Oil & Gas 01 (May 08 - Jul 08)

[kennynah]

wah do until hand sweat sia .. up up and away. I think monday market sure got doomsday effect

ya man...especially, if shd israel attack iran nuclear installation... then, jia lat....

[kennynah]

hi all,

you might wana have a look at XOI and OIH...for an insight to where Oil can possibly head to...

[winston]

Oil Rises to Record on Weakening Dollar, Morgan Stanley Outlook
By Robert Tuttle

June 6 (Bloomberg) -- Crude oil surged more than $10 a barrel to a record as the dollar weakened after the U.S. unemployment rate grew the most in two decades and Morgan Stanley said prices may reach $150 within a month.

Oil may ``spike'' because ``Asia is taking an unprecedented share'' of Middle East exports, Morgan Stanley analyst Ole Slorer wrote. The dollar weakened against the euro after unemployment rose to 5.5 percent, signaling the Federal Reserve may be reluctant to increase interest rates. Oil also rose after an Israeli minister said an attack on Iran may be necessary.

Oil is ``being used as a hedge by speculative buyers for the weakened dollar,'' said Gary Adams, vice chairman of oil and gas consulting at Deloitte & Touche LLP in Houston. ``We are seeing that the price will continue to go up as investors look for alternatives.''

Crude oil for July delivery rose $10.75, or 8.4 percent, to settle at $138.54 a barrel at 2:48 p.m. on the New York Mercantile Exchange. Today's increase was the biggest gain in dollar terms ever and the largest on a percentage basis since June 1996. Oil rose $11.33 to an all-time high $139.12 a barrel during trading.

Today's rise was bigger than the entire price of oil on Dec. 10, 1998, when crude traded at $10.72 a barrel. Oil has more than doubled in the past year.

``This is all just a plain old stampede,'' Tim Evans, an energy analyst for Citi Futures Perspective in New York, said in an e-mail. ``The sellers have basically pulled their orders so it doesn't take much incremental buying to push prices higher.''

Record Gasoline

Gasoline for July delivery rose 21.35 cents, or 6.4 percent, to $3.548 a gallon in New York after reaching a record $3.565. Regular gasoline at the pump fell 0.3 cent to an average $3.986 a gallon after touching a record yesterday, AAA, the biggest U.S. motoring organization, said today on its Web site.

Shaul Mofaz, Israel's transportation minister and a contender for the post of prime minister, told the Yediot Ahronot daily newspaper that Israel will have to attack Iran if it doesn't abandon its nuclear-development program.

``The Iranian risk premium, which had left the market for some time, is likely to return and hover over the market in the next few weeks,'' said Antoine Halff, head of energy research at Newedge USA LLC in New York. ``The knee-jerk reaction to the comments by Mofaz will wear off quickly because Israel would not broadcast its intention in this fashion.''

Brent crude oil for July settlement rose $10.15, or 8 percent, to $137.69 a barrel on London's ICE Futures Europe exchange, a record close, after reaching an all-time high of $138.12 a barrel.

With Asia taking an ``unprecedented'' share of Middle East oil, U.S. benchmark West Texas Intermediate crude oil may reach $150 a barrel by July 4, Morgan Stanley's Slorer said in his report.

Oil Forecast

BNP Paribas SA, France's biggest bank, boosted its 2008 oil outlook by 19 percent to $124 on climbing Asian demand for diesel fuel and kerosene. Last month, Goldman Sachs Group Inc. raised its New York crude-oil price forecast for the second half of this year by 32 percent.

The market ``is underpinned by demand, which is totally different than 1973 and 1979'' when supply cuts caused prices to surge, said Ray Carbone, president of Paramount Options Inc. in New York. Oil's rise is linked to ``supply and demand. Nobody wants to admit it. Too bad.''

A decline in oil prices earlier in the week came after Congress held hearings on possible energy price manipulation, and billionaire investor George Soros said an oil price ``bubble'' is working with fundamentals in the market that may lead to a recession.

Prices rose yesterday after European Central Bank President Jean-Claude Trichet's comment that the bank may raise interest rates next month caused the dollar to fall against the euro.

Weaker Dollar

Oil has surged to records this year partly because investors have turned to commodities as a hedge against the falling dollar.

The dollar weakened further today after the Labor Department said the U.S. jobless rate increased by half a point to 5.5 percent, the biggest increase since 1986 and higher than every forecast in a Bloomberg News survey.

