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
After climbing steadily this morning, crude and heating oil prices fell to close down 3% and up a fraction of a percent, respectively. The Federal Reserve reduced the federal funds interest rate to a range of 0% to 0.25%, strengthening the dollar and making oil a less attractive buy.
With the OPEC meeting just hours away, Saudi Arabian oil minister Ali Naimi’s announcement that OPEC plans to cut production by 2 million barrels per day tomorrow was met with some disappointment, as analysts believed the reduction would not be enough to catch up to rapidly-falling demand. Earlier news that Russia would cut production in coordination with the cartel appears to have lost influence, as a New York Times article explained:
But Russia’s proposal is unlikely to have a big effect on the market. Some analysts see the move as simply window-dressing — Russian production will drop anyway this year, they say, because of the government’s own restrictive policies, inadequate investments and hefty export taxes.
As has often been the case in the last three months, negative economic news and a bleak outlook for recovery of the global economy managed to overshadow statements or events that might lift the price of oil.
HEAT USA price experts predicted a small increase in retail heating oil prices tomorrow.
HEAT USA Price Report Evening projection (for Wednesday’s average retail heating oil price per gallon): UP $0.01
Low oil prices have been a welcome relief for heating oil and gasoline users around the country–fuel prices that were at or near record highs as recently as six months ago are now 25 to 50 percent lower. Even better, it appears as though low oil and energy prices will remain low for at least the next year or so. Amidst all the good news, however, there is a downside.
When the global economy does recover from the current recession (which could be in six months or five years–but it will definitely happen), the oil industry will be hard-pressed to meet surging demand. The seeds of that supply crunch are being sown right now, as the fastest-ever decline of crude prices is forcing oil companies around the world to shut down and delay expansion of oil production. Exploration and production costs are as high as ever, so when crude prices fell hard, oil companies were suddenly faced with operating at a loss, and, being for-profit businesses, the companies balanced their operations by shutting down production. Even Saudi Arabia, the world’s largest oil producer and the nation who can produce oil most cheaply (in a recent 60 Minutes interview, King Abdullah of Saudi Arabia said it costs the kingdom less than $2 to produce one barrel of oil–click the link to see the video and fast forward to the 8:30 mark in Part 1), has postponed the construction of new refineries. Peter Jackson, an analyst at Cambridge Energy Research, has said that if the current trend continues, world fuel supplies could fall by five percent over the next five years. North American extraction facilities and refineries are also putting on the brakes; a front-page article in the New York Times reported today that brokerage firm Raymond James has found that domestic drilling in the U.S. could decline by 41 percent next year as oil companies scale back. Obviously, such a development could put a major dent in plans to reduce U.S. dependence on foreign oil. An analyst at Bernstein Research went even farther, predicting that a 17 percent reduction in North American oil production through 2010 “will be the catalyst needed for oil prices to rebound,” according to the Times article. In that scenario, reduced production by the world’s largest oil consumer and its neighbors will tip the balance and drive production levels below demand levels and spark a sharp price increase.
If current production cuts continue through next year, a price spike appears to be almost inevitable, however it starts. Oil extraction and refinement are complex and expensive processes, and it takes weeks for a dormant oil well or refinery to return to full capacity. When the global economy recovers, oil demand will surge well beyond production capacity, and the price of oil will spike, perhaps closer to the $200 per barrel mark than the $150 mark seen this summer.
So remember, enjoy low heating oil and gasoline prices while they last and plan for an uncertain future–low prices may not be around for too much longer.
As representatives of OPEC member nations arrived in Oman, Algeria for tomorrow’s meeting, oil prices rose steadily, showing strong expectations of a production cut that could be the biggest in the cartel’s history. The price for a barrel of crude had risen about 2.5% to $45.66 and the price of heating oil had increased by 4% as of 9:57 am eastern time this morning.
Statements by Venezuelan oil minister Rafael Ramirez led many analysts to predict a production cut of 2 million barrels per day or more to come out of the meeting–a focused attempt by the group to halt the plunge of oil prices. Russia, the world’s largest non-OPEC oil producer, plans to cut production in coordination with the group, which also helped to support prices on the markets this morning. “Whatever they do now, presumably more than a 2 million barrels a day cut, is going to help, but what helps the psychology is that Russia has also announced they may join in,” said Johannes Benigni, chief executive officer at consultants JBC Energy GmbH in Vienna, quoted in a Bloomberg.com article.
HEAT USA price experts confirmed that the retail price of heating oil fell 13¢ from yesterday morning’s price spike, opening today at 2¢ below Monday’s opening price. Focus on the OPEC meeting and the increase in oil prices on NYMEX led them to predict moderate-to-large price increases tomorrow.
