US Dollar keeps falling while oil price rises

[Gambler]

Euro sets new record against dollar

Euro tops $1.55 for first time
The euro has set a new record high against the US dollar, passing $1.55 for the first time.

Scepticism about whether the Federal Reserve's plans to provide liquidity to the banking system will work was one factor weakening the dollar.

Speculation that the United Arab Emirates is about to abandon its dollar peg also weakened the US currency.

The new record was set at $1.5503 before the euro fell back slightly to trade at $1.5489.

Strong economic data in the euro zone made it less likely that there will be an interest rate cut from the European Central Bank, while the Federal Reserve is widely expected to cut rates at its next meeting.

Industrial production in the 15 states that use the euro rose unexpectedly fast in January, growing 0.9% from December and 3.8% from January 2007, according to officials from Eurostat.

Oil price keeps climbing

Oil strikes new record above $110
The price of crude oil has set a fresh record for a sixth consecutive day, hitting $110.20 as a falling dollar encouraged buying.

New York light sweet crude later fell back to $110.00 while London's Brent also struck a new high at $106.40, before slipping to $106.30.

The dollar hit a record low against the euro, and investors are buying oil to hedge against the sliding greenback.

Rising demand for oil from booming economies has also helped the rally.

"The crude oil uptrend is so strong it will not die easily," said Tom Bentz, an analyst at BNP Paribas Commodity Futures.

The move higher came despite US government data that showed stocks of crude and gasoline rose last week by a larger margin than expected.

At the same time as rising demand, the Opec group of oil producing nations have opted to keep output unchanged, keeping crude supplies tight.

[Admiral Valdemar]

Oil at another record for the sixth day straight even despite inventory gains in the US. $110 has not fazed demand, so maybe $150 will...

Or not.

By the way:

Gas demand much lower. Still, oil's rebound is somewhat surprising given continued low demand for gasoline. Gas demand held steady last week, still averaging 9.1 million barrels per day over the past month. Demand is 0.4% higher than the same period last year.

ROFLMAO! CNN, oh where do you get your economic writers?

[Shinova]

For some reason it looks like an oil bubble, sort of like the housing bubble, where the price keeps rising and rising and investors keep investing and investing until ordinary people can't afford the oil anymore or oil shortages start to hit and then the bubble implodes violently.

[Admiral Valdemar]

This doesn't have the marks of a bubble, though upon first glance it seems so. There was a good piece looking into this aspect over at TOD in October, and it would appear any expectation of profit taking is dashed as the price rises again unexpectedly.

The extra $200bn pumped into the global economy did help I expect.

[Darth Wong]

Gas demand much lower. Still, oil's rebound is somewhat surprising given continued low demand for gasoline. Gas demand held steady last week, still averaging 9.1 million barrels per day over the past month. Demand is 0.4% higher than the same period last year.

ROFLMAO! CNN, oh where do you get your economic writers?

Are you trying to make a fool of yourself? When they say that gas demand is much lower, they obviously mean it is much lower than it has been in recent weeks or months. The fact that it is 0.4% higher than it was a year ago does not necessarily contradict a news statement that gas has dropped, because news is coverage of recent events.

Frankly, I'm getting a little tired of the "hur hur everyone but us Peal Oil people is an idiot" pile-on bullshit that I've been seeing lately. Yes, there are some foolish people out there who postulate stupid shit like oil magically generating itself underground, and other foolish people who think that the party will never end without even bothering to explain why. But that's no excuse for the kind of half-assed no-thought Peak Oil self-celebratory nonsense that I'm starting to see on the forum, where people just post Peak Oil spam rather than arguments. If it weren't for Sikon, these energy-related threads would be absolutely intolerable.

[Admiral Valdemar]

Are you trying to make a fool of yourself? When they say that gas demand is much lower, they obviously mean it is much lower than it has been in recent weeks or months. The fact that it is 0.4% higher than it was a year ago does not necessarily contradict a news statement that gas has dropped, because news is coverage of recent events.

Thing is, it hasn't been. Demand has been roughly unchanged and has grown year-over-year. These articles often make silly mistakes like this and the usual mentioning of inflation adjusted price or bubbles is not much better for elucidating the situation (gasoline stock up, yay. But no mention of more important diesel being in short supply?). Given these people lend credence to a survey that has a 50% chance of being right or wrong, I question whether they really grasp what it means for prices to reach this high, inventories to be drawn down and no real change in demand.

Frankly, I'm getting a little tired of the "hur hur everyone but us Peal Oil people is an idiot" pile-on bullshit that I've been seeing lately. Yes, there are some foolish people out there who postulate stupid shit like oil magically generating itself underground, and other foolish people who think that the party will never end without even bothering to explain why. But that's no excuse for the kind of half-assed no-thought Peak Oil self-celebratory nonsense that I'm starting to see on the forum, where people just post Peak Oil spam rather than arguments. If it weren't for Sikon, these energy-related threads would be absolutely intolerable.

Well I don't see anyone celebrating anything here, and whenever I post any news articles related to the subject (something a damn sight more important than the US primaries), I always add input. Sikon is a good contributor, but he is also rather optimistic in outlook, never taking geo-politics or market conditions onboard. If I was going to take the EIA/IEA projections at face value, I'd be happy as a clam too. But there's a reason such things have been revised, and going by the state of the global economy and diesel shortages, I wonder how the likes of the EIA and IEA missed such problems coming about.

Frankly, I'd rather just get everyone to read and understand Limits of Growth and then just keep their eyes peeled for such stories in the news. I'm through reiterating my position on the topic over again. However, the way it interacts with the insolvency issue, food inflation and political atmosphere warrants further threads discussing what's going on. The economy, for one thing, is going to determine the US election and the future UK one at the very least.

