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OilPrice.com Weekly Oil Market Update: 03/1/2010 - 03/5/2010
Via OilPrice.com
U.S. Jobs Data Propels Crude Oil Above $80 a Barrel
Oil Market Summary for 03/01/2010 to 03/05/2010
Jobs data indicating that U.S. economic recovery might be picking up steam finally pushed crude oil futures decisively over the stubborn $80 a barrel threshold. Nymex’s benchmark West Texas Intermediate settled Friday at $81.50 a barrel, a seven-week high, after topping $82 in intraday trading.
An unchanged unemployment rate of 9.7% and a smaller-than-expected drop in payrolls propelled both stocks and commodities higher on Friday. Earlier in the week, industry job data also came out better than expected, pushing crude just above the $80 a barrel mark.
Any improvement in the labor market would translate into more commuter driving, more vacation driving this summer and generally greater energy demand, analysts said.
The jobs figures trumped other data, such as increases in inventories, that normally dampen oil prices. Oil inventories rose by 4 million barrels in the week, well ahead of consensus forecasts for a gain of only 1 million barrels.
Remarks by Chinese Premier Wen Jiabao at the opening of the National People's Congress on Friday expressing continued support for the economy also pushed prices higher, analysts said. Wen said the economy was on track to grow 8% this year. Recent efforts by Chinese authorities to curb bank lending have led to uncertainty about Chinese growth prospects.
But the situation in Europe with Greece’s fiscal crisis weighing on the euro continued to unsettle markets. Greece successfully placed a bond issue this week, but questions remain about the stability of the euro zone. The euro inched above the $1.36 mark in late Friday trading.
Oil prices also overcame a nearly 4% drop in natural gas prices on Thursday. The benchmark Nymex contract fell 18.2 cents on Thursday to settle at $4.575 a million British thermal units. Traders concluded that cold winter weather was now over, analysts said.
The draw-down in gas storage was only 116 billion cubic feet in previous week, less than the consensus forecast, so that total gas storage remains above the five-year average. Natural gas futures settled only marginally higher on Friday at $4.595/MMBtu.
Natural gas price trends are more often decoupled from crude oil trends as increased output of shale gas in the U.S. creates a different supply and demand situation.
The Commodity Futures Trading Commission has begun flexing some enforcement muscle in energy futures trading. The CFTC fined UBS for exceeding position limits in heating oil and natural gas contracts, and the U.S. Oil Fund, an exchange-traded fund, said the agency may charge it with wrongly reporting some trades.
But the UBS fine was quite small, only $130,000, and the fault in the USO reporting may lie with the broker or clearing house. Even so, commentators said these may be early signs that the CFTC will be following through on its pledge to police futures trading more carefully.
By Darrell Delamaide for OilPrice.com who focus on, Fossil Fuels, Metals, Crude Oil Prices, Alternative Energy and Geopolitics To find out more visit their website at: http://www.oilprice.com
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A $ 130k fine for UBS fraud is an absolute joke and no incentive to discontinue the oil futures trading ponzi. Not even the SEC can match CFTC's lack of vigilance against fraud . Just more wrist slapping.
Penalties have to be meaningful to even put a small dent in the fraud going on with commodities trading. And CFMA 2000 needs to be repealed......it's a ticket to steal.
"Any improvement in the labor market...."
Bingo.
People need to wrap their minds around the nature of oil and its role.
Oil controls everything. Sit everything else aside and thnk carefully about it before typing on your keyboards (which are made from oil).
Oil is not about "There's Plenty Of Oil; we just have to get permission to go get it".
That's not the equation. It's not how full the tank is. It's the narrow diameter of the hose to the tank.
It's not supply and demand. It's PRODUCTION and demand. You can have infinite supply which can only be tapped at a low rate and "supply and demand" means something vastly different than people realize.
Production is a complex equation. It's not just how many new wells in new fields are drilled and pump. You also have to subtract the falling production in the old wells as they drain their fields.
The most scary number in the world today is -5.1%.
That is the avg rate of decline in production from fields currently in production. When multiplied times today's 78 million barrels per day of production it adds up to essentially 1/2 of a Saudi Arabia's production must be replaced each year -- and that's not happening.
Bad things are coming.
That is the formula.
I wonder where do those who say there is no such thing as peak oil, base their statement.
I am afraid that when it becomes obvious it will be too late.
The world at large should look for alternatives before it's too late. My take is that only by utilizing extreme chemistry combined with quantum physics one can find ways to create natural recourses cheaply and in abundance from the basic elements.
We create real diamonds. don't we?
http://www.cbsnews.com/stories/2004/05/10/60II/main616666.shtml
Brains of the world, here is your challenge.
Its is already obvious and already too late
Replacing the energy represented by oil is
the greatest challenge ever faced by mankind
Millions and millions of years of sunlight
integrated into an easily transported,energy
dense liquid fuel....
