Oil Hits 7-Week Low as Inventories Build ($50.60)

[RamboLiberal]

http://news.yahoo.com/news?tmpl=story&u=/nm/20050413/bs_nm/markets_oil_dc_7

Oil fell to a seven-week low near $50 on Wednesday, after the U.S. government reported a ninth straight weekly rise in crude inventories, and a build in gasoline stocks ahead of summer.

U.S. crude oil futures slid $1.26 to $50.60 a barrel, deepening Tuesday's 3 percent decline and hitting the lowest level since February 22. London Brent was down $1.08 at $50.90.

Prices have fallen around 13 percent from last week's record high above $58 a barrel on rising production from Saudi Arabia and signs that a two-year acceleration in global demand growth is finally beginning to ebb.

The latest decline came as the U.S. government's Energy Information Administration said crude inventories, already at the highest level in nearly three years, rose another 3.6 million barrels to 320.7 million.

[mhr]

1. Temporary Lull - I Assure You

The march forward will be with ever rising prices.

For those still looking for 99 cent gasoline again, keep dreaming!

[customerserviceguy]

3. No, 99 cent gasoline

is not coming back, that's for sure. But sub-$2 pricing probably will. I think the current rise in the price is speculators trying to goose a profit out of suckers who will flood into the commodities market for oil. What else would explain the $100 a barrel crap that came from Goldman Sachs? They make an assload of money from speculators.

[mhr]

4. Disagree Completely - Peak Oil Is Real

eom

[customerserviceguy]

6. I think that's just wishful thinking

on your part. The higher the oil price goes, and stays, the more resources that were unprofitable to tap become tappable. That will bring about a new equilibrium in the supply of oil, admittedly at a higher price.

I remember the diamond and silver bubbles of 1979-1980, maybe you don't. They were during a high period of oil price (and general) inflation, and interest rates were rising, as well. Those bubbles were caused by those who wanted one last shot at getting new suckers in, as they were cashing out.

[mhr]

7. I Think Denying Peak Oil Is Wishful Thinking On Your Part

We will have to agree to disagree.

[cliss]

9. One problem: increase in demand.

I think we can all safely assume that as the price of something goes up, demand decreases. On the supplier side, as the price of something goes up, efforts will be made to increase supply. This should create some kind of equilibrium in the market, based on the demand and supply curves intersecting at some point.

So as the price of oil moves into the stratosphere of $60.00 per barrel, old dried-up oil wells will be dusted off and started up again. Saudi Arabia will be hard-pressed to pump even more out of the ground.

These factors alone should cause the price to go down. But there's one fly in the ointment: China and India. They are just arriving at the Party, and they'd like some of that Precious Black Gold, thank you. That's what's going to push the equilibrium price up, even when other factors push it down.

And the analysts at Chevron and Conoco know this damn well.

[Strelnikov_]

14. Agree. Probably Some Demand Destruction Effects

Also, there are a few (of the last?) mega-projects supposed to be coming on line about now.

Myself, I expect continuing price spike cycles as we have seen with ever increasing price peaks.

As for EOR/Technology mentioned by other respondents, my reading indicates that EOR has been ongoing for the last few years, and the extraction technology we have now is about all there ever will be.

I just hope this lull lasts a few more years. I need more time to prepare.

[Javaman]

17. Oil is on the march! oh wait, Freedom yeah yeah freedom is on the...

Oh whatever...

[hector459]

18. But the point is that prices at the pump will never go lower and PROFITS

for the oil companies will be a windfall.

[Rob H.]

2. Which means it'll take three weeks for gas to go down 2 cents/gallon

And then when there's an upward blip in crude prices it'll go up 10 cents a gallon overnight.



(Of course I'm speaking hypothetically--it just seems like that's the way it always works. I don't actually expect the price to go down, and given that I live a whopping 4 miles from where I work I can't complain too much.)

[NashVegas]

5. There's Nothing Hypothetical About It

Two weeks ago, when it was at $54, I paid 2.23 per gallon. Three days ago, 2.34

[Mr.Green93]

8. Good

now there is no need to drill ANWR.

[Rockerdem]

10. Ive cut back my driving - I hope they choke on their stuff

Everyone I know is cutting back. Two have bought gas sippers like mine. It doesn't take much excess to make their tanks overflow with excess inventory. May they drown in it, the bastards.