Rising unemployment ``is going to lead to a drop in the dollar and higher commodity prices,'' said Phil Flynn, a commodities trader for Chicago-based Alaron Trading. The Fed will be ``less aggressive in raising interest rates.''

The dollar decreased 1 percent to $1.575 per euro at 1:52 p.m. in New York, from $1.5593 yesterday.

Chevron in Nigeria

Workers at Chevron Corp. in Nigeria may strike, a union official said. Chevron has yet to respond to worker demands that the head of the Nigerian unit be replaced, said Ethelbert Uka, treasurer of the Petroleum and Natural Gas Senior Staff Association of Nigeria. Daily production of about 450,000 barrels of crude oil may be threatened, the Lagos-based newspaper Vanguard reported earlier.

A Chevron spokesman said the company is trying to open negotiations with the workers.

Nymex trading in crude oil, heating oil and gasoline on the Globex electronic system was ``briefly halted'' and resumed around 1:15 p.m. New York time because heating oil reached its limit move for the session, said Brenda Guzman, a spokeswoman for the exchange.

The limits, which govern maximum price moves, up or down, were doubled for the remainder of the electronic session, she said. Crude oil's limit rose to $20, natural gas to $6 and heating oil and gasoline rose to 50 cents.

[winston]

What's Up With Oil? By John Mauldin

There was a lot of short covering in the various markets, but especially in oil. But let's dig deeper.

I have been pondering for a few weeks about whether the long-only commodity index funds are really affecting the markets. Basically, these funds have become a huge part of the commodities market. It is clear that enough buying and in size will affect any market, but these funds do not take delivery. They "roll" their exposure as they get close to expiration, so they are not involved in the spot price. In theory, the spot price should be a function of immediate supply and demand.

But, it is not that simple, as Louis Gave reminded me. Looking at recent CFTC data, investors known as "commercials" were long 827 million barrels of oil. In the early part of the decade it was 3-400 million barrels. Commercials are supposed to be those who are hedging their production of oil. But large oil companies rarely hedge, and smaller producers only hedge a portion of their oil (see more below). Has supply increased over 100%? I think not.

Where is the increase in commercial interest coming from? The clear answer is long-only commodity index funds and ETFs. They simply buy baskets of commodities at whatever the price is, speculating on the rise in the price of the overall commodity market. It is a one-way trade.

Jim Rogers is probably the most famous exponent of such trades, but there are scores of funds which mimic what he does. But there are limits to how much exposure speculators can buy, because the CFTC will allow a speculator to only buy so much of any given market, to keep large players from getting a corner on the market and driving up prices, a la the Hunt brothers and silver in 1980. These limits are known as "position limits."

There are no position limits for commercials who are hedging. They are in theory hedging their physical exposure to a given commodity they are selling or buying. Think of a farmer and General Mills. Both want to lock in the price of wheat so they can plan for the future. Speculators are useful in that they provide liquidity to the markets. In fact, they are essential to a properly functioning market.

The CFTC created a loophole when they allowed investment banks to be classified as commercial investors. So, when a long-only commodity index fund wants to buy a million barrels of oil, they can go to the investment bank, who will sell them a "swap" on the price of oil, and then immediately hedge their exposure in the futures market.

To be sure, the long-only index fund can now create positions far in excess of the position limits that are enforced upon normal speculators. These funds can grow to be huge - multi-tens of billions of dollars. Even though they are speculators, they are not included in the data as speculators. Because they get their exposure from an investment bank, they are ultimately listed as a commercial. In total, they represent an enormous part of the commodities markets. But they are providing liquidity, so what's the problem? They are not actually hoarding the commodities. The price is still set at the spot price. But.

But that is not the whole story. They are making it difficult, if not dangerous, to short the market. When massive buying comes into the market, it moves the market and sends the signal to the market that prices are rising. Momentum players move in, and prices rise some more.

In fact, as the price of oil has risen from $90 to $100 and higher, normal speculative open interest has declined, as who can afford to fight the tape? At the least, I expect the CFTC to require those "commercials" that are really long-only index funds to provide transparency.

Politicians are demanding that something be done. It is entirely possible that they will impose position limits on the long-only funds. As I said last week, when the elephants are dancing, the mice should leave the floor. And Congress and the regulators are very serious elephants indeed. Let's hope they do whatever they are going to do quickly.

