Category Archives: Oil&Gas

Oil settles near $48 on auto vote

Oil settles near $48 on auto vote

Passage of the $14 billion measure to aid carmakers helps boost sentiment about economy, but threatens weaker dollar.

By Kenneth Musante, CNNMoney.com staff writer

Oil prices jumped Thursday after the House passed a $14 billion stop-gap measure designed to keep the U.S. auto industry from immediate collapse.

U.S. crude for January delivery rose $4.46 to settle at $47.98 a barrel in New York. It rose to a high of $49 a barrel earlier in the session.

The House passed a bill that would provide $14 billion in loans to automakers General Motors (GM, Fortune 500) and Chrysler, and keep them out of bankruptcy until at least March. Ford Motor (F, Fortune 500), which is in better shape cash-wise than its counterparts, is not part of the $14 billion plan.

The measure, which still faces a vote in the Senate, could prevent a large blow to the economy of the world’s largest oil consumer.

An auto bailout has been largely priced in to oil, but a collapse of the U.S. auto industry “would result in a very painful [price] correction, not only in crude oil, but also in the equity markets,” said Chris Lafakis, associate economist with Moody’s Economy.com.

The U.S. auto industry employs about 2 million workers, according to the Center for Automotive Research. That total includes GM (GM, Fortune 500), Ford (F, Fortune 500) and Chrysler workers, as well as dealers and workers at parts manufacturers.

In urging Congress to pass the auto bailout, the White House cited jobless claims, which jumped to a 26-year high last week, according to the Labor Department.

Falling dollar: Oil prices also got a boost Thursday as the value of the U.S. dollar fell versus other major currencies.

The dollar slipped against the 15-nation euro, British pound and Japanese yen.

“We’re seeing concerns that all these bailouts are going to lead to more interest rate cuts and a weaker dollar,” said Phil Flynn, senior market analyst with Alaron Trading in Chicago.

A weaker dollar makes oil (which, like other commodities, is demoninated in dollars) cheaper for foreign investors, which spurs buying.

OPEC cut: Investors are also looking for a large cut in production from the Organization of Petroleum Exporting Countries, an international trade cartel whose members produce about 40% of the world’s oil, when it meets next week in Algeria.

Due to falling worldwide demand, crude prices have plummeted more than $100 a barrel since hitting a record high of $147.27 in mid-July.

The deep cut in prices has raised serious concerns for many OPEC members who rely on oil profits to fuel their domestic economies. more

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The Downturn Hits Dubai

The Downturn Hits Dubai

With plummeting oil prices causing the Persian Gulf economy to shrivel, Dubai’s push to become a global financial hub is in jeopardy.

For a year or so, the movers and shakers of the small but oil-rich United Arab Emirates have watched the unfolding of the credit crisis in the West with a mixture of dismay and denial. It won’t happen here, was their view. And for a long time it didn’t. But now it is. The price of oil, the lifeblood of the Persian Gulf economy, has fallen more than 60 percent since its mid-July peak. Real estate, the other mainstay, especially in oil-poor Dubai, has been quick to follow. An industry source in Dubai estimates that prices, which rose about 14.4 percent in the first eight months of this year, have suddenly dropped by 20 percent to 30 percent, with some developments seeing 50 percent declines.

With prices for villas and apartments falling and sales grinding to a halt, big developers such as Nakheel, which is building the iconic palm frond-shaped projects on fill dredged from the sea bottom, are halting construction and laying off staff. Jobs, though on a lesser scale, also are being lost at investment banks such as Morgan Stanley and Goldman Sachs, which have seen the Gulf as one place business was not drying up. They are now trimming staff, to the alarm of the local authorities, who have staked their future on the Gulf’s becoming a global financial center.

A chill wind is blowing through the Gulf. Credit has dried up; stock exchanges have crashed; and the region’s once-vaunted Sovereign Wealth Funds, set up to save for a future when oil reserves are exhausted, have instead sustained huge losses, potentially in the hundreds of billions of dollars.

War Council

The diciest situation is unfolding in the UAE, where the sheikhs of Dubai — the second-largest of seven emirates — are at last realizing that they need to call time on a decade-long, debt-fueled building and acquisition spree. That admission came most explicitly in the recent naming by the ruler of Dubai, Mohammed bin Rashid al Maktoum, of what looks like a war council composed of nine of the top executives of what is known as Dubai Inc. That’s the network of companies such as Dubai World, Emirates Airline, and Dubai Holding that are controlled by the ruling family and the government. “Yes, we recognize the new reality,” said the Council’s Chairman Mohamed Alabbar on Nov. 24. “Make no mistake.” more

Oil retreats on economic concerns

Oil retreats on economic concerns

Crude futures remain in low $50s range as investors ponder weak U.S. reports.

SINGAPORE (AP) — Oil prices fell to near $53 a barrel Thursday in Asia as dismal U.S. economic data and rising crude inventories outweighed the possibility of production cuts by OPEC and Russia.

