Fears that Israel’s ground and air campaign against Hamas in Gaza could disrupt future oil supplies from the Middle East continued to dictate the mood of the market today, lifting crude and heating oil prices by 4.5% and 6%, respectively. Crude oil closed the day at $48.81 a barrel on NYMEX. Last week’s announcement by the U.S. Department of Energy that it would resume buying oil for the Strategic Petroleum Reserve also contributed to rising prices by building anticipation of stronger U.S. demand and reduced domestic supply. Russia’s natural gas supply line to Ukraine remains cut off as a result of a contract dispute between the two nations, which also contributed to higher oil prices as European traders continued to question Russia’s reliability as an energy supplier.
HEAT USA price experts were disappointed to announce another large increase in retail heating oil prices as the markets turned in another round of sharp price increases in oil-based commodities.
HEAT USA Price Report Evening projection (for Tuesday’s average retail heating oil price per gallon): UP $0.11
In 1975, after the tense days of the Middle Eastern oil embargo, Congress passed the Energy Policy and Conservation Act. One part of this act was to create a Strategic Petroleum Reserve–a massive quantity of crude oil owned by the government and stored on U.S. soil–that could be used to alleviate shortages and depress prices in the event of a major disruption of foreign oil supplies.
Schematic drawing of a salt cave storage reservoir for the SPR
The Strategic Petroleum Reserve (SPR) exists in the form of several salt caves located near the Gulf coasts of Texas and Louisiana. The reserve is intended to hold a maximum of 1 billion barrels of crude oil, and currently holds 702 million barrels (97% of its 727 million barrel capacity). Based on current oil consumption levels in the U.S (21 million barrels a day), the reserve holds a roughly 33-day supply of oil. However, estimates put the maximum withdrawal capability at 4.4 million barrels a day (Wikipedia)–a rate which has never been tested–so the actual availability of the oil in the SPR is highly questionable. According to the Energy Policy and Conservation Act, oil may be released from the reserve to prevent an “economic dislocation” similar to the economic crunch caused by the 1973-1974 embargo–although the specific requirements for release are unclear, as the term “dislocation” is not clearly defined in the text of the bill.
Photo of empty SPR salt cave storage reservoir
As oil prices began to skyrocket last Spring Congress, believing the purchase of expensive oil to be an inefficient use of government funds, hastily passed a bill halting purchase of new oil for the SPR until the end of the 2008 calendar year. After initially opposing it, President signed the bill into law on May 19, 2008.
The SPR re-entered the news last Friday, when the Department of Energy announced, following the expiration of the congressionally-imposed moratorium, that it would resume purchasing oil for the reserve. Although the existence of and use of oil contained in the SPR are not major hot-button issues, they are somewhat controversial. The DOE’s recent announcement elicited commentary from two prestigious oil experts on opposite sides of the political spectrum:
Eric Bolling, a former commodities trader and member of the NYMEX board of Directors and current co-host of the conservative news show “FOX Business Happy Hour,” applauds the DOE’s decision in an opinion piece on Foxnews.com. Bolling argues that current rock-bottom prices (the lowest in five years) for crude oil are a “gift” that our government should take advantage of by filling the SPR to the brim. He asserts that filling the SPR will help assure affordable gasoline and other crude products in the near future. Bolling warns that the three anti-American “thugs” that are heads of state in oil-producing nations (President Chavez of Venezuela, President Ahmadinejad of Iran, and Prime Minister Putin of Russia) will do anything to drive up the price of oil, and is certain that an SPR full of cheap oil would protect against any drastic action the “thugs” might take. He cites the Russian government’s (under then-president Putin) dissolution of the Russian oil giant Yukos en route to creating the national oil and gas monopoly Gazprom as an example of Russian action that resulted in a spike in oil prices. President Obama should not tax oil companies, Bolling advises, and should continue to purchase oil for the SPR–an important investment in our country’s short-term economic stability.
