08 a gallon.

Light, sweet crude for July delivery fell 25 cents to settle at $134.61 a barrel on the New York Mercantile Exchange after earlier soaring to a trading record of $139.89. Earlier, they dropped as low as $132.84.

With little in the way of news to explain oil's turnabout, analysts pointed to Saudi Arabia's weekend decision to boost production and to Tuesday's expiration of crude options, which are agreements to buy or sell futures at higher or lower prices.

Trading is often volatile in the days immediately preceding options expiration. "That could be the cause of some of the volatility today," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.

Saudi Arabia, the world's largest oil producer, told U.N. chief Ban Ki-moon over the weekend that it would boost oil output by 200,000 barrels a day, or by 2 percent, from June to July. In May, the kingdom raised production by 300,000 barrels a day.

A sense that the Saudis may be getting serious about boosting output could be growing among some investors. Still, many analysts believe the boost in Saudi output is too little to make much difference.

"Saudi Arabia's proposed output addition will only go some way in offsetting the significant output losses in other OPEC nations like Nigeria," said Barclays Capital analyst Kevin Norrish in a research note.

Cordier said Saudi Arabia has "to increase by north of 1 million barrels per day" to have an impact on prices, "and the market doesn't think they have it."

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According to the International Energy Agency, OPEC spare capacity fell below 2 million barrels a day in May for the first time since 2006. The majority of that _ about 1.45 million barrels a day _ was in Saudi Arabia.

Earlier Monday, prices rose as the dollar fell against the euro. Many investors buy commodities such as oil as a hedge against inflation when the dollar falls. Also, a weaker dollar makes oil less expensive to investors dealing in other currencies. Many analysts believe the dollar's protracted decline is a major factor behind oil's doubling in price over the past year.

Investors were also mulling the effects of an overnight fire at a StatoilHydro ASA drilling rig in the North Sea, which could affect as much as 150,000 barrels of daily oil production, said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn., in a research note.

At the pump, meanwhile, the national average price of a gallon of gas rose 0.3 cent overnight to its latest milestone, according to AAA and the Oil Price Information Service. Gas prices are following crude prices higher, and likely have several more cents to rise before catching up with oil's latest advance.

If oil prices pass $140 and head even higher, the pain consumers are feeling at the pump will intensify.

Diesel fuel prices held steady Monday at a record $4.797 a gallon. High prices for diesel, used to transport most of the world's food, are pushing food prices higher, putting even more pressure on consumers.

In other Nymex trading, July gasoline futures fell 2.47 cents to settle at $3.4379 a gallon, while July heating oil futures fell 0.94 cent to settle at $3.8274 a gallon.

July natural gas futures rose 30.8 cents to settle at $12.933 per 1,000 cubic feet.

Anadarko Petroleum Corp. said Monday that natural gas production from a project in the deep waters of the Gulf of Mexico has been restored, hitting a gross rate of about 900 million cubic feet per day. Output from the Independence Hub was halted April 8 after a pipeline leak was found.

In London, August Brent crude futures fell 40 cents to settle at $134.71 on the ICE Futures exchange.

___

AP Business Writer John Porretto, in Houston, and Associated Press writers George Jahn in Vienna, Austria, and Eileen Ng in Kuala Lumpur, Malaysia, contributed to this report.

Comments

[research]

Tired of being shafted by the Enron loophole driving the oil market?

Don't vote for McCain.
http://www.consortiumnews.com/2008/051908a.html

1 trillion dollars would replace all coal nukes and imported oil with roof top solar power in less time then you can build more nukes and drilling platforms.

[KillTheMessenger]

Don't vote for McCain, but don't think a trillion dollars will get you out of this pickle, either. It won't. For a trillion dollars you get approx. 100GW of solar. We are burning 25million barrels of oil a day. That's about 290 barrels a second. A barrel has a useful energy content of approx. 1GJ, so 290 barrels/second is 290GW of power.

Research, you are off by a factor of 30, for oil alone (and that is just one third of the equation). If you were off by a factor of three, you would have a fighting chance to be right. But as it is, you are missing over an order of magnitude.

