Japan's Earthquake Leads To Falling Oil Prices On Fears Of Decreased Demand

(Reuters) - Oil prices fell on Friday after a massive earthquake shook Japan, shutting refineries and other industrial facilities in the world's third-largest oil consumer.

Brent was poised to post a weekly loss for the first time in seven weeks, with U.S. crude on track to end down for the first week in four.

As the implications for oil demand in Japan and the region received attention, investors also monitored a planned day of protests in top oil exporter Saudi Arabia and the violence in Libya, where oil exports have been disrupted.

Brent crude futures for April delivery fell $1.39 to $114.04 a barrel at 12:51 p.m. EST (1751 GMT), having fallen as low as $112.25.

U.S. crude futures for April delivery fell $1.71 to $100.99 a barrel, having fallen earlier to $99.01.

With the earthquake shutting some refineries in Japan, the U.S. front-month gasoline crack spread, or refining profit margin rose 43 cents to $24.55.

The heating oil crack spread rose $1.08 to $26.26 a barrel.

"From an oil pricing perspective, the situation in Japan is likely to result in a negative impact on crude oil prices and a positive for refined products," said Dominick Chirichella, senior partner at the Energy Management Institute in New York.

Brent's premium to the U.S. benchmark West Texas Intermediate crude rose 49 cents to $13.08 a barrel, after falling below $8 this week and reaching a record above $17 last week.

Japan was hit by a magnitude 8.9 earthquake, the largest since observations began in the late 19th century.

While the full extent of damage was still being assessed, analysts said the images and reports so far did not suggest a major economic and financial disaster.

"Crude oil futures have fallen sharply as a sizable portion of Japan's oil refinery capacity has been shut due to the earthquake and tsunami. Data from China showing higher inflation also added pressure," said Joe Posillico, broker at MF Global in New York.

Posillico said the question going forward would be, "how long Japan's crude oil demand will be affected."

MIDDLE EAST PROTESTS

Saudi Arabian police flooded the streets of the kingdom's capital to deter a planned day of demonstrations, while a small Shi'ite demonstration was reported in Hofuf, in the oil-producing Eastern province.

Riot police fired tear gas to break up a small, peaceful demonstration by stateless Arabs demanding greater rights in Kuwait, another key exporter.

Fighting continued in OPEC-member Libya. Rebels repelled a counter-offensive by leader Muammar Gaddafi's forces, but appealed to foreign powers to impose a no-fly zone to stop further attacks.

"Looking further forward it would be optimistic to expect Libyan oil production to return to normal levels this year," Lawrence Eagles with J.P. Morgan said in a research note.

Bahraini police blocked several thousand protesters from reaching the royal palace as the region continued to deal with spreading unrest.

Tens of thousands of protesters marched in Yemen's capital and protests turned violent in the southern port city of Aden.

(Additional reporting by Gene Ramos and Janet McGurty in New York, Ikuko Kurahone in London and Alejandro Barbajosa in Singapore; Editing by Marguerita Choy)

Copyright 2010 Thomson Reuters. Click for Restrictions.

Comments

[democrats for life]

12:08 PM on 03/14/2011

if there is no QE3, watch our markets tank

[ta8ersalid]

10:29 PM on 03/13/2011

Dont get too excited, $1.25 a barrel and we are calling this a decline? It is nothing more than a normal fluctuation after running the price up thru the roof.

Come back tomorrow, Monday 3-14, after the price goes up another $2 a barrel and explain how that happened.

We have a real serious cause for the price of oil to drop like a rock, but it wont happen.

The speculators are driving prices, not supply and demand.

Thsi will prove it.

3rd largest oil user !!

[Anabelle Lee]

11:12 AM on 03/13/2011

Korea Seals Largest-Ever Oil Field Development Deal with UAE
Korea has become the first country to make inroads into the United Arab Emirates' oil field development which has not been open to the international arena since the 1970s.
http://www.arirang.co.kr/News/News_View.asp?nseq=113665&code=Ne2&category=2

[Mister Grumpy]

01:40 AM on 03/13/2011

Crack Spread?........... the only crack spread the consumers are getting are located on their backsides..........

Even if the price of crude decreases.......... the cost of all refined products will increase dramatically............. that is a guarranty.............

[ta8ersalid]

10:30 PM on 03/13/2011

The least they could do is supply some lube.

[GorgyPorgy]

03:25 PM on 03/12/2011

Obama wants us to be paying the same as Europe, so he will do anything to raise the prices of fuel.

[ta8ersalid]

10:32 PM on 03/13/2011

Are you usually so wildly wrong?

Obama has re-election at stake by turning the economy around.

High gas prices is the #1 threat to that goal.

So, ask yourself, who would be interested in higher gas prices and a worse economy.

Drum roll........Republicans.

[loki]

07:13 AM on 03/12/2011

just proves Speculation controls oil prices and not supply and demand. If it was supply and demand, the prices would change when those things changed. Not when some greedy butthead on wallstreet wonders if it will.

[trumbull desi]

10:47 AM on 03/12/2011

They should just move Wall St. to Las Vegas and be done with it.

[InterinsicValue]

04:51 AM on 03/12/2011

It is interesting to note that if you measure the oil price in another currency, it has not risen as much. For example the Oil price in Yen is still cost at equivalent to $65 per barrel.

http://theintrinsicvalue.com/research/economic-impact-of-another-oil-shock

[loki]

07:22 AM on 03/12/2011

well the Japaneses leaders are not trying to change the very fabric of their country for the benefit of the ivy greed elitist.

[Morgantheaxe]

06:45 PM on 03/11/2011

Yep and republicans want to kill the law requiring flourescent light bulbs that save tons of energy. Republican governors want to drink in gas taxes while blaming Democrats for republican supporters own gouging.

