Oil Soars On Report Of U.S. Supply Decline

Price Nears $146 Per Barrel; Latest Spike Puts Cost Up 50 Percent Since End Of Last Year

(CBS/AP)  Oil prices neared $146 a barrel Thursday for the first time ever on reports of declining U.S. stockpiles and the threat of conflict with Iran.

Comments by Saudi Arabia's oil minister suggesting his country had no immediate plans to boost production also lifted prices.

Expectations that the European Central Bank will raise interest rates later Thursday could further weaken the U.S. dollar and drive oil prices even higher, as investors turn to commodities as a hedge against a falling greenback, traders said.

By midday in Europe, light, sweet crude for August delivery rose $2.28 to a record $145.85 a barrel in electronic trading on the New York Mercantile Exchange.

On Wednesday, the contract set a new closing record for floor trade at $143.57 - a full $2.60 above the previous close.

The latest spike means a barrel of crude has gone up by more than 50 percent since the end of last year, when oil was going for $96 a barrel.

Wall Street headed for a mixed open Thursday ahead of the government's report on June employment that could offer insights into how well the economy is likely to fare in the coming months. Investors' focus will likely be on the Labor Department's employment report, expected to show the sixth month of jobs losses and only a slight improvement in the unemployment rate.

Rising energy costs, analysts say, are partly to blame for U.S. labor's troubles. Since the beginning of 2008, roughly 400,000 people have lost their jobs, CBS News correspondent Jeff Glor reports.

In London, Brent crude futures rose to a trading record of $146.69 a barrel on the ICE Futures exchange before retreating to $146.07, up $1.81.

"Even though the rise of European interest rates has been priced into oil, an official announcement by the ECB will still add momentum to oil prices," said Victor Shum, an analyst with Purvin & Gertz in Singapore.

The push above $145 a barrel was seen as a last technical barrier to prices hitting $150, in what analyst Olivier Jakob of Petromatrix in Switzerland called "the Morgan Stanley self fulfilling prophecy."

In early June, a prediction by Morgan Stanley analyst Ole Slorer that oil prices could reach $150 by the July 4 weekend caused the Nymex contract to jump nearly $11 in a single day.

Speaking Thursday in Madrid, Saudi Arabia's oil minister, Ali Naimi, left the door open for increased output, but said the kingdom's oil customers were satisfied and that no production growth was planned for now.

The Energy Department's Energy Information Administration said Wednesday crude oil supplies fell by 2 million barrels last week, or about 800,000 barrels more than analysts surveyed by the energy research firm Platts had predicted.

However, the report offered a mixed picture of energy use by the world's thirstiest oil consumer. Gasoline supplies unexpectedly grew by a considerable amount, and demand continued to slide - suggesting record fuel prices are prompting a shift in American driving habits.

Ongoing rhetoric about possible attacks on Iran, the world's fourth-largest oil producer and OPEC's second-largest exporter, also left the market jittery.

Traders are worried Tehran could try to halt shipments and seize control of the strategically important Strait of Hormuz if attacked by Israel or the United States. About 40 percent of the world's tanker traffic passes through the Middle Eastern choke-point.

Iran's foreign minister did not rule the possibility that Iran could try to restrict oil traffic in the strait if the country was attacked.

"In Iran we must defend our national security, our country and our revolutionary system and we will continue to do so," Foreign Minister Manouchehr Mottaki said in an interview with The Associated Press in New York.

Mottaki said he does not believe Israel or the United States will attack, however, calling the prospect of another war in the Middle East "craziness."

A senior U.S. military commander vowed to ensure that the strait remains open.

"We will not allow Iran to close it," said Vice Adm. Kevin Cosgriff, commander of the 5th Fleet based in Bahrain, after talks with naval commanders of Persian Gulf countries in the United Arab Emirates.

The saber-rattling has left energy traders on edge as they try to ascertain the likelihood of a Middle East flare-up and the effect it could have on the world's already tight supply of oil.

