Oil Breaks A New Record

[Admiral Valdemar]

Laaaaadies and gentlemen. Let's geeeet ready to ruuuuuuumblllllleeeee!

Oil jumps above $100 on refinery outage

By JOHN WILEN, AP Business Writer 33 minutes ago

NEW YORK - Oil futures shot to a new record above $100 Tuesday for the first time since Jan. 3 as investors bet that crude prices will keep climbing despite evidence of plentiful supplies and falling demand. At the pump, gas prices rose further above $3 a gallon.

There was no single driver behind oil's sharp price jump; investors seized on an explosion at a 67,000 barrel per day refinery in Texas, the falling dollar, the possibility that OPEC may cut production next month, and continuing tensions between the U.S. and Venezuela.

Gasoline and heating oil prices appeared to be leading the advance, rising faster in percentage terms than oil due to the explosion Monday at Alon USA's Big Spring, Texas, refinery, which could be shuttered for two months.

"The refinery fire in Texas is making people a little concerned," said Michael Lynch, president of Strategic Energy & Economic Research Inc. in Amherst, Mass.

Light, sweet crude for March delivery rose $4.30 to $99.80 a barrel on the New York Mercantile Exchange after earlier rising as high as $100.10, a new record [Ed: Yeah, they conveniently don't make that the banner headline]. Final settlement prices weren't available yet. March gasoline jumped 10.17 cents to $2.5955 a gallon, and March heating oil rose 10.81 cents to $2.755 a gallon.

Oil prices are still within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, $38 a barrel then would be worth $96 to $103 or more today.

The dollar fell Tuesday, giving investors another reason to buy oil. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

For the moment, investors appear to have put aside concerns about the economy that have sent oil prices down into the mid-$80 range twice since crude peaked above $100 last month. Traders are instead focused on the Organization of Petroleum Exporting Countries, which will meet early next month to map out production plans, and Venezuela, where President Hugo Chavez made conflicting statements this weekend about the country's legal dispute with Exxon Mobil Corp.

OPEC could move to cut production in the second quarter, typically a period of low demand, though many analysts feel that's unlikely. In Venezuela, Chavez said he was not serious about an earlier threat to cut oil sales to the U.S., but also threatened to sue Exxon Mobil. The world's largest oil company is fighting Venezuela's nationalization of an oil project, and recently convinced several courts to freeze $12 billion in Venezuelan oil assets.

None of the news is enough to justify a nearly $3 a barrel jump in the price of crude, said James Cordier, founder of OptionSellers.com, a Tampa, Fla., trading firm. Echoing other analysts, Cordier argued that the oil market is in the process of "decoupling" from oil's supply and demand fundamentals. He said investors drawn by the falling dollar and momentum are pushing oil prices sharply higher despite reports last week from the Energy Department, OPEC and the International Energy Agency which all cut oil demand growth predictions for this year.

"Everyone concurs that we've got smaller demand coming in the U.S.," Cordier said.

Retail gas prices, meanwhile, jumped 1.8 cents to a national average price of $3.032 a gallon Tuesday, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, are following oil prices higher. The Energy Department expects gas prices to peak near $3.40 a gallon this spring.

Other energy futures also rose Tuesday. March natural gas jumped 32 cents to $8.98 per 1,000 cubic feet. Analysts said prices were supported by forecasts for cooler weather, but that futures were also following oil prices higher.

In London, Brent crude for April delivery rose $3.38 to $98.29 a barrel on the ICE Futures exchange.

___

AP Business Writers George Jahn in Vienna and Thomas Hogue in Bangkok contributed to this report.

I think we all know I need not comment. Oops, just did.

[Xisiqomelir]

"...despite evidence of plentiful supplies and falling demand."

Okay, John Wilen. Whatever you say.

[Admiral Valdemar]

Nothing to see here, it's market fear premiums, LOL. S'okay, mistah, you go and buy that 3 litre SUV. Plenty of oil on paper still, and that's all that counts.

[Phantasee]

This 'decoupling' they're talking about: they mean the prices are going to become disconnected from reality and are going to be driven up/down by speculation more than actual numbers?

Sounds like the housing market.

[Admiral Valdemar]

More like the rest of the world disconnecting from the dollar. Which ain't happening.

[J]

Excellent news for my investments!
I, for one, will cheer for higher oil & energy prices.

Also, today would be a good day to fill up your car and a few 5 gallon cans as well since the price of gas will be up rather significantly tomorrow.

[Admiral Valdemar]

HOARDING! C'mon, I want to see the US/Canadia in the same situation we were in circa September, 2000.

This, by the way, is the highest close for oil ever too. Recession? What recession?!