Former commodities trader and author of Over a Barrel: Breaking Oil’s Grip on Our Future Raymond J. Learsy expresses an opposite view in a blog posted on the liberal news site HuffingtonPost.com. He makes his case with pointed language, making the argument that, “in essence, the SPR has become a welfare program for the oil industry.” Learsy opines that the DOE’s recent announcement is one more development in the Bush Administration’s history of offering direct and indirect support to the oil industry that has helped consistently inflate oil corporations’ profits. He argues that rumors of the DOE’s decision and it’s official announcement last Friday were direct causes of the sudden rise in oil prices at the end of 2008–the largest one-week (December 29th to January 2nd) price increase since 1986. As a previous example, Learsy notes that in January of 2007, oil prices were on the decline and turned around only after President Bush called for a doubling of the size of the SPR in his State of the Union Address. During these dire economic times, Learsy argues, federal funds should not be used to further boost profits of oil companies, and the partisan decision-makers in the Department of Energy should be given the boot.
The price of heating oil had risen 2.5% and the price of crude had gained 1.7% to $47.14 a barrel as of 9:52 eastern time this morning on NYMEX. The armed conflict in Gaza continued to lead the market following the Israeli ground invasion that began on Saturday. Fears that the conflict could lead to reduced oil exports from the region intensified as “an Iranian military commander called for Islamic producers to cut supplies to Israel’s supporters in Europe and the United States, the official IRNA news agency reported on Sunday.” However, an OPEC source told the Reuters news agency that the Iranian’s comments did not reflect the intentions of the cartel and assured that there were no supply cutbacks in the works, according to CNBC.com. Nevertheless, instability in the region continued to startle investors who believed supply disruptions could be imminent as the fighting in Gaza escalates.
Russia’s refusal to supply Ukraine with natural gas over a still-unresolved contract dispute intensified concerns about Russia’s unreliability as an energy supplier, further contributing to higher oil oil prices.
HEAT USA price experts noted an increase of more than 20 cents in average retail prices since last Monday, and announced another moderate price increase that went into effect this morning.
HEAT USA Price Report
Today’s average retail heating oil price per gallon: UP $0.04 to $0.05
Morning projection (for Tuesday’s average price per gallon): UP $0.04
Crude and heating oil prices maintained high levels reached after an opening dip this morning. Crude oil gained nearly 4% to reach $46 a barrel and heating oil gained 2.5%. Concern over Russia as a reliable source of energy intensified as the market mulled the implications of the second-largest oil-producer’s decision to cut off natural gas supplies to Ukraine after a contract disagreement. Fog off of the U.S. Gulf Coast kept incoming oil tankers from reaching refining facilities in Louisiana. The U.S. stock market also helped support higher oil prices by a strong showing today, reaching a two-week high as investors hoped that the worst trading days during this 2008-2009 recession are over.
HEAT USA price experts regretted to report another price increase for Monday, noting an increase of almost 30 cents since the beginning of this week.
HEAT USA Price Report Evening projection (for Monday’s average retail price per gallon): UP $0.04
Crude and heating oil prices both dropped on the first day of trading in 2009. Both commodities fell several percentage points this morning before posting a sharp increase shortly after 9 am eastern time. As of 9:50 am eastern time, the price for a barrel of crude had fallen 2% to $43.67, and the price of heating oil had dropped about 1%. Wednesday’s rally, stimulated by lower-than-expected inventory numbers and the possibility of refining problems in the U.S. It seems that ever-present wories over the global recession returned to the fore this morning as NYMEX opened for trading in 2009.
Toby Hassall, an analyst at Commodity Warrants Australia in Sydney, quoted in a Bloomberg.com article, explained:
That rally on the 31st didn’t have too much behind it so we’re seeing crude come back to a level more reflective of the fundamentals. We still don’t have a clear picture of when a global recovery is going to take place.
