Jittery Trading Day Sends Oil Prices Down

Sluggish Economy, Stonger Dollar Send Prices Lower Despite Shrinking Inventories And Talk Of OPEC Production Cuts

(CBS/AP)  Oil prices closed slightly lower in jittery trading Wednesday, as the strengthening dollar and signs of a slowing economy outweighed inventory drops and word that OPEC would cut production.

The Energy Department's Energy Information Administration said that crude inventories fell by 5.9 million barrels last week compared to the previous week, and that gasoline inventories fell by 6.5 million barrels. The EIA also reported, however, that inventories of distillates - which include heating oil and diesel fuel - fell by a lower-than-anticipated 1.2 million barrels.

Refineries were running at a low 78.3 percent of their capacity last week, the report said.

"It's being seen as somewhat aberrant because of the storms," said John Kilduff, senior vice president of risk management at MF Global LLC. "But I don't think you can ignore this data."

Light, sweet crude for October delivery fell 68 cents to settle at $102.58 a barrel on the New York Mercantile Exchange, after initially jumping on the EIA's report. It was crude's lowest close since April 1. The contract fell by more than $3 a barrel in the previous session.

In London, October Brent crude fell $1.37 to settle at $98.97 a barrel on the ICE Futures exchange.

The supply readings came after OPEC said it would reduce output by 520,000 barrels a day.

The Organization of Petroleum Exporting Countries, however, decided not to take the more dramatic step of slashing production targets. The decision was viewed as a compromise meant to avoid a backlash from the biggest petroleum consuming nations while halting the rapid decline in oil prices.

A number of analysts said they did not expect OPEC's output decision to spark a sustained rally in oil prices, as investors remain concerned over slowing economic growth in the U.S, Europe and Japan.

"All they're saying is, 'We've been cheating for the past year.' ... I don't think the market's going to take it that seriously," analyst and trader Stephen Schork said by phone from Vienna. "I think the general mood is we are heading lower."

Antoine Halff, an energy analyst with Newedge USA, said OPEC's move could "be the most bearish signal to date in the oil market rout."

"The ministers appear genuinely concerned that the bottom is falling out of global demand and that once depleted stocks are rebounding with a vengeance," Halff said in a note. "Their panic is a testament to how soft the market has become. It is likely to grow even softer."

"You just can't fight the weight of the market right now," said Darin Newsom, senior analyst at DTN in Omaha, Nebraska. "I still think we're going to drop below $100."

Accumulating evidence that demand for crude is falling away in developed nations has created an exodus from the oil markets. The EIA's report Wednesday showed that demand for gasoline, distillate fuel and jet fuel over the past four weeks a falling from last year's levels.

The U.S. dollar rose against the euro, pound and yen, encouraging investors who used commodities to hedge against a weakening dollar to unwind those bets.

At 5 p.m. EDT, Ike was just off the coast of western Cuba, 90 miles west-southwest of Havana. It was moving west-northwest at 10 mph and its maximum sustained winds were 75 mph. It was expected to cross the Gulf of Mexico, strengthening to a Category 3 with winds of up to 130 mph.

Forecasters said that it could hit on Saturday morning about anywhere along the Texas coast, with the most likely spot close to Corpus Christi, where there are number of refineries.

The U.S. Department of the Interior's Minerals Management Service said that as of Wednesday, about 95.9 percent of oil production and about 73.1 percent of natural gas production in the Gulf remained shuttered as Hurricane Ike approaches Texas. Oil and gas operators have had the bulk of their production shut down since they began preparing for Hurricane Gustav nearly two weeks ago.

In other Nymex trading, heating oil futures fell 2.23 cents to settle at $2.9024 a gallon, while gasoline prices gained about a penny to settle at $2.6616 a gallon.

Natural gas for October delivery fell 14.2 cents to settle at $7.393 per 1,000 cubic feet; the EIA is scheduled to release its weekly reading on natural gas in U.S. storage on Thursday.

[closethippy1]

If you do the math if gas is at $3.50/g per $125/barrel, then gas should be at $3.49/g per $25/barrel.
The Bush especulators math, that is.

[eggy1620]

Two years ago the Saudi oil minister claimed the ideal per barrel price was in the 50 to 60 dollar range. You just cannot trust those little devils.