[J]

HOARDING!

Don't look at me, I only have around 700 gallons stashed away so far...

[MKSheppard]

Heh. Solution is to build more damn refineries, so the ones we have aren't forced to run at 95% capacity all the time; and can be lowered down for preventive maintenance, so there aren't as many fires and explosions.

But no, oil refineries are eeevul!

[Surlethe]

Heh. Solution is to build more damn refineries, so the ones we have aren't forced to run at 95% capacity all the time; and can be lowered down for preventive maintenance, so there aren't as many fires and explosions.

But no, oil refineries are eeevul!

Except that the oil companies know oil is peaking, so they're not willing to invest in more refineries, which will take several years to come online and only be profitable for a matter of years as production begins to dwindle.

[J]

Heh. Solution is to build more damn refineries, so the ones we have aren't forced to run at 95% capacity all the time; and can be lowered down for preventive maintenance, so there aren't as many fires and explosions.

You mean the refineries which haven't run at 95% since August 2005, and where utilization has been in the 85%-93% range since then? And which are now running at around 85%?

[Surlethe]

You mean the refineries which haven't run at 95% since August 2005, and where utilization has been in the 85%-93% range since then? And which are now running at around 85%?

Do you have a reference for this?

[Thag]

Excellent news for my investments!
I, for one, will cheer for higher oil & energy prices.

Also, today would be a good day to fill up your car and a few 5 gallon cans as well since the price of gas will be up rather significantly tomorrow.

A tad bit late. Prices around here shot up twenty cents at the cheap stations just while I was at work.

[J]

You mean the refineries which haven't run at 95% since August 2005, and where utilization has been in the 85%-93% range since then? And which are now running at around 85%?

Do you have a reference for this?

Yup.

http://tonto.eia.doe.gov/dnav/pet/hist/wpuleus3w.htm

Ok, so there were 2 weeks where utilization were 93.4% & 93.6%, but that's more than averaged out by the weeks where it was below 85%.

[Zablorg]

Meh, nothing new here. Maybe I can isolate myself from all this silliness by living in a hut and living off the land and such. But with internet access.

Also, I am guilty in that my family has an SUV, but we generally only use it for big-ass family trips.

When I gain a life I am going to walk to places. I won't be able to afford fuel along with the interest rates in 7 years time.

[Winston Blake]

PROTIP: Fill up your vehicles before March.

Thankfully as the American dollar falls, the Australian dollar gets stronger. SBS news was just saying how that will help insulate Australia from large fuel price rises.

The price of crude oil closed at more than $100 a barrel for the first time last night following a steep rise prompted by jitters over a possible tightening of supply by countries in the Opec cartel.

On the New York mercantile exchange, oil futures briefly hit $100.10 - the highest level since trading began in 1983. The benchmark contract for March delivery of crude oil ended the day at $100.01.

An explosion at a Texas oil refinery caused initial alarm among traders, following shutdown of the Big Spring facility, which processes 70,000 barrels of oil a day. There was also concern about heightened tension between America and Hugo Chávez's regime in Venezuela, a key oil producer.

But analysts said the real reason for a $4.51 rise during the day was mounting recognition that Opec could tighten the fuel flow to the global market when oil ministers meet on March 5.

Phil Flynn, an analyst at Alaron Trading, said: "The oil bulls were buffeted with unrelenting winter weather, an oil refinery explosion and an Opec cartel that has no regard for the world economy."

Opec nations are concerned about the prospect of an economic slowdown in America spreading across the world. A fall in industrial production could reduce demand for oil, pushing the price lower.

Algeria's oil minister, Chakib Khelil, who chairs Opec, told Reuters: "Production is not going to increase. It will either decrease or be stable."

Motorists can expect fresh increases in the price of petrol. In Britain, an alliance including the AA, the RAC and the Freight Transport Association, has called on the chancellor to scrap a tax increase of 2p a litre scheduled for April.

The Venezuelan government has become increasingly bellicose over compensation for the nationalisation of an Exxon Mobil oil project.

Don't look at me, I only have around 700 gallons stashed away so far...

*quick Google conversion into litres*

*JAWDROP*

That's like, 13 big 200L drums! Good God lady! Are you certain that much domestic storage of flammables is legal?

[Zablorg]

PROTIP: Fill up your vehicles before March.

Thankfully as the American dollar falls, the Australian dollar gets stronger.

O frabjous day! Caloo! Callay!

[Surlethe]

Do you have a reference for this?

Yup.

http://tonto.eia.doe.gov/dnav/pet/hist/wpuleus3w.htm

Ok, so there were 2 weeks where utilization were 93.4% & 93.6%, but that's more than averaged out by the weeks where it was below 85%.

