The House of Representatives’ passage of a $14 billion “stop-gap” loan to troubled U.S. automakers Chrysler and General Motors, as reported by CNNmoney.com, helped to stimulate a spike in crude prices that led to mid-morning increase in the retail price of heating oil. The first step toward what could be a larger bailout package for the “big three” American auto manufacturers combined with news of November production cuts in Saudi Arabia, anticipation of additional OPEC production cuts next week, Russia’s plans to cut production on par with OPEC, and the IEA’s prediction of recovering global oil demand in 2009 to drive crude and heating oil prices up 6.8% and 5.5%, respectively.

HEAT USA price experts expected the price increase to remain intact until the end of the day, and most likely into tomorrow.

HEAT USA Price Report

Average retail heating oil mid-morning price change: UP $0.08

Two pieces of good news sparked a bullish trend in crude and heating oil prices this morning, lifting crude by 7% and heating oil by 5%. Crude surpassed the $45 per barrel mark and rested at $46.60 at 9:55 am eastern time. The International Energy Agency predicted that world oil demand would grow again in 2009, contrasting with yesterday’s forecast by the U.S. Energy Information Administration, which had estimated a decrease of 450,000 barrels per day next year.

Oil prices were also buoyed by oil minister Ali al-Naimi’s announcement of Saudi Arabia’s output numbers for November: 8,493,300 barrels per day. The figure was in line with reduced production goals set in October by OPEC, and was significantly lower than the 9.05 million barrels per day estimated by the IEA. Prices were further supported by persistent expectations of another OPEC production cut to come out of the group’s meeting next week, as well as Russia’s announced plans to match OPEC cuts.

HEAT USA price experts confirmed a slight price decrease this morning coming after yesterday’s midday price hike, and predicted a moderate-to-large increase in tomorrow’s prices to come as a result of today’s news of production cuts and expectations of growing demand next year.

HEAT USA Price Report
Today’s average retail heating oil price per gallon: DOWN $0.02
Morning projection (for Friday’s average price per gallon): UP $0.05

After-hours trading drove the price for a barrel of crude down to $55.64, after it settled at $56.16 at the market’s close.  The price for a gallon of heating oil also dropped sharply, losing over 5% on the day and settling at $1.83.  Reduced predictions of oil consumption by the US EIA and IEA further intensified fears of a major worldwide recession.

“Fear global recession is worsening day by day is driving this market down.  Demand for oil is deteriorating week by week,” said Rob Laughlin, senior oil analyst at MF Global, quoted on CNBC.com.

HEAT USA price experts were pleased to announce a hefty drop in retail prices for tomorrow.

HEAT USA Price Report
Evening projection (for Thursday’s average retail price per gallon): DOWN $0.10

The price of crude fell 6% to its lowest price in 19 months, to $59.33 a barrel.  Heating oil followed suit, losing 4.5% to settle at $1.92 a gallon.  As mentioned in this morning price report, falling stock markets, a stronger dollar, and anticipation of the IEA’s prediction of reduced oil demand tomorrow all contributed to falling prices.

HEAT USA price experts were pleased to announce a moderate drop in retail prices tomorrow.

HEAT USA Price Report
Evening Projection (for Wednesday’s average heating oil price per gallon): DOWN $0.07

The price for a barrel of crude oil dipped below $60 and heating oil dropped below the $2 per gallon mark this morning.  Skepticism of China’s recently-announced economic stimulus plan’s effectiveness at stimulating oil demand as well as expectations of the IEA cutting its oil demand forecast for the third straight month led to market pessimism.  A strengthening dollar and falling stock market also contributed to lower oil prices.

HEAT USA price experts confirmed an expected small uptick in today’s retail prices and predicted a moderate decline in prices for tomorrow.

HEAT USA Price Report
Today’s average heating oil price per gallon: UP $0.03
Morning Projection (for Wednesday’s average price per gallon): DOWN $0.05

The International Energy Agency (IEA) released a report yesterday that predicted that crude oil prices would soon return to triple-digit levels. Although the IEA did not specify how quickly the price increases would occur, it predicted that the price for a barrel of crude would average $100 from 2008 to 2015, and $200 from 2008 to 2030 (source: The Wall Street Journal).

Although historically-low demand for oil associated with the global economic slowdown has driven prices down in recent months, the IEA predicted that when demand eventually returned, supply would be extremely slow to catch up. According to the report, an average of $350 billion a year in oil investment would be required to keep pace with demand through 2030. That would be a lofty goal, especially considering the dampening effect low prices are currently having on oil investments around the world. One example appeared yesterday in The Economist: to exploit the presumably massive oil reserves in the tar sands of Canada, the price of oil would have to be at least $90 a barrel to make the difficult extraction of the oil financially worth while to oil companies. Plans to begin excavating the oil sands have been put on hold until prices rebound. Furthermore, the extensive investment needed to boost worldwide oil production is made more difficult by the lack of available credit as part of the economic downturn. The combined effects of low oil prices and tight credit make the increasing of oil production by the necessary level (estimated by the IEA) of 64 million barrels a day in order to meet 2030 demand levels extremely difficult.

The only solution, as outlined by the report and quoted in the New York Times, is making major changes to worldwide consumption patterns: “‘Current global trends in energy supply and consumption are patently unsustainable — environmentally, economically, and socially,’ the energy agency said. ‘But that can — and must — be altered.’”