HEAT USA Price Report Today’s average retail heating oil price per gallon: DOWN $0.13 Morning projection (for Wednesday’s average price per gallon): UP $0.07
With OPEC’s next official meeting in Algeria only two days away, focus on the cartel has intensified. Recent statements by OPEC member nations’ oil ministers have given clear indications that another production cut is on its way. The imminent production cut of up to 2 million barrels per day made for an optimistic market this morning that saw the price of crude jump 6% to $49.26 a barrel as of 9:23 am eastern time. Heating oil also gained 6%.
HEAT USA price experts noted that the steep price increase this morning set the pattern for continuing gains throughout the day. They reported that retail prices had already reacted to this morning’s market news, climbing over ten cents a gallon.
HEAT USA Price Report Today’s average retail heating oil price per gallon: UP $0.115
Morning projection (for Tuesday’s average price per gallon):UP $0.04
Russian president Dmitry Medvedev, speaking on Russian state television today, confirmed expectations that his country would reduce oil output in coordination with OPEC at the cartel’s meeting in Algeria next Wednesday. “I would like to say that we are ready to protect ourselves as this is our base income, oil and gas,” said Medvedev, quoted by the news agency AFP.
OPEC and Russia, the world’s second-largest oil producer after Saudi Arabia, have been courting each other heavily as the price of oil has plummeted in recent weeks, with spokespersons on both sides expressing an interest in cooperation. In his remarks, Medvedev also mentioned the possibility of Russia seeking membership in OPEC.
The announcement topped off a very strong trading for oil day that included anticipation of a major OPEC production cut and predictions of demand recovery in 2009 announced by the IEA. Crude oil gained over 10% to settle at $47.98 a barrel. Heating oil rose by about 6%.
HEAT USA price experts expect a smaller price increase tomorrow, as the market price of heating oil continued to rise after today’s mid-morning price increase.
HEAT USA Price Report Evening projection (for Friday’s average retail heating oil price per gallon): UP $0.03
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
In one of the most volatile trading days for oil commodities in recent months, this morning’s inventory data released by the EIA predicted the final performances of crude and heating oil. Crude oil stocks in the U.S. rose less than expected while stockpiles of gasoline and distillates, which include heating oil, increased substantially, defying predictions of slight decreases. The data, coupled with fresh announcements that Saudi Arabia has begun to reduce oil production and exports, drove up crude oil by over 3% to $43.52 a barrel. Heating oil, weighed down by the surprise inventory increases, fell by about 2%.
HEAT USA price experts announced that the midday price increases announced this afternoon had been cut in half by late-day market losses by heating oil on NYMEX, to be reflected in tomorrow’s retail prices.
HEAT USA Price Report Evening projection (for Thursday’s average retail heating oil price per gallon): DOWN $0.02
Projection of oil and gas production by region. Source: peakoil.net
On October 31st, the Zone published a short and simple explanation of peak oil theory. To refresh: peak oil theory is the belief that there is a point in time at which worldwide crude oil production will peak and begin a decline that ends when the world’s oil supply effectively runs out. Most proponents believe that the peak will be reached in the next 40 years, if it has not been reached already.
The October 31st post’s reference to peak oil as a “much-debated” theory is a bit of an understatement. People that accept the peak oil theory as truth are locked in a heated war of words with people who dismiss it as alarmist foolishness. This war plays out online, in academic papers and presentations, and even on television. Without taking one side or the other, we at the Zone would like to present the basic arguments and encourage our readers to decide for themselves.
