Oil prices rise above US$60 a barrel

Oil prices rose on Tuesday as many Asian stock markets bounced back from a weeklong slide, and strategists pointed to robust demand for gasoline and falling petroleum inventories.

``Gasoline demand is now much stronger than expected than at beginning of this year. This should be pushing prices up further,'' said Tetsu Emori, chief commodities strategist with Mitsui Bussan Futures in Tokyo.

Light, sweet crude for April delivery rose 28 cents to US$60.35 a barrel in electronic trading on the New York Mercantile Exchange, late afternoon in Singapore. The contract fell 2.5 percent Monday to settle at US$60.07 a barrel, the lowest for a front-month contract since Feb. 21.

April Brent crude added 31 cents to US$60.85 a barrel on the ICE Futures exchange in London.

Turmoil in global financial markets had weighed on oil prices, partly due to some concerns that global growth may be slowing. But as Asia markets recovered Tuesday, traders also bid up oil contracts.

In their reports to clients, several investment banks were unfazed, pointing to fundamental strength in the oil market.

``Our view is that last week's equity gyrations are nothing more than a healthy correction and there is certainly little reason for markets to begin factoring in any significant weakening in commodity market fundamentals as a result,'' said Kevin Norrish at Barclays Capital.

Global demand for oil remains strong, said Victor Shum of Purvin & Gertz in Singapore, amid forecasts for strong seasonal demand for gasoline in the upcoming peak summer driving season in the Northern Hemisphere.

The U.S. government reported last week that stockpiles of gasoline and distillates, which include heating oil and diesel fuel, dropped by a larger amount than analysts had forecast. Meanwhile, demand for products over the last four-week period rose by 7.5 percent from the same period last year.

Escalating tensions between Iran and the United States are also supporting oil prices. Washington is pushing for tougher U.N. sanctions on Tehran over its failure to comply with demands to halt its uranium enrichment programme.

Iran however said Monday that it would take part in at least part of an international conference on Iraq in Baghdad with the United States, to discuss calming the conflict in Iraq _ if attended by both countries, it would be the first public U.S.-Iranian meeting in nearly three years.

In other Nymex trading, heating oil futures rose 0.54 cent to US$1.7302 a gallon (3.8 liters) while natural gas prices rose 4.1 cents to US$7.295 per 1,000 cubic feet.

Oil prices reduce US trade gap

Helped by lower oil prices, the U.S. trade deficit improved in September after hitting an all-time high the month before. The imbalance with China, however, soared to a record as retailers stocked their shelves for holiday shoppers.

The overall deficit declined 6.8 percent to $64.3 billion in September from a record $69 billion in August, the Commerce Department reported Thursday.

The drop of $4.7 billion was better than expected and represented the biggest one-month decrease in more than five years.

The improvement came from a 10.5 percent fall in the U.S. foreign oil bill, which dropped to $26.3 billion. The volume of imports fell, and crude oil prices had a big decline. They now are about $60 a barrel after hitting $77 a barrel in the summer.

Analysts said the improvements should continue if oil prices do not spike again. But they cautioned against expecting any quick fix in a deficit still on track to set a record for the fifth-consecutive year.

``There is little in this report to tell me that once we get past the petroleum effect, there are any basic changes in the trade situation,'' said Joel Naroff, chief economist at Naroff Economic Advisers. ``With the Congress changing hands, the political pressure on the administration to do something about China is likely to build.''

The deficit with China set a record of $23 billion in September. It is running at an annual rate of $228 billion this year, on pace to surpass last year's $202 billion; that figure was all-time high for any U.S. trading partner.

The big increase in September came from higher imports of Chinese cell phones, televisions and toys as U.S. retailers stocked up for the holidays.

Democrats took over both the House and Senate in Tuesday's elections, and many had criticized the Bush administration during the campaign for not doing enough to protect U.S. workers from unfair foreign trade practices. China often was singled out.

``Clearly, the U.S. needs a serious review of its trade policy. The `hands-off, anything goes' trade policy employed by the Bush administration has not worked,'' Rep. Sander Levin, D-Mich., said Thursday.

