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Oil Hits 100$/Barrel

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From MarketWatch

SAN FRANCISCO (MarketWatch) -- Crude-oil futures hit the $100 mark Wednesday, surging more than $4 a barrel on expectations that U.S. crude inventories fell for a seventh consecutive week and on concerns that violence in Nigeria may cut output from Africa's biggest oil producer.

Crude for February delivery rallied $4.02 to $100 a barrel on the New York Mercantile Exchange in early afternoon trading. With energy futures trading broadly higher, the benchmark crude contract was last up $3.52, or 3.7%, at $99.50 a barrel.

"This is a bullish extravaganza," said Phil Flynn, vice president of futures brokerage Alaron Trading. "The market wants to believe that everything is bullish."

Crude inventories likely dropped by 1.8 million barrels in the week ended Dec. 28, according to a Dow Jones Newswires survey of analysts. The U.S. Energy Information Administration and the American Petroleum Institute will issue separate inventories reports at 10:30 a.m. Eastern on Thursday, a day later than usual because of the New Year's holiday.

In the Nigerian city of Port Harcourt, at least 13 people have been killed in attacks by gunmen on two police stations and a hotel, the BBC reported on Tuesday. Nigeria is the world's 12th-largest oil producer and ranks as the fifth-largest exporter of oil to the U.S.

On Monday, the crude contract ended last year's trading almost flat at $95.98 a barrel. Crude soared nearly 60% for 2007. See Monday's Futures Movers.

Worries on supplies

Analysts polled by Dow Jones Newswires also predicted that U.S. gasoline inventories are expected to have risen by 1.6 million barrels last week, while distillate supplies are pegged as having dropped by 300,000 barrels.

EIA reported last Thursday that the nation's crude inventories fell to 293.6 million barrels in the week ended Dec. 21, down by 3.3 million barrels to reach the lowest seen in nearly three years. U.S. crude inventories had fallen more than 20 million barrels since the week ended Nov. 9.

The U.S. is the world's largest crude-oil consumer, accounting for nearly a quarter of the world's production.

"If you look at the numbers today, the summer driving season looks really scary," says Alaron's Flynn. "But the good news for the drivers is the summer driving season is a few months away."

Flynn thinks oil will step back from the $100 level to trade in the $80-a-barrel range by then. "I think the big determining factor will be the weather over the next few weeks," he said.

Separately, a newly published report by Organization of Petroleum Exporting Countries, which controls about 40% of the world's oil production, indicates the cartel will be much harder pressed than previously thought to meet the world's surging oil needs and could realistically fail to supply its share of global oil markets by 2037, according to Dow Jones Newswires.

At a December meeting, OPEC chose to hold their members' production quotas steady despite mounting pressures from the U.S. The cartel will next meet on Feb. 1.

Worries over Nigeria, Pakistan

The violence in Nigeria, which is a member of OPEC, increased fears that supplies from the nation, already crippled by past militant actions, could suffer more disruption in the future.

A suicide bomb blast on a police station on Wednesday in Algeria, another member of OPEC, added more worries about crude supplies. At least four police officers were killed and 20 people were wounded in the bombing, the BBC reported, citing the country's interior ministry.

And in Pakistan, where tensions have risen sharply after the assassination of former Prime Minister Benazir Bhutto last week, elections originally scheduled for Jan. 8 have been delayed and will take place on Feb. 18, the BBC reported on Wednesday.

"It also appears the market may be building in more of a geopolitical risk premium," said John Kilduff, an analyst at futures brokerage MF Global, in a research note. "There are concerns that any delay [in Pakistan's election]will stoke violence and more turmoil."

The violence in Nigeria "raises concerns that a return to chaos could begin to disrupt international oil flows again," Kilduff added.

Also on Nymex, February reformulated gasoline surged 6.92 cents, or 2.8%, to $2.56 a gallon, and February heating oil soared 8.46 cents, or 3.2%, to $2.734 a gallon.

February natural gas rose 26.9 cents, or 3.6%, to stand at $7.752 per million British thermal units.

Elsewhere on the commodity markets, gold futures rose more than $20 to trade above $860 an ounce, as the rallying crude prices combined with U.S. dollar weakness and rising global political tensions to boost demand for the precious metal.

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Can I have my Volt now, Mr. Lutz?

Chris

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bullish? more like bull$h!.

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waaaay over speculated.

yeah the costs are high, but it's turning into a situation similar to the housing market.

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yeah the costs are high, but it's turning into a situation similar to the housing market.

If you're predicting falling prices and the eventual demise of big oil, I'll hire the DJ and the caterers. Someone else bring champagne and party favors.

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Well it's 100 dollars a barrel, that will bring gas in some markets close to 4 dollars a gallon for 87 octane. But there is something else at work that will make it go to 5 dollars a gallon, and that is the fact that the Saudis no longer want to base crude oil prices on the US Dollar, but on the Euro. They have already started to exchange Dollars for Euros. It seems the rest of the world is losing it's faith in the American Dollar.

Edited by Pontiac Custom-S
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I'm not predicting the fall of big oil. I'm not even predicting a decline in prices yet, but we're already in an unsustainable position. A good 20% of the current price is just inflationary speculation at this point.

There is going to be a point where one or two major oil producing countries are just going to say "screw it" and open up the taps while the money is great. Once that happens many of the other oil producers will start cheating as well.

My bets are on Russia.

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I'm not predicting the fall of big oil. I'm not even predicting a decline in prices yet, but we're already in an unsustainable position. A good 20% of the current price is just inflationary speculation at this point.

There is going to be a point where one or two major oil producing countries are just going to say "screw it" and open up the taps while the money is great. Once that happens many of the other oil producers will start cheating as well.

My bets are on Russia.