Thank you. This will make a useful addition to my peak oil arsenal.

[aerius]

Bloomberg reporters are funny

Lehman Will Revise First-Quarter Oil Price Forecast (Update1)

By Jeremy Naylor and Grant Smith

Feb. 20 (Bloomberg) -- Lehman Brothers Holdings Inc. will revise its first-quarter New York crude oil price forecast of $86 a barrel, chief energy economist Edward Morse said.

``We will be revising it up,'' Morse said in an interview with Bloomberg television. Oil prices, which rose to a record $100.10 a barrel on the New York Mercantile Exchange yesterday, are being driven by financial markets rather than supply-demand fundamentals, he said.

The Organization of Petroleum Exporting Countries is unlikely to reduce output at its March 5 meeting with prices at current levels, Morse said. The 13-member group, which produces more than 40 percent of the world's oil, left production targets unchanged at its previous Feb. 1 conference.

``It's unlikely that at $100 a barrel anybody's going to be in the mood for a cut,'' said Morse. ``The Saudis are uncomfortable at $100 oil.''

Consumption in export-driven emerging markets won't be immune to a slowdown in the U.S., the world's biggest energy user, Morse said. Some analysts have said that Asian markets are ``decoupled'' from the U.S. and so demand there can weather a U.S. recession.

``We will be seeing an impact on Chinese demand, probably after the Olympics, and that's because of what's happening in the U.S. economy,'' he said.

Yesterday's price record was part of a broader flow of investment into commodities rather than the result of any genuine threat to crude supplies, Morse said.

``It's certainly not oil market fundamentals and nothing to do with geopolitics,'' he said. ``This is a commodities issue rather than an oil market issue.''

Clearly the work of those damn speculators, no doubt about it. You gotta love how out of touch with reality they are.

[Admiral Valdemar]

Not market fundamentals or commodity price based?

LOL. Someone failed Econ. 101 class. Must be Xenu manipulating it.

[Spin Echo]

HOARDING!

Don't look at me, I only have around 700 gallons stashed away so far...

Bah, but a mere trifle. One of our neighbors had 6000L recently.

[Colonel Olrik]

PROTIP: Fill up your vehicles before March.

Thankfully as the American dollar falls, the Australian dollar gets stronger.

O frabjous day! Caloo! Callay!

If I see one more one-liner, spam, bitching post coming from you I'm make sure you get banned or deleted from existence. This is your first and final warning.

[Surlethe]

Yup.

http://tonto.eia.doe.gov/dnav/pet/hist/wpuleus3w.htm

Ok, so there were 2 weeks where utilization were 93.4% & 93.6%, but that's more than averaged out by the weeks where it was below 85%.

Thinking about refineries more, is it feasible for them to run at 98% or 100% for extended periods of time? I have no idea, so I'm thinking by analogy (danger!): if you try to run any sort of machine at or near 100% for an extended period of time, it will eventually overheat or give out, or something will break, right? So if that's true, wouldn't the same hold for refineries?

[Korto]

Citibank report says there is a...

view of some market observers that net depletion across all global production is running at 4% currently

According to Citibank this would mean current production could only be maintained (or exceeded) until 2013.
That's not real far away.

In response to oil optimists, they also say

...four years of failed supply response have shifted the burden of proof away from the sceptics and onto the supply optimists.

Now, I actually feel that government action (subsidies, etc) will delay disaster (and make it worse), but I'm feeling a wise man makes plans for eventualities...
I'm happy about one thing. I ride a postie-bike. I could go 210,000km on Spin Echo's (neighbour's) stash. And have a lot of fun.

[aerius]

Thinking about refineries more, is it feasible for them to run at 98% or 100% for extended periods of time? I have no idea, so I'm thinking by analogy (danger!): if you try to run any sort of machine at or near 100% for an extended period of time, it will eventually overheat or give out, or something will break, right? So if that's true, wouldn't the same hold for refineries?

According to my friend who works in the oil industry, refineries can run at close to 100% for months on end but then they have to be shut down or greatly drop production while maintenance is done. Generally this happens in late fall & early spring when refineries change the mix of products they're supplying, more gasoline for the summer months and more heating oil for the winter.

Also, most refineries will usually have several units, kinda like a nuke plant which has has several reactor cores. Once the units check out they ramp them up to full capacity and keep it there as long as the oil keeps coming in and all the lights are green. Sometimes they'll have to take a unit down for the day to do some maintenance but generally speaking they keep them running full out as much as possible between the fall & spring changeovers. Up here in Canada, we've been running at around 95% utilization for the last few years according to my friend, I'll see if I can track down some official stats.