Oil jumps 3 percent on supply worries
Thu Sep 27, 2007 3:36pm EDT
By Richard Valdmanis

NEW YORK (Reuters) - Oil rose sharply to $83 a barrel on Thursday as a weak dollar and supply worries ahead of the winter heating season encouraged buying by financial investors.

U.S. crude settled up $2.58 or 3.24 percent at $82.88 a barrel after reaching as high as $83, bringing it within sight of last week's record $83.90. London Brent was up $2.60 at $80.03.

"Funds are flowing into the global commodity markets with the dollar continuing to weaken," said Andy Lebow, analyst at MF Global. "This is a macro-economic move and speculators think this will continue."

The dollar fell briefly to an all-time low Thursday on concerns over a slowdown in the U.S. housing sector. The weak dollar, which can strengthen the nominal value of commodities traded in the currency, also boosted metals prices.

"In non-dollar terms the rise in crude oil is more manageable and takes the wind out of the sail of people who say it's over-priced," said Stephen Schork, editor of The Schork Report.

Meanwhile, government data showing a drop in U.S. jobless claims last week reinforced the impression the economy of the world's largest energy user remained resilient.

Oil experts are concerned that continued robust demand in the United States and other consumer nations could tighten up world stockpiles when cold weather hits.

U.S. distillate supplies, which include heating oil, are running more than 7 percent below year-ago levels, helping fuel a more than 3 percent rise Thursday in New York heating oil futures (HOc1: Quote, Profile, Research).

The Organization of Petroleum Exporting Countries agreed earlier this month to hike oil output by 500,000 barrels per day to soothe fears of a winter crunch, but many traders said the increase was too little.

Ongoing jitters over supply disruptions during the rest of the hurricane season were also supporting gains, dealers said, after a tropical depression last week briefly cut more than 60 percent of U.S. oil production from the Gulf of Mexico in the heaviest blow to the region's output since 2005.

Mexican state oil company PEMEX said on Thursday it did not expect a tropical storm in the Bay of Campeche to impact offshore oil production or damage rigs.

Analysts said the backwardated structure of the oil curve -- where prices for nearby delivery are higher than those for delivery farther out in the future -- was also luring financial investors into oil.

"For the financial players, it's a no-brainer. You buy the front (month) and then roll and collect every month. You can print money," said Michael Wittner, analyst at Societe Generale.

Meanwhile, in Nigeria, gunmen disguised as soldiers killed one foreign oil worker and abducted another on Thursday -- underscoring the supply risks from the world's eighth largest oil exporter.

(Additional reporting by Damon Evans in Singapore and Santosh Menon in London)


© Reuters 2006.
http://www.reuters.com/article/hotStocksNews/idUSSP10407020070927  

--Last edited by rzero on 2007-10-12 17:22:09 --

No end in sight.  12 months from now it'll probably be $112+ a barrel; maybe more.

Oil Rises to Record on Concern Turkey May Invade Northern Iraq

Oct. 12 (Bloomberg) -- Crude oil rose to a record $84.05 a barrel in New York on concern Turkey may seek to quell Kurdish rebels by invading northern Iraq, a country with the world's third-largest oil reserves.

Turkish Prime Minister Tayyip Erdogan told reporters his country would pursue the Kurdistan Workers Party, regardless of diplomatic costs, according to an Agence France-Presse report. Northern Iraq holds some of the country's largest oil fields, including Kirkuk, the source of much of Iraq's exports.

``That's been the trigger, though physically, realistically, I think it doesn't have any possibility of affecting crude supply,'' said Kyle Cooper, director of research at IAF Advisors in Houston. ``It's a good headline.''

Crude oil for November delivery rose 61 cents, or 0.7 percent, to close at $83.69 a barrel at 2:50 p.m. on the New York Mercantile Exchange, a record settlement. Earlier, the contract touched $84.05, the highest since futures began trading in 1983.

Nymex futures were up $2.47, or 3 percent, this week. They are up 37 percent this year.

Today's intraday high was less than a dollar from the all- time inflation-adjusted high reached in 1981 when prices jumped because Iran cut oil exports. The cost of oil used by U.S. refiners averaged $37.48 a barrel in March 1981, according to the Energy Department, or $84.73 in today's dollars.

Commodity traders wield a greater influence on oil prices than Saudi Arabia and the world's other big suppliers, U.S. Energy Secretary Samuel Bodman said today.

``The suppliers, to some degree, have lost control of the pricing,'' Bodman told reporters in Washington.

Traders, Pricing Control

Markets can move more on emotions than the fundamentals of supply and demand as traders take greater control of prices, Bodman said.

``It's all about money flow,'' IAF's Cooper said. ``There is money and lots of it chasing commodities and thus prices are moving higher.''

Brent crude oil for November settlement rose 40 cents, or 0.5 percent, to close at a record $80.55 a barrel on the London- based ICE Futures Europe exchange. Brent was up $1.65, or 2.1 percent, this week.

Turkey's government will present a bill to parliament by next week authorizing a possible incursion across the border within a year, Erdogan said Oct. 10. Turkey said this week it would launch a crackdown on the Kurdistan Workers Party, or PKK, after rebels killed 15 soldiers in southeastern Turkey. That's the region of a two-decade war with the autonomy-seeking PKK in which about 40,000 people, mainly Kurds, have died.