HEAT USA price experts confirmed a big up tick in retail heating oil prices as a result of Wednesday’s rally, and predicted a decline in prices for Monday as the markets leveled out,
HEAT USA Price Report Today’s average retail heating oil price per gallon: UP $0.12 to $0.15 Morning projection (for Monday’s average price per gallon): DOWN $0.07
Crude oil surged by almost 13% to end the year at $43.99 a barrel, and heating oil leaped by nearly 10% in a major afternoon rally on NYMEX today. Although fundamental concerns about the economy and worldwide oil demand remain, news of reduced refinery activity and need to cover short bets led to a buying frenzy, as Darin Newsom, a senior analyst at DTN, explained to MarketWatch.com: “We are seeing some year end short covering. The fundamentals are still very bearish.”
HEAT USA price experts announced that the unexpected price jumps would lead to big retail price increases that will apply to Thursday’s and Friday’s prices, due to the New Year’s holiday.
HappyNewYear from The HEAT Zone and HEAT USA!
HEAT USA Price Report Evening projection (for Thursday and Friday’s average retail price per gallon): UP $0.12
The price of crude in 2008 Image: FinancialTimes.com
As 2008 draws to a close, traders and analysts on the on the oil markets are happy to see it go. The price of crude oil fell 54% from its peak in July, the largest annual decline since 1983, as a global economic crisis sapped fuel demand and froze lines of credit.
So what is in store for the oil markets in 2009? It is of course impossible to predict where crude and heating oil prices will go, but chances are, after this year’s historic declines, they will be moving upward, gradually or quickly. Whatever happens to oil prices, we can be sure of a few key factors exerting the most influence.
OPEC discipline. OPEC nations have lost the most as a result of low oil prices, and have taken drastic action in an attempt to turn that trend around. The organization has announced production cuts of over 4 million barrels a day since September. The important question is: will all of the member nations comply with the cuts? Many once-skeptical analysts are predicting that they will. OPEC nations (especially smaller producers such as Venezuela and Libya) have a long history of agreeing to the cuts that they then neglect to implement, for fear of losing short-term revenue. According to a Wall Street Journal article, the first annual decline of crude prices in seven years has given OPEC a “newfound discipline” that will translate to almost-full compliance with the production cuts by February of 2009. In an interview with CNBC.com, oil expert Azlin Ahmad, editor at Argus Media, called OPEC’s discipline the most important factor in determining oil prices in 2009 (watch the video here).
The global recession. Oil prices plummeted in 2008 largely because of slumping demand in the world’s biggest oil-consuming regions (the U.S., Japan, and Europe), which in turn led to slowing growth and diminished demand in developing nations like China and India. When credit begins to thaw and consumer economies like the U.S.’s begin to recover, they will kick-start the huge producer economies of India and China. Americans will begin to drive more again, and the factories in developing nations will need huge amounts of oil to get humming again. As demand returns around the world, oil prices will climb. In her CNBC interview, Ms. Ahmad called slumping demand the “main problem” in oil prices today and predicted that developing nations would continue their economic growth and maintain a (smaller than before) demand for oil. This demand may or may not be offset by low demand from developed nations, she said.
Geopolitical events. On Monday of this week, the surge in oil prices in response to Israel’s military campaign in Gaza reminded us that geopolitical events can cause huge swings in oil prices. If Iran decides to enter the conflict and deny Israel’s allies oil, prices could soar. If Iran’s radical president Ahmadinejad is replaced by a moderate less hostile towards the west, prices could fall fast. As unpredictable as the weather, elections, wars, trade agreements and other evens around the world could have profound effects on the oil markets next year.
Depending on those three main factors, oil prices in 2009 could post a great recovery or a great continuation of 2008. Only time will tell.