In other Nymex trading, heating oil futures added 5.15 cents to $4.1230 a gallon, while gasoline futures rose 2.56 cents to $3.5750 a gallon. Natural gas futures gained 13.7 cents to $13.526 per 1,000 cubic feet.

[underdogus01]

"oil" will cause the fall of the greatest nation every known to man kind. Hang on to your A$$ ..Posted by whiskyrocker ..don''t hold on to your stocks hold on to your socks!

[whiskyrocker]

"oil" will cause the fall of the greatest nation every known to man kind. Hang on to your A$$

[bienhoa1968]

I watched a show tonight called "dirty jobs". In this show a guy took dirty cooking oil from a Mexican restaurant, reprocessed it and turned it into biodeisel. He puts this stuff into a 1982 datsun diesel pickup truck that gets 40 miles to a gallon. He estimates that the final cost is 55 cents a gallon. Now explain to me why we are not being ripped off by the OIL PRESIDENT, THE OIL VICE PRESIDENT AND THE OIL COMPANIES THAT OWN THEM!!!!!!

[jimfinster]

REMEMBER!! Obama is just the "presumptive" Democratic Candidate. The Super Delegates, who can change their votes right up until the last minute, can still make Hillary Clinton the Democratic Candidate at the Democratic National Convention in August.

Posted by JTait2


Yeah, about the same odds as an asteroid of pure gold landing in your backyard.

[whitemale08]

Posted by ubrew12 at 07:58 PM : Jul 04, 2008-

Good post.

[ubrew12]

On the subject of the U.S. debt and its relationship to the devalued dollar and high oil prices:

the U.S. borrows $2.5 billion every day from the rest of the world - 85% of the entire world''s net savings. When foreigners, burned once too often by U.S. financial scams or its implicit repudiation of its debts through naked dollar devaluation, decide to quit lending, the effect will be catastrophic. Interest rates will skyrocket as the government desperately bids for funds just to keep its lights on

Already, we aren''t just fighting rising unemployment, but rising inflation. That''s a double whammy that no amount of Fed interference can control. And its totally related to the $10 trillion Reagan/Bush debt, and to the trade imbalance.

[whitemale08]

Posted by JTait2 at 01:09 PM : Jul 04, 2008-

Sorry...Hillary simply does not have the real world experience to be President.

Bill is an opportunist who told Hillary to vote for this war that has blown out our economy.

The American people understand that they already have the best in Obama.

So get over it or under your conditions be prepared to live as a Serf and your children die in Iraq.

Sorry (coy smirk)

[omega39-2009]

ubrew-UH, didn''''t the dems in Congress vote to go to war??? Also, cuting taxes devalued the dollar??? Geez, I''''m just a typical white woman and don''''t quite get that. Explain.

Posted by Xlib

It''s really quite simple typical white woman, debt=weaker dollar. The two biggest influences on the value of our dollar is the debt this country carries and the trade imbalance. as for debt, Bush and the Republicans cut taxes while taking spending to unimagined new highs literally doubling the national debt in five short years. The trade imbalance is primarily a result of jobs being offshored thanks to policies that reward companies for doing so. Essentially every job offshored takes from our own GDP and adds to the trade imbalance. Notice how our GDP growth is supposed to be around .09% while China is now 10% or greater? Adding to the trade imbalance is the cost of oil, as it goes up in price and the imbalance gets bigger, the dollar becomes weaker resulting in an even higher oil price. It is a viscous circle.

[jimfinster]

Now we''''re learning that crude oil is actually formed by the Earth''''s core and not dead dinos. So oil turns out to be a naturally renewing resource!

Posted by HawkSprings


LMAO ! That has got to be the dumbest port of the year!