[Rule Of Law]

To KTM--just in case it fell down the thread too far the first time--

Ok, Mr. Phd I drive a Prius, I'll bite this once:

Back it all up! Show us! Give us 3rd party, NON-industry or govt. data that can and has been corroborated by disinterested parties. Show us the numbers, not just another intellectual circle jerk of rehashed so called "facts," provided by the same criminals foisting this on an unsuspecting public.

As for the benefit of suggesting that the peak has hit, someone should use their head for more than just a convenient place to put a hat. Just as DeBeers has controlled the volume of diamonds--and thereby, the Price for decades--so too can the peak conspirators control the price, especially now with an oil man in the white house who is an honorary member of the Saud family.

Give us the goods, because without them your Phd is about as worthwhile as mine in this arena. Prove it, once and for all! Do it. Not predictions from oil men in the 1950's, not second hand reports that are derived from more oil industry numbers that can't be validated, not government statistics in studies paid for with tax payer money and provided by the Oil Company!

Real, modern, verifiable independent data--am I being clear enough? Or have the good graces to get off the boards with your unsupportable, and highly suspect opinion.

[Rule Of Law]

chirp...chirp...chirp...

[KillTheMessenger]

I think I discussed it on a different blog for you... I hope you read it and learned something from it. I kind of doubt it, though.

[darthdarcy]

What people just don't realize is that what the speculators are doing is the largest reason and biggest part of the recent crazy increases in the price of Oil, and that it constitutes one of the biggest swindles in history...

Is the dollar part of it yes...

Is dwindling oil supplies yes..

Other nations increasing their demand such as India and china ..yes..

But the largest part of this increase in the last 2 years especially is the deregulation and the manipulation of the markets due to the Enron Loophole and the Speculators..

[RoloTomassi]

Where I'm concerned, you're preaching to the choir; and the Peakers will never admit they were wrong, even after the bubble has burst. I think someone within the process will intercede at some point in the relatively near future, as continued abuse of the market will start to affect energy usage too much for big oil's longterm plans--which would give them something of an incentive to help reduce the problem.

The last thing Big Oil wants is for automotive manufacturers to move to alternative fuels/energy before Big Oil is ready for the transition; they want to step in with hydrogen fuel cells and coral the market via US & Japanese automakers buying into the exclusive technology--if they can get their hydrogen fuel cells in place and no one is offering full electrics or hybrids [as automakers would stop making hybrids, if the price is right], big oil can then phase out major oil & gas exploration and still keep consumers paying extreme prices for energy.

Do you think these Hydrogen lease cars are coming out now by mere coincidence?

The absolute last thign big oil companies want is a bunch of commuters driving plug-in electric cars, or even hybrids, for that matter; if they can get sell the unreasonbly expensive hydrogen fuel cells, they don't need to work about oil in mass production any longer....

[darthdarcy]

Good points RoloTomassi...unless these Speculators have a strangle hold that even Big Oil can't escape..

There's no denying this kind of increase is counter productive even from the big oil companies point of few and OPEC itself is alarmed as we've seen already..

[KillTheMessenger]

This bubble can not burst. The peak might come five years later and at a slightly higher plateau. I will have made money on driving my Prius, anyway, while all you have been doing is to be needlessly angry. One has to wonder if you actually realize that...

As far as hydrogen is concerned, it is still not a fuel. It's an energy storage medium. And because currently most of the hydrogen you can buy is derived from natural gas, it is an absolute non-starter, even if you had fuel cells beyond the prototype stage. Hydrogen has been researched for decades. I have seen fuel cell prototypes made by Mercedes Benz twenty years ago in the lab I used to work as a student. They were insanely large, needlessly complicated and... the program was terminated. Every once in a whole they restart it by buying some "new" IP and it is still a loser technology.

[Chavez08]

Wallstreet is the cause, please stop trying to insult our intelligence.

Free Markets = Enslaved People

[KillTheMessenger]

I don't think we have to. You might be doing it to yourself. Once you get off the single cause, single effect thinking, you will post much smarter stuff all by yourself.