The price of crude fell 2.5% this morning to $38.14 a barrel while the price of heating oil gained two-tenths of a percent as of 9:51 am eastern time on the last day of the 2008 calendar year. Investors looking back at the last year on the oil market had reason for pessimism, as the price of crude lost 60% following its all-time high of $147 a barrel in early July. A struggling world economy and receding demand levels in the U.S., Japan and Europe continued to heavily influence the market.
The U.S. Energy Information Administration’s weekly data are due out in the next hour, and most analysts are predicting a drop in crude stockpiles in contrast to increases in gasoline and distillate stockpiles.
HEAT USA price experts announced a small increase in retail prices today, despite yesterday’s decreases in crude and heating oil prices on the commodities market. They speculated that the price increase could stem from increased heating oil demand as a result of a new spate of cold weather settling into the Northeast.
HEAT USA Price Report
Today’s average retail heating oil price per gallon: UP $0.01
Morning projection (for Thursday-Friday’s average price per gallon): UP $0.02
Crude oil finished the day down 2% at $39.03 a barrel, and heating oil came out flat, losing just a tenth of a percent. Worries over armed conflict in Gaza causing supply disruptions in the Middle East that spurred yesterday’s rally seem to have passed, from CNNMoney: “But the market’s initial response was ‘emotional,’ said Phil Flynn, senior market analyst at Alaron Trading in Chicago. ‘The concern that the situation in Israel would lead to disruption in oil supply has gone away.’
This morning’s dour economic news on housing prices and consumer confidence continued to weigh down crude prices throughout the day.
HEAT USA price experts revised their morning prediction slightly, announcing no change in retail heating oil prices tomorrow.
HEAT USA Price Report Evening projection (for Wednesday’s average heating oil price per gallon): NO CHANGE
Israel’s attacks on Hamas in the Gaza strip spurred a spike in crude and heating oil prices this morning on fears that political instability could affect future oil supplies. Although both crude and heating oil retreated from their early gains, both closed above their opening prices, at 5.5% and 3% higher, respectively. Anxiety over the Gaza conflict having consequences in oil-producing nations were further intensified when the Israeli government made it clear that it would continue to attack Hamas in what Defense Minister Ehud Barak called a “war to the death.”
Increasing Chinese stockpiles and the falling dollar covered in this morning’s price report continued to boost oil prices, but persistent worries over declining demand and consumption in the U.S. prevented steeper gains.
HEAT USA Price Report
Evening projection (for Tuesday’s average price per gallon): UP $0.04
Israeli air strike in Gaza Image: AP/Ariel Schalit
Until the fall of 2008, voters and political pundits seemed to agree that the deciding issue in the upcoming presidential election would be the war in Iraq. Many cited Barack Obama’s firm anti-war stance as an important factor in his victory in the Democratic primaries and caucuses. By election day, however, the Iraq war as a political issue was all but forgotten. With the mortgage industry imploding and stock markets plummeting, polls consistently showed voters cared most about the economy and how to fix it, with the Iraq war often ranking a distant third (after health care reform).
A parallel story could be told about oil prices since October of this year. Once the economic “downturn,” (now officially a “recession”) came into focus, crude prices dropped at a record pace. Every new crumb of economic data–climbing unemployment, slumping retail sales, manufacturing slowdowns–knocked oil prices down a peg. The cycle of negative economic news and falling oil prices has made it difficult to remember what, if anything, besides economic developments can have an effect on oil prices.
Enter Israel, with a bang. On Saturday, the Israeli military began a devastating attack on the ruling Hamas party in the Gaza strip, and plans to continue attacking until Hamas in Gaza has been effectively demolished, according to a BBC story. As the commodities markets opened on Monday, the price of crude oil and heating oil shot up as a result of fears that the conflict in Gaza could obstruct Middle East oil supplies. The question is, why would a military conflict between two nations that are neither major consumers nor producers of oil have such a profound effect on oil prices? The answer is simple: perception and emotion. While neither Israel nor Gaza are major components in the machinery of the world oil market, they are located in a region that produces the vast majority of the world’s oil. Theoretically, Hezbollah militants could enter the fray in support of Hamas, which could lead to Iran taking Hamas’s side in the conflict as well, which could mean Iran reducing or cutting off oil exports to Israel and its allies, including the United States.