[petro49l]

The Saudis are lowering output to drive-up the price for a barrel of oil. They insist that the price will reach $150. If no, the Saudis demand that George W. Bush escalate the fighting in Afghanistan. The hostility there would justify a higher price for oil.

[brianbwb-2009]

Posted by howzilla

The Arabs are not our mortal enemy, they simply have an advantage in the game of capitalism, which everyone championed, back when the West had all the advantages.

We created a world where you have to make money to live, giving no quarter to those who we disadvantaged by corrupting the idea, and now you expect quarter from those who were once at the bottom?

Next up, the Chinese, who gave in to the idea of capitalism, which we have been pushing on them since the revolution, now they are becoming a much larger market than the US, with more power, which we taught by example that they must use it ruthlessly, as we did when we had the advantage.

Enemies? no not at all, just players in our game that are learning to play it better than we did.

[jtdev1]

I remember back around 2001 where OPEC was saying (on TV) that they would like the price of oil to remain no higher than $28/barrel.

Now they want to maintain around $100/barrel.

You think they''re getting used to the extra money in their bank accounts?

When is the USA going to smarten up?

[presjfk]

I am glad they are cutting production. We deserve to be treated like this! We have had 30 years to create an energy policy and still we do not have one. Thank you George Bush, heck of a job.

We the USA have put our enemies in control. We gave China, our communist enemy, our economy complete with factories and our technology. We gave the Middle East theocracies and dictatorships our money, and we the American people have nothing but debt and an economy without a foundation. Our politicians should be charged with high treason.

[rconross]

Do you need any more proof that Islam and the Arab world are our mortal enemy? We need to get as far away from carbon-based fuels as we can. We need to develop automobiles that run on hydrogen, electricity or compressed air(these cars exist) and then export that technology to the world and drive Islam and the Arab world into bankruptcy. Their oil won''''t be worth anything then.
________
You are so right on this one. That is the only way that we will win this battle. We must get totally away from carbon-based fuels, which will bankrupt the Middle East. Until then, they will continue to have a financial grip on the American people. And by the way, McCain will not do this...so America,let''s do it ourselves! Free enterprise all the way!!

[missingamerica]

lolll...ya suppose somebody needs a little extra capital to finance the purchase of chunks of Lehman Bros. et al?

[tootall10142]

THE PROUD KNEW OWNER RUBBED HIS HANDS OVER THE SMOOTH CURVES OF HIS SUV.THINKING IVE WAITED SINCE I WAS TEENAGER TO OWN MY OWN SUV.A DREAM COME TRUE THRIUGH HARD WORK AND BUILDING A GOOD CREDIT PROFILE.AS HE HE WAS SIITNG BEHIND THE STERRING WHEEL LOOKING THROUGH THE BRAND NEW WINDSHIELD DREAMING ONCE AGIAN ABOUT THE DAY HE WILL BE ABLE TO SFFORD TO DRIVE HIS NEW TRUCK.AHHH! THE AMERICAN DREAM WHAT A FANTASY IT HAS BECOME.

[payasyougo]

Message to Americans - keep the conservation going.

Message to hungry lawyers - can the rest of us conservation minded folks start a class action lawsuit against SUV owners (actually, against any vehicle owner where the vehicle gets less than 16 MPG) for costing us so much money due to high gasoline prices?

[hangelle]

Drill baby drill. What a joke! Okay, McCain, now what?!

[beehive21-2009]

Use less fuel,walk,have your fat kids walk,park the car and walk at every change.Drive slower at 60 your using less fuel than at 70 or more.

How is it the USA didn''t take all the oil when it was liberating the middle east form the Germans,Turks or other Hulagons ?

Its because Big Oil did ?,now they have you over a barrel.use less fuel.The time is right to nationalize OIL.

[hangelle]

"The U.S. imports about 40% of the oil it uses. We can easily pump that from our own resources and then who cares how high OPEC oil gets. We won''''t need it. "

This has got to be the stupid-est thing I''ve read on here in a long time!

[harp1963]

I hope gas goes up to 20 dollars a gallon. Eventually the millionaires in other businesses will find a alternate fuel way to power America and let the OPEC mafia go out of business.

[afmca]

Unfortunately this is what America gets since neither country has absolutely no reason to treat America with kindness. Bush/Cheney has spent the last 8 years trying to kill their leaders and overthrow their governments so they take pride in raising our prices and hurthing our economy. Under Obama we would definitely have more goodwill leverage.