Now, let's look at how the credit crisis is contributing to the problem. Let's say you are a small oil producer or grain company. You go to the futures market and hedge your oil production or the grain in your silos; and if the price goes up, you don't care, because you are going to deliver the grain at a cost you already know. But there is the matter of that margin call, and you need to borrow from your local bank to meet that call.

You are hedged. Your profits are locked in at some point in the future. But the margin clerk is calling today. And your bank is having a small problem with its capital base. What is the cover story in the Wall Street Journal today? "Real Estate Woes of Banks Mount." Banks, mostly smaller ones, may have to write off as much as $165 billion in bad real estate loans made to developers and commercial builders. Regulators are "encouraging" banks to raise capital and increase their lending standards.

So banks have less capital to lend. Your banker looks at you when you ask for more money to meet those margin calls, and says, "There are two types of problems. Mine, and not mine. Yours is of the latter variety." And you have to cover your hedges. Enter the margin clerk (the person who calls you and tells you to come up with more money or they will sell out your position at whatever the market price is.)

When Bubbles Collide

So, what happens? Bernanke talks the dollar up and commodities and oil go down. Two days later a French president of the ECB gets inflation religion and the markets react swiftly. Commodity prices rise and more money comes into the market. Traders start covering their shorts as quickly as possible.

Then this morning, the margin clerks of the world go to work and oil spikes as the pits smell blood. Morgan Stanley issues a call for $150 oil in July. The euro rises to $1.5778! Interest rates drop. The stock market falls large at the open.

Who can aggressively short in this environment? In a conversation with Dennis Gartman this afternoon, he commented that it felt like the NASDAQ. But is it 1999 or 2000? The oil market will continue to go up until it doesn't, and no one knows when that is. It will continue to rise until all the shorts that are not strong hands have been covered. The margin clerks are in control, and they will have their way. Was it all over today? I rather doubt it.

I wonder if some of the majors aren't tempted to sell some of their production at $138? I mean, really. If you don't think that is a reasonable price, and they tell us they don't, then why doesn't Exxon just go in and start taking all the bids they can? They and the other majors would be the ultimate strong hand. But then, what do I know?

Central banks, short covering, a respected analyst issuing a near-term call for a $20 rise in oil, conspiracy theories and Iran, long-only funds buying, everyone scared to short, margin calls, and a credit crisis all give us the perfect storm.

Three quick points. I think oil is lower at the end of the year. Inflation in Asia and rising subsidies are going to force more and more Asian countries to allow the price of oil to rise and send the proper signals to consumers to use less oil. Over the next decade, oil will be much higher, but I think the pressure over the next year will be to the downside. But don't ask me how high it can go in the short term. Ask the margin clerks.

[winston]

Chinese energy official attributes surging oil price to speculation
www.chinaview.cn

AOMORI, Japan, June 7 (Xinhua) -- The fluctuation of crude oil prices is closely related to the global financial market and the surge of oil prices should not only be ascribed to rising energy demands of fast developing countries, a Chinese energy official said Saturday.

Oil has become a commodity of the largest trade volume in the world. A huge amount of oil trade is conducted in the financial market and the oil prices are no longer up to the traditional marginal utility, but have become a financial concept under the influence of a lot of factors, said Zhang Guobao, vice chairman of China's National Development and Reform Commission.

Zhang dismissed the idea that rising demands in industrializing countries such as China and India should be blamed for the surge of oil prices.

"This is an incomprehensive idea since decisive factors for oil prices have run further beyond the concept of supply and demand," Zhang said in his speech at the energy ministers meeting between India, China, the United States, Japan and South Korea.

Zhang noted that from 2003 to 2006, world oil consumption posed annual increases of 1.9 percent, 3.8 percent, 1.2 percent and 0.7 percent respectively. "The rates were all in normal range."

He suggested that his counterparts put the rising oil prices into the context of global financial market, which could be affected by a wide range of factors such as the change of exchange rates, geopolitics, political instabilities and natural disasters.

"All these may turn to be reasons for speculation, ...and from this way of thinking, an answer to the current record high oil price could be found," Zhang said.

He called on his counterparts to cherish the opportunity to discuss the obvious problem in the global oil market and refrain from concentrating on their own interests.

The five-party energy ministers meeting, initiated by China, was the second of its kind following the first one in Beijing in December 2006.