One problem with that bet, and his name is Vladimir Putin. He hates the US and is still fighting the Cold War. I wouldn't expect much oil from him.

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One problem with that bet, and his name is Vladimir Putin. He hates the US and is still fighting the Cold War. I wouldn't expect much oil from him.

I'm not putting any timeline on my bet..... I agree with you completely.

keep in mind, I work for a company that trades oil, natural gas, and electricity. we're fairly major in the industry.... and I have access to some of the best minds in the biz.

most of my speculations are coming from the traders.

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There is going to be a point where one or two major oil producing countries are just going to say "screw it" and open up the taps while the money is great. Once that happens many of the other oil producers will start cheating as well.

Come to Alberta, our taps are flowing with Oil just waiting for more foreign investment. :smilewide:

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Here is my theory, which may make sense of why oil is rising and why we will feel the pinch more than other countries.

Most of world's oil is traded in dollars. With the dollar tanking and with the fear that it is not an investment currency and thus being dumped, the price of oil has to go up in dollars, to sustain the profits ("greeds") of the oil producing companies. Otherwise they will not get the "return" to their investment in dollars and crude they want.

Now, the dollar has been tanking with respect to other countries as well. So the price increase of crude oil in dollars is offset by the loss of value of dollar. Take this example, Dollar stood at 44.23 Indian Rupees at begining of 2007 and the price of crude was about $55/ gallon. Let us say India bought 100 oil futures in dollars then. It paid 100*44.23*55 = Rupees 243,265 for those 100 crude futures. As of today Dollar is 39.45 Rupees, the price of oil is $99.0/ gallon, India is paying 100*39.45*100 = Rupees 394,500. This is an increase of 62.2%. But for us Americans price of crude oil jumped (99/55-1)% = 80%. So theoritically, India has a "net" gain in the investment of fuel prices. We thus feel more pinch than India will at the gas pump. But the question is why is India clamoring for loss of dollar? Because, India sells goods with dollars more than it buys, so if the dollar looses value, so will its profits erode.

Now going a step further, since our politicians and we cannot curb our spending greed, and our desire to save and invest despite of the economy slowin (slowed?) down, Uncle Sam has to pay interest on those treasuries and loans of close to 8 Trillion dollars he owes. How will he do it? By indirectly charging us more on our oil. Oil is a single commodity which we need even if it goes to $200/ gallon. It is a hidden tax which we are paying. Since our government does not have balls to tell our citizens to curb spending, this is indirectly novel way.

Upto a certain extent the CAFE may be thus a smoke screen, because Uncle Sam will need this more money he is getting from us for the oil. That is why the goal is set to 2020. Do you not think that three forthcoming presidents and 6 forthcoming congresses till that date may not overthrow or change this CAFE? I mean it is not part of the constitution and even constitution can be ammended.

Any thoughts?

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you know.... if the dollar wasn't in the dumps, it would still be more like $70 at most.

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I'm going with PCS on this one..I think gas prices are going to jump high and quickly....

Add the middle east issues and this could get very interesting....

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I'm not predicting the fall of big oil. I'm not even predicting a decline in prices yet, but we're already in an unsustainable position. A good 20% of the current price is just inflationary speculation at this point.

There is going to be a point where one or two major oil producing countries are just going to say "screw it" and open up the taps while the money is great. Once that happens many of the other oil producers will start cheating as well.

My bets are on Russia.

Doubt it.

Fear makes money now....and they plan to ride that wave for a while....

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Some are pointing out that if the U.S. does go into a heavy downturn/recession (and the odds are falling on this just about daily), demand for oil drops accordingly, so that should counter the wild speculation that we've been seeing these last 2 quarters. The new construction housing market situation has to be freeing up X-amount of barrels just by itself. I've heard numerous analysts predict a major backcut by the summer of '08... I guess we'll see.

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You know, this is depressing me about getting a Sierra in a year or two. I know I don't need to have a Sierra, but that's what I want. It's not the most practical choice, but it's something I've wanted for a LONG time. If I can't afford to gas it up, then I can't get what I want then. And I;m not comfortable in small vehicles, so the next 1-2 years will be interesting for me. :unsure:

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1st time it's broken the resistance at $100/barrel, so let's see how market psychology works: how low it goes in the next few days (to see where the bottom resistance level is on the downside), and how high it goes from there. Someone from Reuters was on the radio this morning talking about forecasts of $200/barrel in 5 to 10 years.

*grabs popcorn*

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From what I've read, it was one trader who bid over $100 a barrel. He immediately sold at a loss. just wanted to get his name in the history books as the first to bid over the magical $100.

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From what I've read, it was one trader who bid over $100 a barrel. He immediately sold at a loss. just wanted to get his name in the history books as the first to bid over the magical $100.

Well, that makes me feel all warm & fuzzy inside as I sock $60 a pop into my gas tank. I'm sure that trader is really hurting from selling "at a loss". :rolleyes:

It's nothing but @#$%^! legalized gambling that rules my life.

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Well it's 100 dollars a barrel, that will bring gas in some markets close to 4 dollars a gallon for 87 octane. But there is something else at work that will make it go to 5 dollars a gallon, and that is the fact that the Saudis no longer want to base crude oil prices on the US Dollar, but on the Euro. They have already started to exchange Dollars for Euros. It seems the rest of the world is losing it's faith in the American Dollar.

Nothing would be better long term for the economy than $5.00 per gallon gas.

We need to start conserving NOW. The problem for the dollar would not exist if we hadn't been sending so many overseas.

Chris

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Nothing would be better long term for the economy than $5.00 per gallon gas.

We need to start conserving NOW. The problem for the dollar would not exist if we hadn't been sending so many overseas.

Chris

Yes and no.

Conserving would be good....but gas at five bucks-everyone would need locking gas caps.... :(

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