That is why I say take the money America is going to give the oil companies to drill, drill, drill and invest it in alternatives. With American ingenuity in the 10 years it will take an oil well to become productive we will probably invent enough alternatives to make the oil unneeded. I would rather place my trust in America''s scientists and inventors before trusting big oil once again.

[moosemcbush]

McCain angrily responds:

"Clearly the phrase "prices rose Wednesday " was a sexist attack aimed at Sarah Palin and Obama should apologize. It implies that I became aroused by Sarah and became stiff staring at her rear. This is sexism and anyone who wanted clinton should vote for me because my running mate also has b_oo_bies."

[mytoosense]

"Oil Prices Up On OPEC Cut Backs"
This is not free market Capitalism, this is market manipulation or economic Dog wagging.

[mytoosense]

Shame on Obama for calling Sara a Pig when she is obviously a Bittch.

[donevis-2009]

The 520,000 barrel''s is very close to the figure reported 5 or 6 weeks ago as the amount the US is not using now that the prices rose so high. Sounds like they''re adjusting for the difference. Too bad the "Oil Guys" her will have to bump it up cuz Lord knows it''s not us, the consumers, will get a break for conserving.

[shanev137]

Hilarious.

Big oil and all the speculators tried to screw over the world and now the world is fighting back by slashing their consumption and not spending money.

I hope it continues and everyone who is long in oil and gas goes completely bust.

[gce65]

CBS: Think these two might be worth mentioning?

CNN reports 2 Russian long range bombers have just landed in Venezeula for military exercises...

And the BBC reports: US Bolivia Ambassador ''Expelled.''

Why no mention? Look around people, the REAL news is out there.

[gce65]

Oh no! Oil Jitters! And Hurricane Ike has left Cuba and is now heading straight for Galveston/Houston! Supposed to strengthen to a cat 4 according to Natl Hurricane Ctr.

It''s okay, demand is down...........

Ha! Ha! Ha!

[sara48909]

Hmmm. The price of oil goes down, but the price at the pump in Michigan goes up $.25 a gallon. Its past time for someone to investigate the oil companies and slap them with a fine.

[credibility2]

In my area, a suburb of Chicago, gas prices have jumped ten or more cents per gallon since Sunday, with many places charging over $4.09/gal. So much for the drop in crude improving the situation for the consumer.

[closethippy1]

If you do the math if $3.50/g at $125/barrel, then gas should be at $3.49/g at $25/barrel.
The Bush especulators math, that is.

[brianbwb-2009]

This is on a tangent, I know, but here in tiny Singapore, the morning paper reads thus;

S*ex, drugs, and poyalties
US agency workers in oil industry scandal

Washington _ Employees in the same US agency whose errors cost the government billions of dollars in oil royalties had s*ex with their industry contacts and took illegal drugs such as cocaine.

The story goes on to implicate the director, who took coke and had s*ex with subordinates.

"We discovered that between 2002 and 2006, nearly one third of the RIK (royalty in kind) staff socialized with, and received a wide array of gifts and gratuities from oil and gas companies with whom RIK was conducting official business" Interior Department inspector General Earl Devaney said in a letter accompanying the report.

He goes on to say that Chevron refused to cooperate with the investigation, that Director Gregory Smith Bought cocaine from subordinates, and that while still heading the programme, also worked for a consulting firm doing business with the agency.

Other companies involved included Royal Dutch Shell and Gary-Williams energy company.

Wonder why this is not in the US news? Maybe McSame''''s connections with Bush''''s oil boys are keeping the lid on this, everyone knows who this will affect more adversely, because McSame wants to eliminate taxes for big oil.

Now don''t get me wrong, I like parties as much as the next guy, but $10 Billion? come on...

[beehive21-2009]

We cannot wait for the hanging to begin.Whole lot of shaken goin on.The white house is in bed with Big Oil ,and now ,coke,hey Bushies choice of drugs,imagine that.

[dredre2k]

Gas prices continue falling during the height of the hurricane season... proof that the true price of gas has nothing to do with storms &instabilities in the world... only "market forces" and speculators cashing out now that demand for their drug has sharply declined. Americans have cut back on gas consumption to the point where prices must fall because there is too much supply! Now watch refineries slow their rates of production to keep prices high. :-X