The expected new House speaker, Rep. Nancy Pelosi, D-San Francisco, has been an outspoken critic of China's human rights record; other Democrats are pushing legislation that would penalize China unless it allows its currency to rise in value against the dollar as a way of making U.S. products more competitive in China.

The large decline in oil helped push total imports down 2.1 percent to $187.5 billion in September. U.S. exports, helped by a big jump in sales of commercial aircraft, rose 0.5 percent to an all-time high of $123.2 billion.

Source: www.mercurynews.com

Market Instability

What is it that causes a major or even a minor crash in the stock market? Or even anything else? Daily there are events that move the market slightly either up or down. By slightly I mean one or 2%. These fluctuations occur naturally within major and minor trends again either up or down. Currently the price of crude oil has an important role. Housing/interest rates another and consumer purchases a third. These are the big three forces today. They change with the times.

So far none of them has influenced the overall major upward trend of the past 3 years. From a place almost no one can fathom comes a completely strange event that causes a change in the major trend.

The assassination of a minor Arch Duke set the flames of war for World War One. Certainly this individual act was not the reason for that terrible conflagration. Big events such as Hitler’s invasion of France and Japan’s bombing of Pearl Harbor had many tiny acts of aggression not seen to have caused such flagrant behavior.

What might seem to be the major overt act has fingers of instability reaching into areas we cannot even imagine. An important event may not trigger anything and yet an insignificant one may reach deeply into the fabric of our economy starting ripples that become a tidal wave. The failure of a small bank in North Dakota might start a series of defaults that feeds upon itself ultimately tearing into the structure of the world banking community.

Suddenly, very suddenly, a financial crisis of dramatic proportions occurs with defaults in trillions of derivatives. All other phases of world economies are sucked into it and become part of the tumbling mass. It becomes a self-feeding event that is now an avalanche that none of the world’s great financial geniuses can stop. Markets collapse world wide.

Today we look to the 3 important avalanche potentials (oil, housing and the consumer) and wonder what is holding up the market. Yet it continues its upward bias. Some far off event may occur that lights the fuse of the next recession. And don’t think there will not be one. The markets of New York, Tokyo, London, Moscow and Beijing are all connected at the hip. Recessions are as sure as the sun in the morning and the moon at night.

An investor must guard his savings during these downward periods. A zero return on investment is better than a negative return. Do not think to be able to recognize the event that will turn the market down. That is almost impossible.

Learn to recognize the major market trend and be in cash or bonds when it turns.

Al Thomas' book, "If It Doesn't Go Up, Don't Buy It!" has helped thousands of people make money and keep their profits with his simple 2-step method. Read the first chapter at http://www.mutualfundmagic.com and discover why he's the man that Wall Street does not want you to know.

Oil Prices Drop to $61 a Barrel

Oil prices fell to $61 a barrel in choppy trade Tuesday as brokers weighed a healthy supply-demand balance against the possibility of an OPEC production cut.

Prudential Financial broker Aaron Kildow said oil prices bounced up and down due to the lack of a clear signal from the Organization of Petroleum Exporting Countries, which recently held its output quota steady but whose members have hinted of a possible cut.

Tuesday's retreat was also a sign of expectations that weekly government data scheduled to be released Wednesday will show U.S. supplies of gasoline and heating oil rose last week.

Kildow said that since the late-summer selloff, pension, mutual and hedge fund investors have become somewhat more conservative, and that they are quicker to take profits after a runup.

After rising as high as $62 a barrel, light sweet crude for November delivery reversed course late in the day on the New York Mercantile Exchange to settle at $61.01, a decline of 44 cents.

In London, Brent crude slid 68 cents to settle at $60.12 a barrel on the ICE Futures exchange in London.

Nymex heating oil futures rose less than a penny to settle at $1.6578 a gallon while gasoline prices fell less than a penny to settle at $1.4918 a gallon.

Nymex natural gas futures edged a nickel higher to settle at $4.526 per 1,000 cubic feet Tuesday. The contract slid 15.2 cents Monday amid record U.S. supplies to settle at $4.475 per 1,000 cubic feet the lowest close since Sept. 26, 2003.

The Organization of Petroleum Exporting Countries recently reduced its demand forecast for the remainder of the year because of weaker demand in the U.S. However, some cartel members have insinuated that oil prices below $60 could prompt a production cut, and Eurasia Group energy analyst Greg Priddy said in a research note Tuesday that Saudi Arabia and Kuwait might even make unofficial cuts to their production.