Only a miracle energy find at this point can
save us.So don't count on that
The US, no doubt, will use military might to
stave off disaster. No telling how that will go. At best, we will have 15 to 20 years of hell while we furiously start building nuclear reactors
Anyone who believes we can biofuel\PV cell\wind mill our way
out of this one is delusional
California alone uses 20 billion gallons of gas\diesel a year.
Mexican and Venezuelan are already officially
in collapse, our 2nd and 3rd biggest suppliers
Its really difficult to comprehend the magnitude of the numerous problems that now
confront us, but that is what happens when
problems are not solved as they present themselves.
Anyone who wants to understand the magnitude of the energy crisis we now face, I recommend the following:
Anything by Professor Deffeyes
http://en.wikipedia.org/wiki/Kenneth_S._Deffeyes
Also Matthew Simmons (twilight in the desert)
http://en.wikipedia.org/wiki/Matthew_Simmons
Resources are cited in the wiki docs
The article "the stonewalling of peak oil"
which is an interview with Bob Hirsch,
is a must read
http://www.aspousa.org/index.php/2009/09/interview-with-bob-hirsch-the-s...
This is a no win situation. Better economy equals higher oil prices. Lower dollar equals higher oil prices. Less available oil equals higher oil prices. That is why we are strategically positioned throughout the middle east and we aren't going to leave. WMD? Al Qeada? Iran Nuclear?
Since everythng in the markets today is nothing more than gambeling....from LV I would put the odds of higher oil prices due to faster economic growth at 4:1against. Have fun at the tables I'm glad you decided to play
When we have oil cooperates who continuously corrupt our government from new technology development for new and cheaper energy. Sadly enough, there is nothing we can do but to pay the price for it. Because the government and cooperates are too powerful for the market to handle.
There is a large supply of oil now and if carry trade speculation and the rest wasnt going on oil would be $ 60 at most now. I think I have heard when oil hits about $ 85 and the average gallon of gas is about $ 3 is the point it really drags on the economy. These speculators are only going to make the double dip happen sooner rather than later.
>>
I am afraid that when it becomes obvious it will be too late.
>>
It's already too late. Oil runs the huge tractors and combines that plant and harvest the 10s of thousands of acres. None of them run on nat gas or electricity and they never will. Power requirements are so enormous that only oil can fuel them.
When they stop, and they will, soon, those fields don't get planted or harvested.
The estimate is that without oil this planet can feed 900 million people.
Present population: 6.8 billion. Your goal is to be one of the 900 million. More or less none of them currently live in cities, which will starve in a matter of days when the trucks stop stocking shelves.
Added bonus to get really scared, have a look at this discussion on "the oil drum", a must read:
http://www.theoildrum.com/node/6248
only after reading that, come back here....
Victory Gardens are back in style. Start planting something, here is a good place to start: www.seedsavers.org
Don't whine, become as self sufficient as possible, when the shit hits the fan you are on your own.
I hope the news helicopters will still be flying. I was too young to remember the LA Riots. The fallout from net oil exports drying up should be interesting to watch on T.V.
much too glum about energy : build Nuke plants ala France's 80 % electricity production.
(nice high paying jobs there so we probably will not do it, but oh well)
mine coal - gasification (ala Germany 1940's) makes all sorts of fuels and chemical bases.and we get 300 more yrs of carbon energy
seems USA has most of worlds coal supply so of course we will not use it.. or our large Nat Gas and Oil reserves (Anwar must be kept pristine LOL ..been to the N country helping map a gold mine and pal it's a cold hell)..
Mid Eastern sheiks
pay off our congress and eco lobby very well to keep us dependent on imports-( most of the sane ZH readers know this anyway.)..add solar- wind & geothermal as they will always be drops in the energy bucket but people seem to like the idea of a non- nuke non- carbon energy gotta wonder what kind of humans are so.. well oh .. Stupidly stuck with ideals that facts never penetrate (ala globull warming alarmists) final idea = plenty of methane hydrates in the oceans that adds even more centuries to the energy production scheme.
The earth can support our human populations energy needs..but then many of us will reach our limit on having to deal with idiots who worship Gia..or marx/lenin..I am liking dogs alot better than the walking zombie protomaxistprogressives I am forced to live with on this planet.. add in screwed up islamists and our NWO elite bankers . and maybe no energy is the way to go after-all
peace and love.and 12 yr old single malt scotch whiskey on cold winter nights.
Dan
look at a chart- decline rates- seriously? Every spike has a kurplunk... (especially in world adjusted real prices). Ask some NG players about decline rates- oh I'm sorry we found shale....
Decline rates matter- but nobody drills unless the marginal cost supports it... ever heard of a rig count? Oil rises then falls because every player (especially Russia right now) doesn't have the discipline not shut off the valve. Real Gasoline prices are too high for demand- type in DOE on your bloomberg and have a look at implied oil demand since 1988. ya we peak a few years back... demand has peaked before production- just ask PBR who likes oil at $60---- and that include their deepwater projects :)
Not saying the price wont rise due to inflation, but "peak" oil is dumb... The demand is not and never will be inelastic- trade will stop before real oil prices can sustain at a level to get to peak oil...