[RoloTomassi]

"Once you get off the single cause, single effect thinking, you will post much smarter stuff all by yourself."

Ah...yes, indeed; advice you yourself should follow.

But I won't hold my breath.

[MetalCanuck]

Time to educate the little socialist bunnies on this site on the real reason for oils rise in price and it has very little to do with investing...you should start putting your shrinking dollar in to oil soon or you mayhave no real money left.

http://ca.youtube.com/watch?v=iwAHnpIR8is

then watch this

http://ca.youtube.com/watch?v=jqz9J4hxh3k

and this

http://ca.youtube.com/watch?v=INTaWXl3ooo&feature=related

how about this

http://ca.youtube.com/watch?v=4n3g5lUgkWk

Time to wake up folks..you are being robbed and its not by investors..its BANKERS. (And the gov)

[RoloTomassi]

Jeez dude, I don't need a Friedmanite free-marketer's tutelage, thanks anyway...but don't you see that you're not refuting anything, but merely presenting the flipside of the same coin?

Yes, financial institutions are involved, but so are speculators; the falling dollar, and the lying government, yes, all of those things apply.

[MetalCanuck]

I am talking about what the second guy is saying. The first guy is an idiot. Speculators are insignificant.

[EinChicago]

The "weak dollar" is doing nothing othe rthan providing an excuse for speculation.

6 months ago, the dollar was at 1.59 euros/$1 and oil was at $85-90. Today, the dollar is at 1.54 euros to $1, and oil is at $135.

Tjhe dollar has strengthened relatively while oil has still increased by almost 70%. The weak dollar is a red herring for plundering.

[MetalCanuck]

Its the dollar only...NOT speculation. The reason other currencies are going down too is because we are lowering interest rates to continue trading with America. Its hurting us but our governments are insane too. You are being lied to, the dollar is not strengthening, they just inflated by well over a trillion in the last 10 months. 200 BILLION in may alone.

[Sundialsvc4]

I simply do not "buy" the notion that floods or fires have anything at all to do with the spiraling energy prices. I've been alive quite a few years now, and there have been floods and oil-rig fires every single year.

What is happening today is one thing, and one thing only: the devaluation of the American Dollar. And it is happening, I believe, as a shrewd non-military world response to the aggressive, belligerent, most-dangerous nation that our leaders have caused our nation to become.

If you want to change the oil prices, and a whole lot of other things: Impeach.

That's right: impeach. Enforce your own laws. Go into the halls of Congress, of the White House, of the Judiciary, and into the office of "every civil officer," remove them from Office and put them on trial. Those who live by the sword will die by the sword, but a nation that lives under the Law will not perish.

We are living in a nation that was built by our forefathers under those principles, and we seriously turned-away from those principles less than 40 years ago. But how much damage has been done in those last 40 years, and especially in the last 8! These are not "inevitable things" ... they are Crimes. And the criminals live among us. Why?

[KillTheMessenger]

If you want to lower oil prices, don't buy gas at $4.50. It's that simple.

[research]

Mission accomplished, BushCheny Oil Inc.

[Rule Of Law]

I see that our neighborhood peak oil conspiracy theorist is in full throat today. I understand having an opinion. But expressing it ad infinitum in a hectoring and didactic tone alienates even potential allies. It's obsessive compulsive, but hey, it's a living, right? If a person were being paid by the post, mining this topic would be a "gusher" for a--ummm, activist like this one?

But the truth is, peak oil doesn't yet exist, and no one knows for certain when it will arrive. Will we expend all fossil fuel at some point? Sure, nobody argues against that. But my guess, and I admit this is just a guess, is that water will be a more critical resource to us sooner and with far greater impact.

These are the musings of a born again, fossil fuel evangelist, raving about the end of the world in our time, waving his placard and wearing his crown of thorns. His source of data, his Bible if you will, is written by the Great Satan himself, the Federal Government that lied us into two wars, deregulated the market to allow for speculator control, and supports the big oil cartel with your and my tax dollars. Nor The self serving figures supplied by the oil industry. Both have a history of lying for their own benefit--ours be damned. If peak oil conspiracy theorists can do no better than to mouth second hand lies, then they'll have to be counted among the liars.