[loki]

07:33 AM on 03/12/2011

are you kidding, they really want to kill Flo lights now? LOL..

[trumbull desi]

10:49 AM on 03/12/2011

Sadly, Loki, Morgan is right. They're going after energy savings lights, right after they reinstated styrofoam in the congressional cafeteria. Really meaningful stuff this congress is doing, huh?

[tjconkster]

05:40 PM on 03/11/2011

The price of a barrel of oil goes down....and the price of a gallon of gasoline goes up....this only makes sense to Wall Street Speculators.....Like Goldman Sachs....

Its a lengthy read....but Matt lays it out...

Matt Taibbi on Deluded Tea Partiers, Ayn Rand and How the U.S. Is Like the Soviet Union
Every country has scam artists, but only in a dying country are they part of the power structure.

http://www.alternet.org/teaparty/148941/matt_taibbi_on_deluded_tea_partiers%252C_ayn_rand_and_how_the_u.s._is_like_the_soviet_union?page=1

[Morgantheaxe]

05:46 PM on 03/11/2011

Yep, gas went up 20 cents in my area today. 3.49 when I drove this morning and 3.69 just now as I came home. This is why I love every single bad thing that happens to Wall St. The people responsible for this have no purpose in the life cycle of a gallon of gas. They are a private tax and thats it. People claim we couldn't get along without commodities markets. Thats a big lie. There is no reason at all to have these vampires between the suppliers and the the distributors. None what so ever other than their own self serving interests.

[loki]

07:25 AM on 03/12/2011

and if the price of gas does go down, it will only be a fraction of what it went up, and the media will do as they are told and praise it as a relief and a wonderful thing for all of us. Its like the old NeedlessMarkup sales. Double the price, put it on sale at 20% off, and call it a big sale!

[AgingLady]

04:30 PM on 03/11/2011

This is so weird. Clearly lots and lots of oil out there while squeezers let the price go UP. And now that maybe the demand will do down, prices go down. Haruumph. I am not impressed with how prices happen. Will watch at the local pump!!!

[interlude]

04:45 PM on 03/11/2011

It's interesting that pump prices all over town are almost identical.

[ILibertine]

11:23 AM on 03/12/2011

This has been in process for several years now in most areas I have noticed about the land. In uniformity we trust.

[blessedfrog]

03:41 PM on 03/11/2011

Won't Japan use a lot of oil in rebuilding the place?

[loki]

07:14 AM on 03/12/2011

not if your a speculator.

[Steve Rockett]

01:49 PM on 03/11/2011

Let's get off the oil teat once and for all.

[loki]

07:28 AM on 03/12/2011

Ive always wondered. Plastic is made of oil. There has to be a way to return some of it to a state where it can be used for gas. Just think of all the water bottles and foam dinner ware that go in landfills. If we could use it for petrol? We'd have 100 lifetimes of energy tomorrow. But I'm sure someone very powerful would decide that prices would have to increase to cover their insatiable desire for more and more profit.

[ta8ersalid]

10:38 PM on 03/13/2011

I saw a guy in Japan, of allplaces, showing a new investion that takes plastic and turns it back into oil, then can be refined into gasoline or diesel.

You would need to search youtube under water powered car, hydro powered car, etc..

[rascalcat]

12:48 PM on 03/11/2011

Didn't we have a President about 30 years ago that told us and had a plan for weening us off of foreign oil?
 
Whatever happened to that?
 
Oh, yeah, Reagan.

[LoneeU]

01:10 PM on 03/11/2011

NO it was NOT Reagan, it was President Jimmy Carter ..

[hrpmap]

01:19 PM on 03/11/2011

The department of energy was supposed to get us free of foreign oil and here it is many years later and we are still dependant on foreign oil and the department of energy, an obviously failed government agency is still here costing us Billions ervery year.  

[Jaskoen]

02:48 PM on 03/11/2011

I don't think you read that right.

[Laurie Allen]

01:43 PM on 03/11/2011

I'm pretty sure it goes all the way back to Kennedy!

[barbra1971]

12:58 AM on 03/12/2011

It goes all back to before every elections, after they enter white house the story changes... some magician has little talk with them and they change their outlook on this problem. That means: before anyone becomes president the way we see things is completely wrong, only after one becomes president somehow overnight that person becomes wise man.
Every wise person wants to live how long is possible.

[Howard Pearlman]

10:40 AM on 03/11/2011

You should have to take possession of all commodities. And you should have to pay full price for commodities. This would get rid of a lot of speculation.

[verycold]

11:49 AM on 03/11/2011

True, but then when you place puts and calls you really don't take possession either.  The entire investing world is based on short-term gains, and not long-term thinking.  So naturally we have lots of volatility.

[interlude]

05:00 PM on 03/11/2011

The investing world is based on short-term changes and long-term changes. Companies are often run by CEOs whose compensation depends on stock price. Look at them first. An example of this is Chain-Saw-Al. This is not to say that groups of investors haven't caused bad decisions to be made by CEOs in the name of short-term gains (or losses).

The idea of commodity traders having to take possession would certainly be game-changing.

[ta8ersalid]

10:41 PM on 03/13/2011

The real problem on Wall street is they let companies place put options on their word with nothing invested.

Investigate how they brought down Bear-stearns with millions of bogus put options and never had to ponie up any real cash.

[jabreal00]

10:19 AM on 03/11/2011

The commodities market is very opaque with very little transparency. It's rampant speculation that is the main engine for the wild fluctuation in oil prices. It's similar to the shell game that use to be the housing market before it crashed.