Light, sweet crude for January delivery was down $1.18 to $53.26 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.

Prices have hovered just above three-year lows this week as bad economic news painted a bleak picture of U.S. demand for crude.

The Commerce Department on Wednesday said orders to U.S. factories for big-ticket manufactured goods plunged in October by the largest amount in two years. The 6.2% drop was more than double the 3% decline economists expected.

The department also said Americans cut their spending in October by the largest amount since the 2001 terrorist attacks. Consumer spending plunged by 1% last month, worse than the 0.9% decline that had been expected.

The fall in consumer spending has shown up in rising oil and gasoline inventories. For the week ended Nov. 21, crude stocks jumped by 7.3 million barrels, the Energy Department’s Energy Information Administration said in a weekly report Wednesday. Analysts had expected a boost of only 400,000 barrels.

Gasoline inventories rose by 1.9 million barrels. Analysts expected stockpiles to rise by only 300,000 barrels

“It looks like $50 is a support level,” said Gerard Rigby, an energy analyst with Fuel First Consulting in Sydney. “But when it gets up to $54, people take profits. No one wants to get too bullish.”

Prices have fluctuated between about $50 and $54 a barrel this week as investors grapple with the impact the global economic slowdown will have on crude demand.

The contract overnight rose $3.67 to settle at $54.44 on expectations China’s biggest interest rate cut in 11 years – and the fourth in three months – will boost growth and demand for oil in the world’s second-largest economy.

“People are still confused about the overall global economic situation,” Rigby said. “Traders were looking for supportive news, so they looked to the China rate cuts.”

“But for the next few months, everyone is going to be worried about the U.S. economy since it’s still the largest in the world,” he added.

Expectations of a production cut by the Organization of Petroleum Exporting Countries has helped support prices. OPEC, which accounts for 40 percent of global supply, will hold an informal meeting Saturday in Cairo and an official meeting Dec. 17 in Algeria.

Some OPEC members, such as Venezuela, have called for the group to reduce output quotas by 1 million barrels a day at the Cairo meeting, while OPEC President Chakib Khelil has said the organization needs more time to evaluate the effect of previous production cuts.

The group cut output by 1.5 million barrels a day last month.

“I wouldn’t be surprised if they announce a cut this Saturday,” Rigby said. “Anything they can do to get prices back up, they will. It will have to be between 500,000 and 1 million to get the traders interested.”

Investors will also be eyeing Russia to see if the oil exporter joins OPEC in cutting output. Russian Energy Minister Sergei Shmatko said this week his county will support any production cut OPEC makes.

“They may talk about it, but I’d be surprised if they actually did it,” Rigby said. “Russia wants all the benefits of what OPEC does to boost prices, but I don’t know if they really want to cut their production and their revenue.” more

Oil prices at near 22-month low

Oil prices at near 22-month low

Crude and gasoline inventories rise in the latest week, according to government reports.
By Kenneth Musante, CNNMoney.com staff writer

NEW YORK (CNNMoney.com) — Oil prices fell to a nearly 22-month low Wednesday after a government report showed a bigger-than-expected rise in crude inventories, reinforcing concerns that demand for petroleum products is waning.

U.S. crude for December delivery fell 77 cents to $53.62 a barrel. The last time prices were this low was January 2007. Just before the report, the contract – which expires Thursday – was up 63 cents at $55.02.

The Energy Department said crude supplies rose by 1.6 million barrels in the week ended Nov. 14. Analysts had expected to see a rise of 1.2 million barrels of crude oil, according to energy research firm Platts.

An increase in crude stocks was largely expected, but the lack of any surprises backs up the idea among investors that demand for oil is on the decline, according to Stephen Schork, publisher of energy trading newsletter The Schork Report.

“We are in a well-defined bearish market, and this report is bearish by default,” said Schork.

The government also reported that supplies of gasoline had risen by 500,000 barrels, and stockpiles of distillates, which are used to make diesel fuel and home heating oil, fell by 1.5 million barrels.

Analysts had expected to see a 700,000 barrel rise in gas supplies, and a 900,000 barrel rise in distillates.

Meanwhile, the rate at which refineries were operating last week rose 0.3 percentage point to 84.9%, the opposite of the 0.3 percentage point decline that had been expected by analysts polled by Platts.

Falling demand: Concern about demand for petroleum products has driven crude oil prices down from a record high of $147.27 a barrel in mid-July. The decline has also slashed the price of unleaded gasoline in half since July to $2.047 a gallon, motorist group AAA reported Wednesday.

“People [are] cautious about crude after the monster pull-back [since July],” said Tom Orr, head of research with brokerage Weeden & Co. in Connecticut.more

Oil appetite in Middle East to soar

Oil appetite in Middle East to soar

Tamsin Carlisle

The Middle East may overtake China as the biggest contributor to global oil demand growth, according to a leading international investment bank.

Noting that China