[jsarets]

That's nice. How do explain the fact the worldwide oil discoveries peaked in 1965, U.S. oil production peaked in 1970, and worldwide per-capita oil production peaked in 1979? These are irrefutable facts. It may take another several years to verify that worldwide oil production did in fact peak in December 2005, but until we surpass that production production, all indications are that we are now post-peak.

This is not to belittle your argument about freshwater shortages probably being a more pressing issue. Ultimately there are simply too many people on Earth, and if we are opposed to authoritarian population control, then we must accept the consequences of not having enough water, food, and energy to sustain all the children that are born into this overburdened world.

[KillTheMessenger]

How will he explain that? It was the speculators, of course. And the environmentalists. There is plenty of oil, we are just not allowed to search and drill for it. Easy. :-)

[ImmanuelGoldstein]

Except of course he actually has things like numbers and charts that back up his assertions. Peak oil is not a 'conspiracy theory' in anny sense usually meant by the term. Indeed his 'work' is frankly an anodyne to actual conspiracy theory that blames oil prices on simpleminded ideas about 'evil speculators' (as though evil speculators never existed before).

Your own rant has one big point common to real conspiracy theorists. All information sources that don't confirm the conspiracy are tainted by the evil conspirators. Never mind that oil future speculators and similar types also rely on these figures. And of course you don't reference any supposedly superior information, you just provide an emotional screed and lot of name-calling.

[EinChicago]

"Peak oil is not EVEN a 'conspiracy theory' in anny sense usually meant by the term."

Fixed for accuracy.

[Rule Of Law]

I called no one any names, and named no one in particular. However, if the shoe fits...However, I did get the response I was looking for. Funny how when a true believer's religion is questioned, it's called a rant. Oh, and anodyne (a medicine that relieves or allays pain)--nice word that it is, may not be the one you were looking for.

It's a classic conspiracy. The data presented is from two sources--The Government, and Big Oil. There is no outside, impartial third party corroboration due to the fact that most of that data is either confidential or classified. And they're not exactly inviting researchers in to the oil fields to do independent inventories, are they? What we get here is just an unvetted repetition of those numbers, repeated by the peak acolytes as holy writ! Repeating a suspect set of data does not make it fact.

What's most disturbing, is that sane and circumspect posters are willing to believe peak oil lies from the same Government and Corporations from whom they would believe nothing on any other issue!

When the product AND the data are controlled by the same people, and government has been brought under the same tent as business, you get an economic Butterfly Effect of market manipulation and speculation that makes past attempts by those "evil speculators" pale by comparison! If you believe that discoveries, production, have peaked and are "irrefutable facts," all you have is a belief, like any religion.

[studlyguy]

Repeating propaganda doesn't make it true.MAN you've learned a lot from your leader Bush,unfortunatley repeating the lie isn't going to brainwashedanyone with a brain into believing it's true,as you Brown shirts seem to think , been there done that ,that won't work anymore ,Americans are wide awake ,NOW!

[studlyguy]

Afraid of what I had to say huffpoooo it's no wonder you've lost a lot of people coming to your site with your censorship of peoples comments you don't agree with or don't like,I put two comments and neither made it,sadly you've become what you railed against.

[ErnestineBass]

Google "BannedfromHuffPo'. More and more posters there every day...

[studlyguy]

Yet they let KTM post at nauseum,go figure!I will do that ,thx EB.

[PSTEN]

There is no hard data on any of this. Your talking about oil in the ground you can't see and therefore can only guesstimate at. The only solid data is that oil production in any field goes down over time. The same is true of speculators. You can't say it's speculation driving cost beause you can't see any evidence of it. This will be a crisis, truly a crisis, when Gewar output goes south in a major way. It's are biggest source of oil in the SA. Even the prior head of Opec OIl states that politicians in the United States have been grossly irresponsible in basing our economy so heavily on oil.

