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OilPrice.com Weekly Oil Market Update: 04/05/2010 - 04/09/2010
Submitted by Darrell Delamaideof OilPrice.com
Oil Market Summary for 04/05/2010 to 04/09/2010
Crude oil prices ended the week virtually unchanged from a week ago as optimism about demand warred with trepidation about historically high inventories in both crude oil and gasoline.
The benchmark West Texas Intermediate contract settled at $84.92 a barrel on Friday, only 5 cents ahead of the previous week’s Thursday close after surging above $87 a barrel early in the week and then declining for three straight sessions.
Bears noted that oil seemed unable to stay above $87 a barrel level, while bulls said that oil had tested the $84 level going down and found resistance.
The contango for oil increased during the week, suggesting continued downward pressure on short-term prices. Contango is when further-dated contracts have higher prices than near contracts. Contango widened to about 60 cents from 40 cents as near-term prices fell at the end of the week.
Analysts also noted that the gasoline crack spread – the difference between a barrel of crude and a barrel of gasoline – declined over the week, indicating soft demand for gasoline.
Crude oil inventories rose for the 11th straight week and gasoline inventories remained high for the season. Refineries increased capacity utilization to nearly 85%, giving rise to concerns that gasoline stocks would remain high if seasonal demand failed to materialize.
Crude oil has gained more than 70% over the past year, outstripping the fundamentals, on speculation that economic recovery would result in an increase in demand.
Energy prices are approaching a crossroads, analysts said. Either demand will in fact start reducing inventories and prices will head toward $100 a barrel, or inventories will remain at above-average levels and prices could head back in the direction of $75 a barrel.
Continued uncertainty about Greece’s fiscal crisis also dampened oil prices. Fitch downgraded Greek debt to BBB-, the lowest investment-grade rating, increasing the country’s borrowing costs even as it frantically tries to raise money in international capital markets. A Greek default and its knock-on effects in Europe could severely impact economic recovery and reduce demand for oil.
Source: http://www.oilprice.com/article-high-inventories-keep-crude-oil-prices-f...
By. Darrell Delamaide for Oilprice.com who offer detailed analysis on Crude oil, Geopolitics, Gold and most other Commodities,. They also provide free political and economic intelligence to help investors gain a greater understanding of world events and the impact they have on certain regions and sectors. Visit: http://www.oilprice.com
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So far, demonstration of a good control, we are back at just under 85$, hats off to the guys behind the curtain, but how long can you pull this off ? For those not following the front line: despite heroic efforts from the Russians (at several THOUSAND oil wells drilled to keep production barely leveled), worldwide production will be declining withing month. The Saudis are still a question mark...and there is nothing on the immediate horizon to boost production any significant amount. It's getting tough to maintain that oil price ...
They were saying stuff like the world would be out of oil by like 2002 years ago and that was even counting untapped oil.
LOL, there is plenty of oil for sure, but we will not be able to afford it, that is the reality. Oil over 85 $ is toxic to the world economy. What is gone, definitively, is the good, cheap stuff, that is simply a fact. Oil IS the systemic risk, forget about fiat money and even Gold, without cheap oil flowing in quantity, game over, end of the show. Get used to it.
Trading desks don't want the oil for delivery; the price per barrel increases purely from money flooding the market. QE is great, isn't it?
I know. They have even quit with all the Iran b.s. excuses and the rest to try to justify it. Without all the free investment bank money from the central banks oil would be no more than 60 dollars a barrel with where supply and demand is now.
Oil is the new currency! Hard to carry in your pocket though.
Oil below $70 = political chaos in Saudi Arabia.
Oil was at 35ish within the last few years and there wasn't a murmer from the Saudi populace.
The carnage in the KSA will occur when (IF) it becomes public knowledge that they are past peak production.
Their sheeple think the oil bounty has another 100 years to run.
Truth is closer to it doesn't have 10 years to run.
Once they understand that, it's a knife fight to the death in a dark room.
My bet is on a FF attack blamed on a neighbor to hide their oil decline.
Item A price goes up.
Question to Economists - What is causing price to go up?
Answer from Economists - Supply is down or Demand is up or raw materials costs have increased.
If it's toilet paper?
Yes.
If it's houses?
Yes.
If it's horseshoes?
Yes.
If it's marbles?
Yes.
If it's PV modules?
Yes.
If it's comic books?
Yes.
If it's cable TV ads?
Yes.
If it's oil?
Hm? What? Oil? No. Increases in the price of oil are caused by speculation.
We're running out of oil.
Hubbert predicted this 50 years ago.
Here's the secret - it's paradigm changing. And because it's paradigm changing, people don't want to believe it. Like Old Galileo saying that we weren't the center of the Universe. Whoops. Gotta give up a lot of paradigm to agree with him.
Oil is depleting. Price has been ramping up since about 2000.
Supply demand. Supply demand. Everybody wants oil, but there's not enough to go around. Price goes up.
When your on a trading desk, searching for yield, pumping a lot of money into futures does help.
Demand will go down as the economy continues to sink.
But the easily extracted reserves will also fail.At some point, the current model based on inexpensive energy will collapse.And it will be ugly.Paradigm change imminent.
@Cistercian
"Demand will go down as the economy continues to sink."
Not so sure about that actually, it's a pretty inelastic situation really. And: serious hording has started some time ago. It's called "strategic reserves" and it's rampant all over the G20.
We shall see soon which one comes first: economic collapse or existing, catastrophically declining oil fields.
And not to forget that thing called Export Land Model (ELM) ....
Interesting article here: the US military gets nervous...
http://www.guardian.co.uk/business/2010/apr/11/peak-oil-production-supply