China, Japan, South Korea, the United States and India take up 47 percent of world oil consumption.

The meeting was one day prior to the Group of Eight Energy Ministers Meeting and the G8 plus China, South Korea and India energy ministers meeting.

[winston]

Asian powers, US warn oil shock to hit global economy
Posted: 07 June 2008 1239 hrs


AOMORI, Japan - The United States and Asia's four largest powers voiced concern Saturday after a record spike in oil price as worries grew that energy costs may derail the global economy.

Oil prices, which have soared five-fold since 2003, posted their highest ever one-day gain of 10.75 dollars to close at a new record of 138.54 dollars in New York after hawkish remarks by an Israeli official on oil producer Iran.

US Energy Secretary Samuel Bodman said that the record oil prices were "a shock" and warned oil producers that it would do them no good if the US economy took a hit.

"It's not good for producing nations to see the US struggling economically (as) they depend on us to be a significant engine in world economic activity," Bodman told reporters ahead of the talks in Aomori, Japan.

Their talks will be followed Sunday by a meeting of the energy ministers of the Group of Eight industrial powers here in Aomori, a hub of Japan's nuclear energy industry 600 kilometres north of Tokyo.

"This has become a major risk factor for the world economy," Amari said.

Meeting with South Korea's Knowledge Economy Minister Lee Youn-Ho, Amari said that he believed crude oil prices were "abnormally high."

Lee added: "I don't think the oil prices are at normal levels either. It is fairly questionable whether the [b]world economy will be able to develop further at this level of crude oil prices."

Japan, the world's second largest economy, is nearly entirely dependent on imports for its oil and gas. Its fishing industry recently said the situation had become so severe it was considering a strike this summer.

Analysts said the sharp spike overnight was a reaction to reported remarks by Israeli Deputy Prime Minister Shaul Mofaz on Iran, a major oil producer.

Mofaz, a former defence chief, warned that the Jewish state would attack Iran if it continued its alleged nuclear weapons drive, although he stressed such an operation could only be conducted with US support.

Despite the spike, Bodman said he did not see oil prices as a "crisis" and denied the need for tighter regulations of oil markets.

The International Energy Agency said in a report Friday that no single form of energy or technology could solve the problem alone, calling for increased use of carbon dioxide capture and storage, renewable and nuclear energy and better energy efficiency. - AFP/ir

[winston]

World needs $45 trillion energy plan
International Energy Agency calls for construction of 32 nuclear power plants annually and vast expansion of wind power to cut emissions in half by 2050.
Last Updated: June 6, 2008: 9:49 AM EDT

TOKYO (AP) -- The world needs to invest $45 trillion in energy in coming decades, build some 1,400 nuclear power plants and vastly expand wind power in order to halve greenhouse gas emissions by 2050, according to an energy study released Friday.

The report by the Paris-based International Energy Agency envisions a "energy revolution" that would greatly reduce the world's dependence on fossil fuels while maintaining steady economic growth.

"Meeting this target of 50% cut in emissions represents a formidable challenge, and we would require immediate policy action and technological transition on an unprecedented scale," IEA Executive Director Nobuo Tanaka said.

A U.N.-network of scientists concluded last year that emissions have to be cut by at least half by 2050 to avoid an increase in world temperatures of between 3.6 and 4.2 degrees above pre-18th century levels.

Scientists say temperature increases beyond that could trigger devastating effects, such as widespread loss of species, famines and droughts, and swamping of heavily populated coastal areas by rising oceans.

Environment ministers from the Group of Eight industrialized countries and Russia backed the 50% target in a meeting in Japan last month and called for it to be officially endorsed at the G-8 summit in July.

The IEA report mapped out two main scenarios: one in which emissions are reduced to 2005 levels by 2050, and a second that would bring them to half of 2005 levels by mid-century.

The scenario for deeper cuts would require massive investment in energy technology development and deployment, a wide-ranging campaign to dramatically increase energy efficiency, and a wholesale shift to renewable sources of energy.

Assuming an average 3.3% global economic growth over the 2010-2050 period, governments and the private sector would have to make additional investments of $45 trillion in energy, or 1.1% of the world's gross domestic product, the report said.

That would be an investment more than three times the current size of the entire U.S. economy.

The second scenario also calls for an accelerated ramping up of development of so-called "carbon capture and storage" technology allowing coal-powered power plants to catch emissions and inject them underground.