Peak oil as fact. Peak oil theory was introduced by geologist M. King Hubbert to determine when the U.S. would run out of oil, and later applied to the world’s oil supply. Although his prediction of world peak oil in 1970 is now considered by both sides of the peak oil debate to be inaccurate, the fact that oil production in the U.S., the world’s largest oil producer from the late 1800s until 1971, clearly did peak (U.S. crude production in 1971 was at 10 million barrels per day and is currently at about 5 million barrels per day), is a boon for the argument in favor of world peak oil. “In any geographic area, it’s a natural phenomenon for oil to peak at some point,” said Tim Considine, a former professor of natural resource economics at Penn State. Leading Peak Oil proponent Matthew Simmons, president of Simmons and Company International, asserts that world production reached a recent peak in May of 2005 and has “flattened” since then. Simmons also argues that oil production data is hugely off-base, claiming that OPEC nations intentionally exaggerated their estimates of proven oil reserves that they released in 1982-1988. When their estimates did not change for 20 years, he says, they were seen as conservative and generally accepted to be accurate. The vast majority of wells in the Middle East are not equipped with gauges that accurately measure daily output of oil, and the world is therefore forced to accept the estimates of oil companies and oil-producing nations that have financial incentive to convince the oil market that supplies are plentiful. The rapid increase in worldwide oil demand from 1994 to 2008 far outpaced any predictions and used up nearly all of the world’s spare production capacity, paving the way for a major supply crunch in the next few years. Although the global recession has significantly reduced demand and consequently pulled down prices, the fact that demand continued to rise through the price spike of this summer shows that when the global economy recovers, demand will be as high as ever, spiking much faster than supply could increase and causing political conflict as nations fight over remaining oil. Simmons points to the deterioration of the world’s oil infrastructure as a major impediment to supply increases meeting spiking demand. Rust and other wear and tear on huge and expensive rigs around the world have worn them out to the point where 80% of the world’s production infrastructure needs to be rebuilt to function at full capacity. While many argue that relatively new technologies like horizontal drilling have made previously-unreachable oil reservoirs accessible, Simmons and others counter that new technology has only increased rate of extraction from existing reservoirs, speeding our approach to peak oil. Those who see peak oil as fact steadfastly assert that, whether peak oil production is reached in 2009 or 2050, inadequate preparation for the related supply crunch could result in catastrophic events around the globe. Reliance on oil as the main energy resource on earth much be reduced, and development and utilization of alternative energy sources much take place as quickly as possible in order to avoid disaster.
Peak oil as fiction. The theory of peak oil was introduced by a geologist, and continues to be defended by geologists who insist that it is a “fossil fuel”–a finite resource that will run out at some undetermined point in the future. These geologists do not give due credit to the power of human ingenuity and technology, which have managed to overcome incredible obstacles to harvest the vast resources the earth has to offer. In 2000, Cambridge Energy Research Associates (CERA) disputed the figure of 1.2 trillion barrels of total world oil reserves put forth by many peak oil proponents, estimating 4.82 trillion barrels in conventional and unconventional oil reserves worldwide. Peak oil theorists have predicted imminent decline in oil availability and production at several points during the 20th and 21st centuries, and have been proven wrong each time. Technology and innovation will continue to expand the quantity of “accessible” oil–a point of view held by the International Energy Agency, who in 2005 stated that “in principle, [there is] no shortage of hydrocarbons,” and the only limits on oil production are will power and the sophistication of applicable technologies. Furthermore, the IEA noted that known unconventional oil reserves (such as the tar sands of Canada and oil shale deposits of the United States and Venezuela) far surpass conventional oil fields in the quantity of present oil. The agency noted that technology for extracting both conventional and unconventional oil deposits will have to develop quickly enough in order to meet an expected 50 percent increase in worldwide oil demand from 2005 to 2050–a challenging but attainable goal. Another weak spot in the argument in favor of peak oil theory is the presumption that crude oil is in fact a “fossil fuel,” a product of the decomposition of fossils and other organic material hundreds of thousands or even millions of years old. Although that explanation has been widely accepted for decades, findings originally published by the physicist Thomas Gold in 1992 posit that oil and other “fossil” fuels are actually not products of biological materials at all. This “abiotic” hypothesis on the origin of oil asserts that hydrocarbons were present at the early formation stages of our solar system, and that bacteria in the earth’s mantle feed on gas flows caused by tectonic movements to continuously replenish shallower oil reservoirs, making oil an infinite resource. In Gold’s own words, abiotic oil means that “Hydrocarbons are not biology reworked by geology (as the traditional view would hold) but rather geology reworked by biology.” Evidence such as the discovery of oil 30,000 feet below the earth’s surface (well below the depth at which organic matter is no longer found) and dry oil wells later replenishing themselves lend support to the abiotic theory. Although the abiotic origin of oil has not been proven beyond a doubt, it is a possible explanation that one must consider when contemplating future oil resources. Although oil resources have become more difficult to extract since oil was first utilized as fuel, human ingenuity and technology have managed to keep extracting and producing oil to meet growing demand, and will continue to do so for decades, if not centuries, into the future.
Conclusion. So there are the basic tenets of the arguments for and against the validity of peak oil theory. An interesting debate that will no doubt continue for years–at least until major discoveries or geopolitical events prove one side or the other. In any event, the Zone encourages you to explore additional resources and make your own determinations about peak oil theory.
Resources.