[J]

For some reason it looks like an oil bubble, sort of like the housing bubble, where the price keeps rising and rising and investors keep investing and investing until ordinary people can't afford the oil anymore or oil shortages start to hit and then the bubble implodes violently.

I think it's possible we've been riding a bubble in the last couple weeks as investors have piled into commodities as their other investments have tanked and gone south. Right now, a lot of investors are struggling hard to cover their losses from the mortgage and financial sector mess, they need money and they need it fast to cover margin calls and so forth, but they can't risk it equities since those are highly volatile right now. So the smarter investors are dumping lots of money into oil & other commodities, driving prices up, fast.

However, the fundamentals as they are do support a high oil price, we're not going to see $50 a barrel oil again as there simply isn't enough to go around at that price. If the US & world economy crashes hard, as it should given how the fundamentals are completely out of whack, it will put downward pressure on the price of oil. However, given the actions of the Fed to date, it's also quite likely that the US dollar will also tank hard which has the opposite effect, as will the actions of investors seeking a new (black) gold standard to keep their money safe. As a guess, I'd say $105+/-20, assuming no blow-ups in the Middle East or other major events.

[Admiral Valdemar]

It's a lot harder for a bubble to form in such a commodities market, though, since at the end of the day, someone has to take delivery of that product or off-load it to someone else. Unlike the stock market, it's not as easy to play that way via speculation without bigger risks. What's more, is that while we have a constricting supply situation, especially with diesel and refinery crack spreads of longer carbon chains like heating oil distillates etc., there have been no other events that have caused this price spike bar the dollar. I can't say the dollar's fall in value accounts for this large jump in prices over the last few months, because it simply can't account for all of it.

This makes me wary of when we hit driving season and hurricane season. Those two periods will lead to potential major disruptions if more product isn't brought on-stream on-time such as Thunder Horse or the KSA's newly expanded fields such as Abu Jifan or Khurais. Additionally, the decline rate globally is expected to be much higher than previous forecasts (consider many organisations didn't even predict a peak or plateaux for decades until recently) with the hopelessly optimistic CERA expecting 4.5% and now the IEA mentioning 7.7% as if it's nothing. Neither figure includes export drops or other set-backs and expect mega-projects to meet deadlines already penned. I think the all liquids numbers rising a little over the 2005 figure, yet showing no benefit price-wise shows how the big increases lately have been from bio-fuels with less energy per unit mass and the knock-on effect of the largest food price increases in history and record low grain stocks. Cheney flying to the Middle-East and the IEA calling an emergency meeting on crude prices speaks volumes, given the complacency not 6 months ago.

[The Yosemite Bear]

For some reason it looks like an oil bubble, sort of like the housing bubble, where the price keeps rising and rising and investors keep investing and investing until ordinary people can't afford the oil anymore or oil shortages start to hit and then the bubble implodes violently.

when that happens
poor Aerius and J.....

[J]

It's a lot harder for a bubble to form in such a commodities market, though, since at the end of the day, someone has to take delivery of that product or off-load it to someone else. Unlike the stock market, it's not as easy to play that way via speculation without bigger risks.

It's not that hard really, as I recall roughly 200 million barrels change hands on NYMEX every day yet it's really just 4-5 million barrels or so going round & round & round. Plus the daily price limits are very generous.

What's more, is that while we have a constricting supply situation, especially with diesel and refinery crack spreads of longer carbon chains like heating oil distillates etc., there have been no other events that have caused this price spike bar the dollar. I can't say the dollar's fall in value accounts for this large jump in prices over the last few months, because it simply can't account for all of it.

Definitely noticed that this year, it's seems the US has been stocking up gasoline after last year's near brush with minimum operating levels, but the thing is refinery usage is fairly low while imports for finished products have gone sky high.

This makes me wary of when we hit driving season and hurricane season. Those two periods will lead to potential major disruptions if more product isn't brought on-stream on-time such as Thunder Horse or the KSA's newly expanded fields such as Abu Jifan or Khurais. Additionally, the decline rate globally is expected to be much higher than previous forecasts (consider many organisations didn't even predict a peak or plateaux for decades until recently) with the hopelessly optimistic CERA expecting 4.5% and now the IEA mentioning 7.7% as if it's nothing. Neither figure includes export drops or other set-backs and expect mega-projects to meet deadlines already penned. I think the all liquids numbers rising a little over the 2005 figure, yet showing no benefit price-wise shows how the big increases lately have been from bio-fuels with less energy per unit mass and the knock-on effect of the largest food price increases in history and record low grain stocks. Cheney flying to the Middle-East and the IEA calling an emergency meeting on crude prices speaks volumes, given the complacency not 6 months ago.

It's going to get ugly. Just switching to summer blend gasoline alone is going to spike priced upwards significantly, in the past couple years it's been something like 20-25% from winter to driving season. Even with no major events last year, stocks went from well above average highs to just above MOL over the course of a summer, this year, we may not be so lucky. It's not a good thing if a severe widespread recession or depression is the only thing which seems to be able to put a damper on demand growth.

when that happens
poor Aerius and J.....

We'll be fine, we've diversified our investments so we won't get wiped out.

[Surlethe]

On the actual thread topic, interestingly (according to the WSJ), the dropping dollar has spurred an increase in exports, which the rising price of oil more than offset to increase the US trade deficit yet again. I got in a short debate the other day with a friend, who claims a dropping dollar is good because it stems imports and spurs exports; the problem with this position is that it makes necessary imports (like oil) that much more expensive, and it hurts the economy in the short run. Of course, one could make the case that this pain is in fact good, because the higher-than-otherwise oil prices mean that the economy will move away more quickly than oil than it otherwise would.