The study said that an average of 35 coal-powered plants and 20 gas-powered power plants would have to be fitted with carbon capture and storage equipment each year between 2010 and 2050.

In addition, the world would have to construct 32 new nuclear power plants each year, and wind-power turbines would have to be increased by 17,000 units annually. Nations would have to achieve an eight-fold reduction in carbon intensity - the amount of carbon needed to produce a unit of energy - in the transport sector.

Such action would drastically reduce oil demand to 27% of 2005 demand. Failure to act would lead to a doubling of energy demand and a 130% increase in carbon dioxide emissions by 2050, IEA officials said.

"This development is clearly not sustainable," said Dolf Gielen, an IEA energy analyst and leader for the project.

Gielen said most of the $45 trillion forecast investment -- about $27 trillion -- would be borne by developing countries, which will be responsible for two-thirds of greenhouse gas emissions by 2050.

Most of the money would be in the commercialization of energy technologies developed by governments and the private sector.

"If industry is convinced there will be policy for serious, deep CO2 emission cuts, then these investments will be made by the private sector," Gielen said. To top of page

[kennynah]

action - reaction....newtonic law...

when we humans do unto ourselves a great dis-service of over speculating a necessary commodity like crude oil to such devastating level, there will be far greater negative global implications beyond very steep price inflation of basic staples.

nuclear energy is a very dangerous source of energy.... it is an opposite to a natural occurring event...the burning of the sun... what goes against nature is going against the grain of life...

sunday lah.... pre-dinner talk talk here...

[winston]

Oil Falls as Saudi Arabia Says Price Surge Was `Unjustified'
By Nesa Subrahmaniyan

June 9 (Bloomberg) -- Crude oil fell from a record in New York after Saudi Arabia's Oil Minister Ali al-Naimi said the surge in prices was ``unjustified.''

The gain in prices is being driven by non-fundamental factors, the state-owned Saudi Press Agency reported after a meeting between Al-Naimi and his Pakistani counterpart yesterday. U.S. gasoline rose to $4 a gallon at the pump for the first time, AAA, the nation's largest motoring club, said yesterday.

``The market overall remains bullish. It will take some time for the demand data to show a slowdown,'' said Victor Shum, a senior principal at consultants Purvin & Gertz Inc. in Singapore. ``There's an evaporation of optimism over the U.S. and global economic growth.''

Crude oil for July delivery dropped as much as $1.42, or 1 percent, to $137.12 a barrel in after-hours electronic trading on the New York Mercantile Exchange, and traded at $138.19 at 3:40 p.m. in Singapore.

The contract rose $10.75, or 8.4 percent, to $138.54 in New York on June 6, the biggest-ever gain in dollar terms and the largest percentage increase since June 1996. Oil reached a record $139.12 during the session as the dollar weakened after the U.S. unemployment rate grew the most in two decades and Morgan Stanley said prices may reach $150 within a month.

Oil has surged to records this year partly because investors have turned to commodities as a hedge against the falling dollar.

``I am very suspicious that gasoline demand in the U.S. will be as strong as usual this summer,'' said Hirofumi Kawachi, a senior energy analyst at Mizuho Investors Securities Co. in Tokyo. ``This is because of the tremendously higher prices they are paying.''

Pump Price

The pump price climbed 20 cents on June 6 from three weeks earlier, according to oil-industry analyst Trilby Lundberg's survey of 7,000 filling stations nationwide.

``The rise in crude oil is going to continue for some time,'' said Bob Takai, general manager of commodity derivatives at Sumitomo Corp. in Tokyo. ``OPEC is not going to do anything,'' he said in a television interview.

Strong physical demand for oil products and increasing investor concerns about longer-term crude prices make oil a better hedge against inflation than alternatives such as gold, Sumitomo's Takai said.

The Organization of Petroleum Exporting Countries pumps about 40 percent of the world's oil. A stronger U.S. dollar may prevent oil from reaching $150 a barrel, President Chakib Khelil said June 5.

Saudi Arabia is increasing production 3.3 percent this month in response to rising demand and following a request from the U.S.

The nation will raise daily output by 300,000 barrels to 9.45 million, Al-Naimi said May 16.

[kennynah]

considering that on fri...it went limit up and the day before another $5.50 up... dropping by some $1.50 today is child's play man... but i do hope it plummets in another 30 minutes when London comes online...