Peak oil comes from minds that have "peaked."
Yes oil is important- but seriously? Peak oil- decline rates? c'mon ask Natty players about that story.... see "Shale kicked my ass."
Seriously, inflation adjusted prices are a function of marginal cost and marginal demand (it is called math and ROI for those nimbasils who actually think OPEC affects the price of oil)- look at your dam bloomberg DOE- implied demand since 1988. Peak oil cant happen- oil spikes and then kurplunks. Demand is imperative and NOT INELASTIC. Would you buy more oil because it is expensive? WTF? This is not water in Africa, but driving 15% less.....Trade will end before oil can drain itself... Look at an oil chart since 1888... up down up down- c'mon somebody read a book or two.... Technology has always outpaced demand...
Peak oil is for minds that have "peaked" or they are too ignorant to use non-linear math. Ever heard of a rig count? everybody cheats and F*** themselves. We have OPEC bc of game theory- produce- produce- produce- regardless of demand, while some other person cuts. The Fed and printing money/ interest rates/ marginal cost of lending will always move the price of oil more than "decline rates." Believe it or not decline rates were in the 30-50% back in the 30's...
However, Scotch is required in all situations
All of economics is based on human behavior using resources that increase in availability with price.
How does that work for oxygen? If oxygen was scarce, would economic models mean anything for it? No. Because people would be dead.
Thinking in terms of how economics works is a failed starting point when you are dealing with oxygen, or oil. When it's something that kills you in a matter of weeks when it is lacking, economics is not a player.
See, it's a matter of speed. The gradiose and glib presumptions that "we'll adjust" or "we'll drill more wells and produce more as price goes up" all presumes that the trucks continue to bring food to your mouth during those years it takes to drill those wells. There is no rule of the universe that says all this happens in a nice, adaptable, comfortable rate. That -5.1% number above is far more likely to steepen to -20 or -30% because the enormous surge in rig count is draining those fields so rapidly. When they go to zero, they will do so suddenly.
That's why economics fails. Economics means nothing if you can't eat.
My argument is against the simplistic decline rate assumption, not pro economics; economics is all theory- on a good day. Why would anyone buy oil that is going to be used next month if you are betting on peak oil in 20 years? That makes sense? Oil is not oxygen... and its demand is not inelastic;like I said, go to your bloomberg and look at implied demand... it has been down for 3+ years. My point is that the rate is not comfortable, not linear, and entirely biased- look at natural gas... we do drill horizontal now... this is not the 30's. Where on earth do you get surge in rig count? Um have you been to BHI's website? If one believes in "peak oil" they should buy corn- freeze it for 2.5 centuries- Oil is a MEANS NOT AN END. One only needs OIL to get the corn into his mouth... of course with oxygen and beer... I honestly think oil is a great LT investment- but I just cant stand ignorant sheep. If peak oil is real... it wont be because of decline rates- it will happen because of demand, and population; which both would tell you to be buy it before it gets scarce- which is not Cushing OK 2010... People wrap their minds around simple assumptions... the real world is not simple or linear... at the end of the day someone pays to drill the oil- if crap hits the fan as hard as "peak" oil would imply our monetary system is F*** (which it may be...) so just buy gold- it at least doesn't rot in a tanker after 4 years... which you could use to buy the oil in the future when it is so scarce. BTW if it declines and the price rises- that would fit into my definition of economics....
Perhaps demand is being driven by more people living in their cars. The pun is deliberate.
Well, at least you're trying to think about this. You haven't been able to embrace the entirety of the extrapolation, but you're trying.
Oil's elasticity of demand implies that there is slack. That the whole world is taking Sunday drives that they could cut out. It implies that people drive places for fun on a daily basis rather than perhaps once or twice a year.
There is no slack. And there doesn't have to be a price spike before a scarcity Apocalypse. There. See? If economics can be wrong, it can be wrong big. The price of oil doesn't have to spike before the trucks suddenly don't show up at the grocery store. Of course, this depends on the definition of "spike". If you have an hour of notice, and NYMEX is closed, maybe there's no spike. If you have a day's notice and it's Sunday, maybe there is no spike. A week would get you a spike, but what good would a week of warning be?
If you were the Saudis and you knew you were going to be empty in 2 years, you would be utterly insane to tell anyone. If you told anyone, there is no way countries would trust some UN agency to "divide fairly". They (whoever) would invade to "ensure fairness". The result, huge numbers of Saudis die in the invasion. How do you, as the Saudi leadership, prevent that? By keeping your mouth shut and never mentioning it until there is so little left that there's no point in anyone invading.
As for rig count, Russia right now is drilling literally THOUSANDS of wells PER YEAR to hold production up in western Siberia as those fields go dry.
People thinking about these things in a decades perspective are hugely optimistic.
Ooop, western Siberia, not Eastern. My mistype.
The jobs lost, aren't coming back. And more to go, big time.
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