That is just one of several possible scenarios that could lead to major supply disruptions and drive up the price of oil. Although unlikely, these scenarios help form a perception of instability in the Middle East and conjure images of political strife causing precious oil exports to slow to a trickle. The important lesson here is that headline-grabbing world events, not economic data, hold the most sway over oil prices. HEAT USA President Andrew Heaney touched on this fact in his Q&A session with HEAT This Week a few weeks ago when he made his predictions for oil prices over the next few years: “I think the price of oil will hover between $30 and $70 for the next couple of years, with a good amount of volatility due to geopolitical events, not economic ones.” Certainly, Israel’s assault on Hamas in Gaza is the first such volatility-inducing event.
However the conflict ends, it is fairly certain that it will have no direct effect on worldwide oil supply or demand. However, it will continue to affect the perception of oil and the nations that produce it, and that perception could prove to be more influential than any economic or technological realities.
Israeli tanks near the Gaza border Image: New York Times/AP/Sebastian Scheiner
Over the last few months, economic factors have caused changes in oil prices, with few exceptions. Yesterday’s Israeli air strikes on Hamas infrastructure in the Gaza strip showed how geopolitical events can also have profound effects on the world oil market; oil prices jumped this morning as Israel continued its assault on Gaza’s ruling faction. The military action stoked fears that instability in the Middle East could lead to oil supply disruptions–but fears of long-term supply problems are largely unfounded, according to an Associated Press article:
“There could be fear that an escalating Middle East conflict could disrupt supplies, though I don’t see that happening at this point,” said Gerard Rigby, energy analyst with Fuel First Consulting in Sydney. “(Israel-Palestinian conflict) always causes a bit of a blip and is one component that could support prices short-term.”
A declining dollar, depressed by consistently negative US economic news, also helped to lift oil prices, as cheap U.S. currency made the commodity a more attractive investment. China also announced plans to increase its crude oil stockpiles while prices are low, maintaining brisk imports from OPEC members (primarily Saudi Arabia). OPEC member United Arab Emirates also helped support prices by announcing production cuts in line with OPEC targets set at its meeting in Algeria earlier this month.
As of 9:58 am eastern time, the price for a barrel of crude had retreated from an early peak of $42, but still stood more than a dollar up on the day at $38.79. Heating oil followed a similar path, up 3% over Friday’s closing price.
HEAT USA price experts reported a 4¢ increase in the price of heating oil over Friday’s price early this morning, as well as a 6¢ increase effective at 10 am as a result of the spike in market prices.
HEAT USA Price Report Today’s average retail heating oil price per gallon: UP $0.10 Morning Projection (for Tuesday’s average price per gallon): DOWN $0.01
This morning’s trend of falling crude prices for January delivery and increases in crude prices for February delivery combined with rising heating oil prices on January and February contracts continued through the market’s close at 2:30 pm. January crude contracts lost 8% to close at $33.17 a barrel while February contracts rose by about 2% to $42.36 a barrel. Heating oil for January and February delivery rose at similar rates, with the January contracts closing up by about 1.5%.
As the NYMEX crude oil storage site at Cushing, Oklahoma rapidly approached capacity, oversupply of the market became more apparent. However, assurances by Saudi Arabia, the world’s largest oil producer, that it would reach decreased production targets next month helped raise bets on higher prices in February of next year. Expectations of another OPEC cut in January also helped boost February contract prices, as described on Blomberg.com:
“The scale of the cuts is quite significant,” said Rachel Ziemba an analyst at RGE Monitor, an economic research company in New York. “With oil at $35, members can’t balance their budgets. OPEC will find it hard to do more than they’ve already promised.”