[KillTheMessenger]

We got plenty of "semi-hard" data. Look at Mexico's production curve, for instance. They have absolutely no reason to display a near perfect Hubbert peak to fool the world.

http://www.theoildrum.com/files/Oilwatch_juni_2008_6.png

http://static.flickr.com/64/188248781_c6be718c00.jpg

They are peaking because Cantarell is crashing and it looks, to zeroth order (and without crosschecking this data) that unless they can find another large oil field, the party is over.

Mexico has nothing obvious to win from faking a peak if they could keep pumping at least at a constant flow rate. Actually, if their decline continues along a typical post peak production curve for their fields, because they are using more and more oil themselves, very soon the country will have serious economic problems when it turns from a net exporter to a net importer.

I would not take this lightly. We are talking about a lot of GDP here. Total Mexican GDP was $1.4 trillion. Oil sales at $80/barrel would have been some $105 billion. If they could double that, why shouldn't they?

[zizyphus]

What I see is a perfect storm brewing of forces that will continue to drive the price of oil up.

1. The unregulated and criminal speculating
2. Depletion of easily obtained oil reserves
3. Monopolies and cartels controlling oil production
4. Increasing demand worldwide

The US allows the oil companies to make excessive profits to the point where they are about to kill the US economy. Other oil producing nations give their own people a break on the price of gasoline!

[joebhed]

The forces you mention will continue to push the price of oil up.

But you also mention that the American economy is going in the tank, as we speak.

That will have a negative effect on one of those storm factors.
Increasing Global Demand.
The result of the high price of oil will be decreasing the global economic output, and therefrom the global demand for oil.
Such a relationship should ease somewhat the price pressure on the commodity.

However, given the alignment of the other three points in the storm, we are unlikely to know anything about global oil supply/demand relationships, beyond what the oil companies are compelled to tell us.
Which is also just about nothing.

[MetalCanuck]

88 percent of the oil prices are because of a falling dollar and government spending. You would have to have a 90 percent income tax to cover the cost of the government right now and well over 100 percent for future debt. Trading oil is insignificant.

[Americanium]

Here is how gas prices will go down.

Obama's first State of the Union address. He announces an alternative energy commission with full executive status to conduct research into sustainable sources of energy including coal and nuclear technology.

That would send the futures market into a tail spin.

[leduck]

what is sustainable about coal?

[EinChicago]

The fact that it s use is actually based in reality and not a super duper wonderful dream of magic powered rainbow catchers?

[leduck]

i can see it now.....
a thousand years from now, two people from a rudimentary civilization, standing on the banks of a river "chewing the fat."

you know..., it's not that we really ran out of oil..., they just want to keep us as SERFS!

[leduck]

darthdarcy
if you really truely know something about the oil industry
then you must know Peak Oil is real
that depletion of individual wells is real

the only thing you could possibly disagree on is timing of Peak Oil

[KillTheMessenger]

I doubt he even wants to know about the oil industry. He sounds more like somebody who likes to theorize about conspiracies. Facts are boring for those who have enough imagination to make up their own reality.

What gets me is that many people who accept peak oil are so dead set that the peak will happen in 2030 rather than in 2010. The difference is a mere 20 years and the crash that comes later will be harder. I would be thrilled if the peak happened in 2030 IF we could get our act together and began mitigating the consequences NOW! Instead those who opt for believing in a later peak are not even suggesting to change our ways now, they just want everything to stay exactly as it is.

In any case, when I grew up the 2030 number was traded a lot, but it was not as part of a peak model, but as the time when oil would not be available any more as a major source of energy, i.e. 2030 was assumed to be a long time after the peak. I wonder how many people heard that number in the past and are now believing that it was actually an estimate for the peak rather than the post-peak era that it was meant to describe.

[darthdarcy]

Michael Greenberger is making thing up the former director of the Commodities and Futures Trading Commission...I keep telling you to listen to him he's the expert..conspiracies everyone if referencing the same info the Senate is having him speak at hearings and you just won't even listen..Peak Oil is a conspiracy you want it so bad you ignore all the facts..