[lostusadream]

To everyone, we are all upset about the oil issue in the USA. dems blame repubs, repubs blame dems, Fact is
that this effects us all. We can complain here all we want but this is not the correct venue. If you really truely are interested in getting action, You must be prepared to walk the walk and talk the talk to Washington. Pick up the phone and CALL, daily if necessary and tell your representative, DEM or REPUB,
that you are fed up and you want them to act. Tell them they have not done the peoples work and that you have a vote. YOU HAVE A VOICE. YOU PAY TAXES. IF they don''t do as you want. DO not re-elect them. IF you let the rich, who control the oil, control you, then you have lost. IF calling doen''t work, DO what we did in the SIXTIES, GET on the Bus and go to WASHINGTON, and be prepared to stay for a while. People there is a LOT at stake here. Do you wish your son or daughter to become slaves to the rich? The middle class
is very actively being destroyed. THe value of our houses and land, the cost of EVERYTHING is controled by OIL. It is YOUR choice. I have no desire to be controlled by the rich. This is my life, my country, and I will fight, legally, to be represented by someone who cares about me and you, for my constitutionally guaranteed pursuit of happiness.

[xlib]

ubrew-UH, didn''t the dems in Congress vote to go to war??? Also, cuting taxes devalued the dollar??? Geez, I''m just a typical white woman and don''t quite get that. Explain.

[xlib]

rharrin-studds, studds, studds.
DRILL, DRILL, DRILL.
The democratic congress is a joke. They are do nothings solely for political gain. DRILL, DRILL, DRILL!!!

[marcosis78]

ok seriously where is this oil going thats declining in our stock piles??? Is Bush using it for his friends and flipping us with the bill, again? The Saudis already said they are raising production by a half million barrels a day plus another untapped region that will give us millions more, so seriously, where is this oil going?

[alpine42]

Posted by OneAmerican- at 07:21 PM : Jul 03, 2008 Don''''''''t you find it interesting that in early 2006, the Democrat congress passed legislation to allow China to drill for oil within 45 miles of U.S. shores - and now they refuse to even allow the U.S. to drill for oil any closer than 90 miles offshore?

This is not true. There are lots on liars practicing thier political science on the blogs like Oneamerican.

[alpine42]

OneAmerican- said: "This oil problem only occured after the Democrats took control of congress after the last election."
I''ll add to this one too: The Republicans and Bush controlled congress and the house for six years during which oil prices were already on the rise. AND DID NOTHING! AGAIN, 6 YEARS!

[noloyalisti]

We can''t drill our way out of this problem. We need to conserve, Americans consume 25% of the worlds energy but have 6% of the world population. We need to recycle our SUVs and abandon the suburbs and shopping centers. Oh, and we need to end this fascist government and get Exxon and Chevron out of the executive branch. Take over the oil companies ASAP.

[ubrew12]

OneAmerican- said: "This oil problem only occured after the Democrats took control of congress after the last election."
This oil problem is directly related to the falling dollar (Republican Congress cuts taxes), and the Iraq War (Republican Congress goes to war). The problem with the history you''re trying to rewrite is that its history the rest of us have lived through.

[oneamerican-]

"We can''t we have to have somebody there as we are going to vote out the rubber stamping pedophiles in the republican party."

Posted by rharrin1 at 07:36 PM : Jul 03, 2008

You must be talking about Jim Webb - and he''s a Democrat, for your information.

He even wrote several books about his amoral activities.

[lloydbest1]

"Now we''''re learning that crude oil is actually formed by the Earth''''s core and not dead dinos. So oil turns out to be a naturally renewing resource!" Posted by HawkSprings at 02:55 PM : Jul 03, 2008

WHERE on earth did you get that little snippet. Even if true, it''s an awful long ways to drill to get it.

[oneamerican-]

Don''''t you find it interesting that in early 2006, the Democrat congress passed legislation to allow China to drill for oil within 45 miles of U.S. shores - and now they refuse to even allow the U.S. to drill for oil any closer than 90 miles offshore?

This oil problem only occured after the Democrats took control of congress after the last election.

Vote the bum Democrats out!