[naderzenithnow]

13. problem is the speculators are here to stay.

Any positive news on the economy will goose oil again and head off any rise in the stock market and choke economic growth also. The glut of commodity speculation has made the oil market extremely tight. We should expect extreme volatility from here on into the foreseeable future. We'll definitely see $100 barrels within a year whether warranted or not

[Javaman]

11. Okay, so if the price per barrel has gone down in the past 3 days...

How come the price at my local pump here in Texas has gone up 12 cents in the past 3 days?

[Almost_there]

16. Its a pipeline issue..

Not pipeline as in Alaskan, pipeline as in oil is NOT sold for today, it is sold for a 3 month contract, right now, you are at a minimum buying May, June & July's contracts. So, the oil is 'bought' in 40 gallon barrels out of the ground today, then, it has to hit the pipeline to travel from the gulf or wherever, transit to the US or wherever, come to port, go to cracking facilities, then come to the pump. So, this isn't a price falls on oil today, falls in the pump tomorrow.

It takes several weeks before the stations lower prices to A) take advantage of customers, and B) to let the gas they bought at contract high prices be sold and replaced by lower. Is this a peak? I don't think so at all. Goldman Sachs was totally full of crap when they spewed that 105 "superspike" garbage, they lost a lot of credibility, that was simply 1 analysts' take on things, they usually use best case, worst case and middle, this guy was fringe.

Prices should settle somewhere around mid 30's AFTER the summer demand season. You'll also notice China's demand begin to fall in a few months as their inventory is getting built WAY up, and the huge building boom they hit is hitting a brick wall. They can't sustain growth like that, look how many started and unfinished projects there are in China, they have been abandoned forever. Oil will settle, at least I think according to what I've read, seen in Asia (been there, done that) and am inferring from the commodities markets.

~Almost

[TexasLawyer]

12. crude inventories-- and some questions

"The latest decline came as the U.S. government's Energy Information Administration said crude inventories, already at the highest level in nearly three years, rose another 3.6 million barrels to 320.7 million. "

Why are crude inventories at the highest level in nearly three years? This has to mean oil is being purposely kept OFF the market to drive up prices.

Also, why has Bush been actively FILLING the Strategic Petroleum Reserves throughout this whole price spike disaster? Filling the SPR also takes oil OFF the market, which oil otherwise would have been sold into the market to lower prices generally.

(Through exchanges, much of the oil flowing into the SPR is royalty oil taken "in kind" from oil producers leasing MMS-administered offshore and outer-continental shelf lands in the Gulf of Mexico and elsewhere. So this is our own domestic U.S. oil that's being taken off the market in massive quantities.)

I have my own pet theories, but one of them is NOT that the world is running out of oil (yet).

This is just an old-fashioned rip -off.

[Strelnikov_]

15. Reports Indicate The SPR Will Be Filled By The End Of June, Just In Time

for when war closes the Strait of Hormuz following Israels attack on Iran's nuclear infrastructure.

As for price, this is just the typical commodities market acting on a perceived (demand or supply driven) shortage for a commodity.

[Almost_there]

19. Inventory from EIA is not SPR

The numbers in the Energy Information Administration are NOT Strategic Petroleum Reserve, the numbers used in this report are for inventories at refinaries and public storage locations, such as tank farms, off ship sites, etc. The 320.7 mb number is for oil (sweet for gasoline, hazmut (I think its called that) for plastic production, and sour for industrial applications such as heavy burners, lubricants, greases) that is sold to the public, not the SPR. SPR links are here
http://www.fe.doe.gov/programs/reserves/spr/spr-facts.html
http://www2.spr.doe.gov/DIR/SilverStream/Pages/pgDailyInventoryReportViewDOE_new.html
which shows the SPR is at an all time high in barrels, but, not in days of reserve. Plus, the gov't has deals to buy oil at such a slow, measured pace it really doesn't affect global prices much at all, which is why they also get such low prices.

And the SPR is constantly filling and draining if I recall from years ago of learning about commodities trading. The problem is also that some OPEC countries could care less about the rest of the world getting pinched, perhaps because they simply see their coiffers being filled, not realizing that when the spike ends, the money slows, and when their oil reserves dry up, or people start to buy better cars, get hydrogen cars, planes become fuel efficient, the demand will drop, and who wants to contemplate the end of the only thing your country produces?

~Almost