HEAT USA price experts noted the price gains on NYMEX and predicted a corresponding increase in Monday’s retail prices.
HEAT USA Price Report Evening Projection (for Monday’s average retail price per gallon): UP $0.03 to $0.04
The January 2009 contracts for crude oil and heating oil closed today, with crude oil down 4.4% to $34.64 a barrel, but rising just above $42 in February. Heating oil was up moderately in January and February contracts as of 12:04 pm eastern time. Closing out a difficult trading month, traders looked optimistically at February contracts, perhaps expecting the announced OPEC cut to take hold over the next month. A reassurance offered by OPEC President Chakib Khelil may have inspired confidence as well. From CNBC.com: “I don’t believe there is any reason for it to fall any further. I don’t see it going lower,” he told Reuters in London.
HEAT USA price experts confirmed an expected moderate drop in retail prices today, and predicted a comparable price increase on Monday.
HEAT USA Price Report
Today’s average retail heating oil price per gallon: DOWN $0.04
Morning Projection (for Monday’s average price per gallon): UP $0.05
With yesterday’s OPEC production cuts already a distant memory, the market price of crude and heating oil dropped far and fast in late trading today. Crude oil lost nearly 10% to close at $36.22 a barrel, and heating oil fell by almost 4%.
All-around gloomy economic news precipitated the drops, directly and indirectly indicating that oil demand continued to slow this week and will not rebound any time soon. The EIA’s short-term energy outlook released yesterday included rising domestic crude supplies and a 4.9% drop in overall U.S. demand over the last four weeks. China’s plan to cut gasoline and diesel prices apparently had no effect on prices, but could lift future prices if it is successful in stimulating demand.
HEAT USA price experts were happy to report a larger-than-expected decrease in retail heating oil prices for tomorrow.
HEAT USA Price Report
Evening projection (for Friday’s average retail heating oil price per gallon): DOWN $0.04
Oil prices continued their epic fall today, touching a four-year low of $38.71 a barrel. And a combination of statistics and trends appear to point to the low-price pattern continuing well into 2009. A Wall Street Journal article detailed the evidence of still-falling demand in the world’s biggest oil-consuming nation: U.S. crude stockpiles have increased 11 of the last 12 weeks, and the Cushing, Oklahoma delivery point for NYMEX crude is just 500,000 barrels shy of record-high storage numbers. The article also quoted analysis firm Tudor, Pickering, Holt, and Company’s estimate of $57.50 per barrel average price in 2009.
A second WSJ article examines the challenges that OPEC faces in its quest to cut production sufficiently to meet falling demand. The main challenge, the article suggests, is the impossible task of predicting when worldwide demand will hit its floor: “Intuitively, low prices today should curb investment, meaning dearer oil tomorrow. But against that, no one knows where falling demand will bottom out.” A look at crude oil futures also indicates a tough task for OPEC. Although advance contracts show a fairly steep price increase, they also reinforce the fact that the oil market is heavily oversupplied, as the article’s author explains in this video:
In fact, oil producers have more oil than they know what to do with, leading them to rent floating storage facilities as their land-borne storage spaces fill up. Furthermore, when inflation is factored into distant futures prices, the increases are much less heartening for oil producers. The furthest out contract, for December 2017 delivery, is currently at about $77 per barrel. At a 1% rate of inflation, that $77 barrel would be worth 71 of today’s dollars, but at a 3% inflation rate, would only be worth $59 in today’s money. The wide range of possible values for 2017 oil makes it even more difficult for producers to set targets and make decisions about expanding production in order to maximize profit.
As the market’s brush-off of the recent production cut shows, OPEC’s recent attempts to halt falling prices have had little or no effect, and available data supports the estimation that it may be a long while before the cartel is able to exert influence they way they would like, which of course means lower prices for longer periods.