A 2005 segment on the future of oil and peak oil theory CNBC’s Squawk Box, “Peak vs. Deep Oil.” Featuring Matt Simmons and Jerome R. Corsi:
Peak Oil as Fact
http://www.simmonsco-intl.com/
http://www.rps.psu.edu/probing/peakoil.html
http://www.postcarbon.org/say_goodbye_peak_oil
http://members.home.nl/peakoil/facts.html
Peak Oil as Fiction
http://centerblue.org/2006/07/07/the-case-against-peak-oil-gloom-and-doom/
http://www.cera.com/aspx/cda/public1/home/home.aspx
http://internationalaffairs.suite101.com/article.cfm/the_peak_oil_debate
http://www.freeenergynews.com/Directory/Theory/SustainableOil/
Crude and heating oil prices jumped up this morning, effectively erasing yesterday’s price drops. As of 10:03 am eastern time, crude was up 5% to $44.16 a barrel and heating oil was 3% above its Monday closing price. A Bloomberg article cited near-certain production cuts to come out of OPEC’s December 17th meeting and Russia’s plans to make a coordinated production cut as the main reasons for today’s optimism on the oil market. Industry analysts surveyed by Bloomberg expect a 1.3 million barrel increase in crude stocks to be announced by the EIA this morning, but also predicted a significant decrease in gasoline and distillate stocks.
CNBC.com reported that U.S. gasoline demand in November increased 0.3% over November 2007 levels, leading Petromatrix analyst Olivier Jakob to comment, “We can’t really talk about ‘demand destruction’ in the U.S. anymore.”
Good news appeared to outweigh bad this morning, as expectations of increasing crude stocks in the U.S. and falling crude imports in China failed to drag down prices.
HEAT USA price experts confirmed an expected moderate drop in retail heating oil prices for today, but predicted a similar margin of increase in tomorrow’s prices.
HEAT USA Price Report Today’s average retail heating oil price per gallon: DOWN $0.05 Morning projection (for Thursday’s average price per gallon): UP $0.06
Oil prices climbed yesterday on optimism for economic recovery motivated by President-elect Barack Obama’s announcement of a big public works program that came on Sunday. Current realities appeared to have dampened that optimism this morning, as crude and heating oil prices both fell slightly at the market’s open. Today’s economic bad news comes from Japan, the second-largest oil-consuming nation after the United States. In the third quarter of 2008, Japan’s economy shrank by 1.8%, a larger-than expected margin that will most likely result in falling oil demand.
On the other hand, comments by the Libyan oil minister and the president of OPEC signaled plans for another major production cut at their December 17th meeting.
By an hour into the trading day, positives and negatives appeared to have counterbalanced each other. After early declines, the price for a barrel of crude was up by 0.7% to $44.02 and the price for a gallon of heating oil was 0.5% above its opening price at 9:51 am eastern time.
HEAT USA Price Experts announced a small decline in retail heating oil prices that cut into Monday morning’s steep increases. They expect minimal changes in tomorrow’s prices, based on current market movements.
HEAT USA Price Report Today’s average retail heating oil price per gallon: DOWN $0.02 Morning projection (for Wednesday’s price per gallon): UP $0.01
Crude and heating oil prices held on to most of their early gains, closing 6.5% and 5% above their opening marks, respectively. President-elect Obama’s plan to boost the U.S. economy with wide-ranging public works projects and the near-completion of a bailout for the U.S. auto industry spurred market optimism today, driving up Asian, European, and American stock markets as well as other U.S. commodities. Saudi Arabia’s announcement that it will reduce crude shipments to Asia and Europe convinced investors of supply contraction and contributed to rising oil prices just nine days ahead of OPEC’s meeting in Algeria that is expected to result in another supply cut.
HEAT USA price experts announced a slight decrease from this morning’s retail prices, effective tomorrow.
HEAT USA Price Report Evening projection (for tomorrow’s average price per gallon): DOWN $0.01
Last night, Leslie Stahl anchored the leading story on CBS’s 60 Minutes that profiled “The Oil Kingdom”–the world’s biggest oil producer (by far)–Saudi Arabia. The segment included interviews with Saudi Arabia’s Oil Minister Ali Al-Naimi and the national Saudi oil company’s (known as Saudi Aramco) CEO, Abdallah Jum’ah. Stahl also toured a massive new facility in the Saudi desert that will increase the nation’s production capacity from 10 million to 12 million barrels per day when it comes online next year.
Although the story did not offer much insight into the future of oil prices or even future moves by OPEC, it did offer an interesting glimpse inside the enormous and highly sophisticated Saudi Oil operation. Perhaps most impressive was the giant office space in the Saudi Aramco corporate headquarters that serves as the “nerve center” for every single drop of oil that is extracted and exported from Saudi Arabia.
Watch the two-part segment below, or at cbsnews.com, where you can also read a written version of the story.