The seasonal softening of demand comes as U.S. inventories of gasoline stood last week at 207.6 million barrels, 6 percent more than last year and slightly above the five-year average for this time of year.

Source: www.abcnews.com

Alternative Fuels

Alternative fuels, as defined by the Energy Policy Act of 1992 (EPAct), include ethanol, natural gas, propane, hydrogen, biodiesel*, electricity, methanol, and p-series fuels. These fuels are being used worldwide in a variety of vehicle applications. Learn more about how the EPAct Program works by going to the EPAct Web site.

Using these alternative fuels in vehicles can generally reduce harmful pollutants and exhaust emissions. In addition, most of these fuels can be domestically produced and derived from renewable sources.

Use these alternative fuels pages to learn more about the fuels, their benefits, and how they can be used in personal and fleet vehicles. You can compare alternative fuels properties, including benefits, environmental impacts, and more. To get regional alternative fuel pricing data, got to the Alternative Fuel Price Report.

Alternative Energy Investments

The oil market is not the only one looking up. Alternative fuel stocks are also attracting many investors. Because oil and gas are expensive, Americans are looking for cheaper nonfossil fuel and that demand is boosting the alternative fuel stocks as well. This is especially good for anyone who cares for the environment -- the greens. If you consider yourself an environmentalist or a preservationist, this is perfect for you, for you are now able to support efforts to preserve the environment while at the same time profiting from those efforts. It's a win-win situation. Consider this: Pacific Ethanol Inc., a small ethanol-producing company started in 2003 by Bill Jones, the former secretary of state for the state of California, has trebled its stock price on NASDAQ to about $30 a share within a year of going public in March of 2005. Like many other similar renewable fuel start-ups, millions of dollars in private equity money are being thrown at Pacific Ethanol like the world is coming to an end. Billionaire Bill Gates, the chairman of Microsoft, is one of those investing in renewable fuel stocks. Gates' investment company, Cascade Investment, has agreed to pump $84 million in Pacific Ethanol.

The U.S. government has recognized alternative fuel as the fuel for the future and has included a number of tax incentives in the Energy Policy Act of 2005, the energy law signed in the summer of 2005, to spur growth in the alternative fuel sector. If you haven't already, you should give alternative stocks a try as it will make you feel morally stronger. It's been nearly three decades since efforts to promote alternative fuel floundered after the 1973 oil crisis, but it's making a comeback. Still, alternative fuel remains a small industry, with small cap companies dominating. Since 2005, 15 of the 36 companies in the WilderHill Clean Energy index have made huge profits. That includes hydroelectric power and wind energy, solar energy, and fuel cells.

Some of the most successful companies in the renewable fuel sector are huge conglomerates, like General Electric and Germany's Siemens, and also big oil companies, like BP, that are hedging their bets. Investing in these companies offers a chance to own a clean energy stock. Here's some information about GE worth knowing: It made close to $2 billion in sales from production of wind-powered turbines in 2005, treble what it made from that business unit in 2002. However, that's only 1 percent of GE's revenues.

There's a lot of hope that alternative fuel technologies developed by some of the smaller companies will become commercially viable and help support the sector. As a result, stocks for these companies are expected to soar. WilderHill Clean Energy Index gained 26 percent in the past 12 months alone, compared with 50 percent for oil. That's not bad, considering this is not an established sector in the United States.

Moreover, since continued oil supply is uncertain, a lot more consumers are going to turn to coal, which is abundantly available in the United States, China, and India. Coal used to be frowned upon because of its dirt, but technology has improved enough to make it just as clean as other fuels. Shrewd investors could buy shares in U.S. coal producers, including the two biggest, Peabody Energy Corp. and Arch Coal Inc., both based in St. Louis, Missouri. Coal companies have profited from the current oil boom.