The failure of OPEC’s 2.2 million bpd production cut was further emphasized this morning, as oil prices sunk to new lows. The price for a barrel of crude rested at $37.90 and the price for a gallon of heating oil had lost a penny as of 9:49 am eastern time. News of China’s intention to cut domestic fuel prices in an attempt to stimulate demand fueled a slight recovery early this morning, but it was quickly erased.
OPEC’s production cut is widely viewed as insufficient to pull up oil prices, especially considering the cartel’s history of not fully complying with its own production targets. As Edward Meir of MF Global stated in an CNBC article, “The verdict was a resounding vote of no-confidence in the (OPEC) cartel’s ability to curtail production given its previous tendencies to backslide on commitments.”
HEAT USA price experts confirmed a small decrease in retail prices this morning, and looked forward to another slight decrease tomorrow.
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): DOWN $0.02
Oil prices plunged today, moving in the opposite direction intended by OPEC when it announced a new production cut of 2.2 barrels per day, effective January 1st. Although the cut was the largest ever implemented by the cartel, and slightly deeper than the 2 million bpd cut analysts expected, the market at large viewed the cut as not substantial enough to compensate for serious reductions in demand that have been seen in recent months. From CNBC.com:
“It seems like, despite the fact that the economies of producer nations are clearly in trouble, they don’t have the temerity to actually go ahead and do the kind of cut that would be really interesting to traders to turn this around,” said Addison Armstrong, director of market research at Tradition Energy in Stamford, Connecticut.
At the 2:30 pm NYMEX close, crude oil had lost 8% to settle at $40.06 a barrel and heating oil had lost about 1%.
New stockpile data released today by the EIA showed increases in crude and refined oil products as a result of continually-falling demand also contributed to falling oil prices.
HEAT USA price experts were pleasantly surprised by the drop in oil prices, and predicted a slight reduction in retail prices tomorrow.
HEAT USA Price Report
Evening projection (for Thursday’s average retail heating oil price per gallon): DOWN $0.015 to $0.02
OPEC announced a 2.2 million barrel per day (bpd) production cut from current levels, a 4.2 million bpd reduction from September levels. The U.S. Energy Information Administration released its latest stockpile numbers just moments before the OPEC announcement, showing a 500,000 barrel increase in U.S. crude oil stocks last week, which helped to hold down crude prices on NYMEX. The price for a barrel of crude stood at $43.55 at 10:59 am eastern time (just 0.1% lower than its opening price) and showed was on the rise, presumably on the news of the OPEC cut.
The EIA data also showed a 5.5% decrease in residential fuel oil (heating oil) stocks last week, balancing out a 2.2% increase in distillate fuel stocks.
HEAT USA Price Report Morning projection (for Thursday’s average price per gallon): UP $0.02
Crude and heating oil prices fluctuated this morning and were near their opening prices as of 10:03 am eastern time; crude oil had risen half a percent to $43.62 a barrel, and heating oil had gained almost three percent.
Saudi Arabia’s oil minister Ali Naimi set expectations on Wednesday of a 2 million barrel per day production cut to be agreed upon at the OPEC meeting today. While that would be the largest single production cut in the cartel’s history, many analysts see it as inadequate to push up oil prices. From Bloomberg.com:
“I think 1.5 million to 2 million is needed just to stabilize the market,” said Robert Montefusco, a broker at Sucden (U.K.) Ltd. in London. “Demand is falling away quite rapidly. They will probably need more if they want prices going back up to $50 and higher.”
The oil market is also waiting for the announcement of the EIA’s weekly oil inventory data. Predictions of the stockpile data vary, but most include an increase in crude supplies, which would help drive down oil’s market price.
HEAT USA price experts confirmed a one penny increase over yesterday’s retail prices this morning, and stated that results of the OPEC meeting and official EIA stockpile data were needed to project tomorrow’s prices.
HEAT USA Price Report Today’s average retail heating oil price per gallon:UP $0.01 Morning projection (for Thursday’s average retail price per gallon): TBD