Saudi Arabia has the world's largest reserves of crude, followed by Iran and Iraq. Iraq produced 2.075 million barrels of crude oil a day in September, according to Bloomberg estimates.

Effect on Supply

``At the end of the day, even if Turkey does cross the border, it's not going to mean anything to the supply of oil,'' said Addison Armstrong, director of market research at TFS Energy LLC in Stamford, Connecticut.

U.S. crude oil inventories fell 1.67 million barrels to 320.1 million barrels in the week ended Oct. 5, the first decline in three weeks, a U.S. Energy Department report showed yesterday.

In Cushing, Oklahoma, the main U.S. supply depot, inventories rose 1.1 percent to 18.6 million barrels, the second straight weekly increase, the report showed. Supplies fell to their lowest since December 2005 in the week ended Sept. 21.

``Yesterday was a pretty dramatic day'' on the Nymex, Armstrong said. Some people think ``the move was unjustified given that crude inventories at Cushing rose. It is reasonable to expect a little bit of a pullback.''

Oil May Fall

Crude oil may decline next week on speculation that higher output by members of the Organization of Petroleum Exporting Countries and falling demand will bolster stockpiles.

Twenty-one of 35 analysts surveyed, or 60 percent, said oil prices will fall through Oct. 19. Eight, or 23 percent, said prices will rise and six said there will be little change. Last week, a record 75 percent of respondents said oil would fall.

OPEC's daily shipments of crude oil will rise 2.8 percent in the four weeks to Oct. 27 from the previous month, consulting company Oil Movements said. The group will load 24.49 million barrels a day, up from 23.82 million.

``As OPEC is rewarded with oil in the low-to-mid $80s, they have all the incentive to pump it and get it shipped out,'' said James Cordier, president of Liberty Trading Group in Tampa.

A two-day oil workers strike in Nigeria was called off yesterday without affecting exports from Africa's largest oil producer.

http://www.bloomberg.com/apps/news?pid=20601087&sid=apUGY2_an2OE&refer=home

Oil reaches new records above $87
Oil prices have hit record levels above $87 a barrel amid tensions between Turkey and Kurdish rebels in northern Iraq and output concerns.
In European trading, US light, sweet crude rose as high as $87.97 a barrel before easing slightly to $87.55 while Brent crude surged again to $83.99.

The continued upward curve followed reports that Turkish forces had shelled an Iraqi border village in recent days.

With global supplies tight, any threat to oil output is likely to hit prices.

Economic impact

The Turkish government is preparing a motion seeking parliamentary approval for a military incursion into northern Iraq after 13 Turkish soldiers were killed close to the Iraqi border.

Ankara estimates that 3,500 Kurdistan Workers' Party (KWP) rebels - who want to see the establishment of an independent Kurdish homeland - are based across the border in Iraq.


All the factors in the market are bullish
Tetsu Emori, Astmax Futures  

Analysts said Turkey's decision to ask for permission to pursue Kurdish rebels into Iraq fuelled fears that hostilities would disrupt oil supplies.

"Whenever there is any escalation in political tensions in the Middle East, oil markets become concerned," said a commodity strategist at the Commonwealth Bank of Australia.

Oil prices have quadrupled since 2002 due to demand from fast-growing economies such as China and India, allied to instability in oil-producing nations in the Middle East and Africa.

The cost of oil is still below the inflation-adjusted level of about $90 a barrel seen in 1980 when spiralling prices helped contribute to a recession in the US.

Analysts are divided over where prices will head next, although most believe the upward pressure on prices - driven by concern about the availability of supplies - is set to continue.

Predicting the future

Further pressure on supplies came with news that oil producers outside the Opec cartel were to reduce output by about 110,000 a day.

Last month, Opec said that it would be boosting its production by 500,000 barrels per day from the beginning of next month to cope with resilient global demand for oil.

However, it has since added that demand for oil this winter in the US - the world's largest consumer of heating oil - will be stronger than previously thought.

"It is very difficult to say what will happen next," said Tetsu Emori, commodity markets fund manager at Astmax Futures.

"All the factors in the market are bullish. There are no bearish factors except maybe that the market looks like it has been overbought, technically."


Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7046348.stm

Published: 2007/10/16 13:27:05 GMT

© BBC MMVII

Ugh, $90 a barrel and likely $100 by year's end.

January 2th 2008: Oil $98.92 Gold $ 861.60

From the nuts at TB2K:

ALERT - Spot oil breaks $100 a barrel

--------------------------------------------------------------------------------

On CNBC Now. First time ever for $100 Oil. Spot Market Quote..

http://www.timebomb2000.com/vb/showthread.php?s=af397124353a1fa2683909aefe5ea93c&t=271293

Its gonna be one helluva year.

Jan. 2 (Bloomberg) -- Crude oil reached $100 a barrel and gold soared to a record, leading a surge in commodities as the dollar's slump against major currencies enhanced the appeal of raw materials as hedges against inflation.

http://bloomberg.com/apps/news?pid=20601087&sid=aHLvQJvlNIuM&refer=home