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OilPrice.com Weekly Oil Market Update: 03/22/2010 - 03/26/2010
Submitted by OilPrice.com
Crude oil prices still found stubborn resistance above the $80-a-barrel level amid concerns about demand while natural gas continued its decline, to below $4 per million British thermal units, as burgeoning supply from unconventional sources depressed prices.
The natural gas Henry Hub benchmark futures settled Friday at a nearly six-month low of $3.87, down 31% so far this year from above $6 in January. Natural gas demand experiences a lull at this time of the year as warmer weather reduces heating use but the need for more electricity from gas-fired plants to power air conditioners is still weeks away.
Increased production of shale and other unconventional gas in the U.S. has pushed down prices. Rig counts have been increasing in spite of the slack off in demand, though the decline in prices has already prompted Chesapeake Energy, a major producer of shale gas, to consider suspension of production at some rigs.
Crude oil futures declined for the third day in a row on Friday after the U.S. Commerce Department revised its estimate for fourth-quarter GDP growth downwards, to a 5.6% annual rate from 5.9% previously, adding to concerns about demand for oil.
Gains by the euro against the dollar on Friday after European Union leaders once again affirmed their readiness to stand by Greece during its fiscal crisis were not sufficient to offset the bearish sentiment regarding oil demand.
Earlier in the week, a bigger-than-expected increase in oil inventories reported unsettled the market and pushed prices back down. The U.S. Energy Information Administration said crude oil inventories rose 7.25 million barrels in the week, much higher than consensus forecasts of 1.67 million barrels.
The benchmark West Texas Intermediate contract settled at $80 a barrel on Friday, compared with $80.58 last Friday.
Not everyone was gloomy about demand. The London-based Centre for Global Energy Studies was optimistic in its monthly report for March, saying demand could return to pre-financial crisis levels this year. But the research group sees new sources of supply keeping a damper on prices.
Non-OPEC producers are now supplying 1.5 million barrels a day more than they were before the crisis. Although OPEC is currently supporting prices by restraining output, the CGES said, spare capacity in the cartel has increased to 6 million barrels a day from 2 million bpd before the crisis. In addition, OPEC members have increased production of natural gas liquids by 500,000 barrels a day, a further damper on upward price pressure for oil.
The Commodity Futures Trading Commission report on traders’ positions indicated that non-commercial traders reduced their net long position -- which anticipates an increase in prices – to 111,919 lots in the week ended March 23 from 124,143 lots in the previous week.
Source: http://www.oilprice.com/article-crude-oil-still-stuck-at-80-natural-gas-falls-below-4-dollars.html
By Darrell Delamaide for Oilprice.com who focus on Fossil Fuels, Alternative Energy, Metals, Oil Prices and Geopolitics. To find out more visit their website at: http://www.oilprice.com
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Oil needs to move one way or another in this trading range.
If, by chance, oil crashes below $75 this summer, then it will be painfully evident that the "Peak Oil" story will go down as one of the greatest scam stories ever told on Wall Street.
With CRB Index locked in a downtrend and Natural Gas in a virtual death spiral, the evidence is now leading towards the oil bears at the moment.
No, falling energy prices are confirmation that demand destruction is now here to stay, at least for developed economy's, and it is the lack of spare global oil production capacity that is reducing demand (and thus price) in the first place...
Demand from developing nations is keeping the price of energy too high for the very nations that require a return to price equilibrium that will allow economic growth and with it, credit expansion to service the debt liabilities within the system. If the price of energy cannot fall to meet the equilibrium, economic activity will continue to fall and theerfore, so will demand for energy.
You are making the same mistake every energy cornucopian makes, "If the price of oil falls then that can mean only one thing, excess supply". Better to think of it like this.
If supply cannot meet demand in economy A (developed), prices rise. If the price of energy rises beyond the point of economy A's price equilibrium, demand falls. But when 2 billion new energy consumers in economy B (developing) now have the purchasing power to consume the increased market supply created by economy A's reduced demand, the price of energy cannot fall far enough for economy A to return to an energy price equilibrium.
I have often been accused of living on another planet but hey, "they" are right. We are not experiencing a global credit crisis, this is a global energy crisis. Falling demand is just as frightening to me as $100/oil as in both cases, the result will be the same. Economic meltdown.
Don't be an idiot.
Refusing Peak Oil means that you propose that exponential growth in production can be sustained indefinitely.
Peak is inevitable.
"Crashes" below $75?? WTF...oil was $20 freakin a barrel a few years ago, jack...you've capitulated to $75??
Oil is the most important raw material of the modern world, used in plastics and chemicals in general. It is also the most important source of energy in the modern world.
So we can understand why the modern world is in trouble:
http://blogs.oilandgasinvestor.com/guests/files/2009/07/nominalandinflat...
In terms of 2008 dollars (inflation adjusted), the price of oil was under $40 in 95 percent of the time between the years of 1986 and 2003 (when George W. Bush had the brilliant idea of starting total war in the Middle East).
But that good old 17 years are over. Now we live in a world where crude oil never will go bellow $60 again. The Oil Civilization is in great trouble...
Don't forget to throw in some kudos for CFMA, signed into law by Clinton in December of 2000......a month before he was out of office.
The "Enron Loophole " ( as CFMA is historically known ) has other loopholes that still exist. Oil futures trading is one of them. Oil producers/trading cartels have "cleaner" ways of making big bucks....whether they are moving product or not. It's like throwing shaved dice.
Abuses and manipulation in the commodity trading arena have been legendary since the days of Rockefeller. But today it is at a whole new level. These non-end-user-futures boyz make the mortgage bankster thieves look like stupid street mutts. Lloyd didn't get to lead the squid squad because he was ignorant on commodities, that's for sure. That's his main game.
At $ 3 / gal plus, the game will get more risky......so I see a back off coming into play soon. Manufactured demand projections meet reality sooner or later.
Amen Zina, the infinite growth economic model is over and will never return... I would appreciate if you checked out a little theory of mine that I posted in the general forums under the title What is money? and let me know what you think ;-)
get a clue guys.
http://www.gasresources.net/Introduction.htm
http://thecannabischronicle.com/henryford.html
http://www.cheniere.org/correspondence/030110.htm
Three interesting reads. Pity that our American students are more interested in social networking than science.
Wow! I loved the idea of hemp biodiesel! I wanna work on a hemp biodiesel refinery!
I imagine that the soundtrack in the workplace will be something like it:
http://www.youtube.com/watch?v=P_4MvOsAiys
(Eric Donaldson and hemp biodiesel vapours in the mind!)
Whether oil is sourced from dead plant matter or embedded methane is utterly irrelevant.
All that matters is the new ratefore the we can flow it to the surface.
I have tried to educate people as to what Peak was for 7 or 8 years now. For some of the intelligent, it has literally taken most of that time over and over again, phrasing it different ways before they get it.
Peak is reality...it's happened in the US, it's happened in Mexico, in 54 or so of the top 65 oil producing nations, rising production, a peak, then inexorable decline in production.
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