Investing in coal doesn't mean that Big Oil isn't safe anymore. It only means that you are on much firmer ground when you have a diversified portfolio. If you look at both types of stocks, the difference isn't large. Exxon Mobil, for instance, returned 36 percent to its shareholders in market appreciation and dividends in 2005 and BP returned 21 percent. Peabody Energy stockholders, meanwhile, did far better in the same time period. They more than doubled their money, and Peabody shares have risen more than three and a half times since the company's initial public offering in 2001. Arch Coal stock returned 65 percent in 2005 as well.

Coal producers have benefited from increased demand from power plants and steelmakers in the United States, China, and India. Massey Energy Co. of Richmond, Virginia, for instance, said its average selling price for coal used in steel-making jumped 38 percent in 2005. Consol Energy, Inc. of Pittsburgh, the third largest U.S. producer, plans a $500 million mine expansion to keep up with orders.

Soaring prices for natural gas have given coal demand another lift. Many electric power plants have switched from gas to coal, which costs about half as much. In the spring of 2006, Duke Energy Corp. closed on a deal purchasing Cinergy Corp. for about $9 billion, in large part because of Cinergy's coal-fired plants.

Back to oil, we've also seen that the market has been good to minnows as well. In fact, some smaller oil companies also have outperformed the giants. For instance, Apache Corp. of Houston produced a 12-month total return of 51 percent for its stockholders, helped by increased first-quarter selling prices of 51 percent for crude oil and 11 percent for natural gas. Apache recently bought property from Shell, BP, and Exxon Mobil and its profit rose tremendously in 2005. Oil transport companies have not been left behind. Overseas Shipholding Group of New York made an acquisition in 2005 that made it the world's second-largest oil tanker company. The bigger fleet, combined with higher tanker rates, boosted the company's 2005 earnings by about 40 percent. The world's biggest owner of oil tankers, Teekay Shipping Corp. of Vancouver, Canada, capitalized on high energy prices in yet another way. In the fall of 2005, Teekay raised $132 million through the public sale of a 20 percent interest in Teekay LNG Partners LP, whose ships carry liquefied natural gas and crude oil.

Is it too late to buy energy stocks, large or small? BlackRock, Inc., which manages $391 billion, doesn't seem to think so. It reported to the SEC in late summer of 2005 that after $870 million in purchases, it owned stakes in Peabody, Arch, Consol, and Massey ranging from 3.3 to 8.8 percent. The money manager also has a 4.7 percent stake in Newfield Exploration Co., an oil-and-gas company that returned 49 percent to its shareholders in 2005.

The bottom line is this: The world needs a lot of energy, but supply is getting tighter; an "überspike" in oil prices is in the making and the potential rewards for the savvy energy investor are huge.

George Orwel is an Oil Analyst and Senior Writer for both the Oil Daily and Petroleum Intelligence Weekly. Previously, he covered the oil market for six years as a staff reporter for Dow Jones Newswires. Orwel has appeared on key media outlets, including CNN, BBC, and NPR, and contributed articles to the Los Angeles Times and the Christian Science Monitor, as well as other publications. He lives in Brooklyn, New York.

Article Source: http://EzineArticles.com/?expert=George_Orwel

OPEC Pushing Envelope on High Oil Prices and They Know It

OPEC realizes that it is pushing oil prices too high and it also realizes that the world demand is going up and if it does not move quickly to keep prices lower and keep production high then it is obvious that there will be problems down the road for their economies in the Middle East as well as the world's first world economies.

OPEC also realizes that it is pushing the envelope on high oil prices and they realize that if they do not keep these prices lower the new technologies and research and development dollars will be from thrust into the market and propel a future without oil.

We can already see in the United States with the new initiatives for alternative fuels that the bankers and venture capitalists are putting new monies into innovative technologies, which will use alternative fuels, hybrids and propulsion.

If OPEC fails in keeping prices low for sweet crude oil then in the future they stand to lose out. Currently with gasoline prices at three dollars per gallon and oil barrel prices approaching $80 it is quite obvious that biofuels such as Biodiesel and Ethanol are starting to make a lot more sense.

If OPEC is to keep their stranglehold on world markets for energy and fuel then they will need to consider the price point at which they are offering it to the rest of the world. If oil prices get too high and economies stagnate there will be less purchases of oil and they will have shrunk their overall pie for demand.

Indeed this would keep prices high but volumes low and therefore they will make less money in the end. Please consider all this in 2006.

Lance Winslow