MarketWatch.com reports this afternoon that the price of a barrel of crude oil increased by $2.25, reaching a one-year high of $81.37. The “front-month contract,” as followed by the New York Mercantile Exchange, is the highest price since last October.
According to the Energy Information Administration, the national average price for a gallon of regular gasoline rose almost nine cents to $2.57 a gallon:
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Forget renewable energy, for the moment oil companies are more focused on plentiful energy. The OPEC countries aren’t the only ones who want to keep oil prices from falling. While we know cheap oil prices are a welcome sign for consumers, the oil companies say that if prices fall like they did this past December (to $34/barrel), it could ruin the hot streak they’ve been on so far this year.
According to the New York Times, over 200 new oil discoveries have been made in dozens of countries so far this year. During the first half of the year alone, the new finds equaled about 10 billion barrels of oil, says IHS Cambridge Energy Research Associates. If oil companies continue at this pace until year’s end, they will have discovered more oil then they have in nearly a decade.
Oil futures rose this morning on the news of an improving job report and a strengthening dollar. Oil prices topped out at $70.32 a barrel, the highest level recorded in six months. Futures quickly receded back to between about $67 and $69 a barrel:
There’s nothing like a global recession to help bring down oil prices:
World oil demand is contracting faster than expected, increasing pressure on prices, OPEC said on Friday ahead of a key meeting this weekend of the group.
The Organization of the Petroleum Exporting Countries said global demand will fall by 1.01 million barrels per day (bpd) in 2009 to average 84.61 million bpd. Its previous forecast was for demand to contract by 580,000 bpd.
According to a recent Gallup poll, despite oil prices that have fallen nearly $100 a barrel, the majority of Americans are continuing to drive less. Lack of demand has allowed cheap gas prices to put some money back in consumers’ pockets:
Even though prices at the pump are now about 45% lower than they were a year ago and significantly below $2 a gallon, 52% of Americans told Gallup that they have not gone back to their old gas-guzzling ways.
The Organization of the Petroleum Exporting Countries (OPEC) concluded their 151st (Extraordinary) Meeting of the OPEC Conference today by cutting their daily output by 4.2 million barrels from September levels. Today’s announcement did little to bring oil prices anywhere near the range Saudi Arabia’s oil minister had hoped for at the beginning of the month. After the meeting, as of 11:40 a.m. EST, oil futures dropped by 7.4%, or $3.27, to $40.35 a barrel.
The over-$100 decline in oil prices since July forced OPEC to call two additional meetings in order to develop a production strategy that would return the price of crude back to a “fair” price. We reported at the beginning of the month that “Saudi Arabia’s Oil Minister Ali al-Naimi said $75 a barrel was a sufficient and fair target for oil prices that would keep global oil projects and production on time and efficient.”
Not only are oil prices dropping to historic lows, they remain one of the only portions of our economy putting money back in consumers’ pockets. Oil futures closed the week down $2.85, or 6.5%, to $40.81 — the largest weekly decline recorded since 1991. Crude-oil futures finished the day down to levels not seen since December 2004. A strengthening dollar as well as November’s unemployment report were the main proponents that continued to spiral prices:
“The fall in employment was brutal,” said James Williams, an energy economist at research firm WTRG Economics. “Folks without jobs drive less, and those in fear of losing their jobs are minimizing expenditures.”
Over the weekend, Saudi Arabia’s Oil Minister Ali al-Naimi said $75 a barrel was a sufficient and fair target for oil prices that would keep global oil projects and production on time and efficient. This was the first time the world’s largest exporter of oil has announced a “fair price” for crude. The Organization of Petroleum Exporting Countries (OPEC) is scheduled to meet again December 17 in Algeria, where many experts expect the countries to trim global production by between 1-1.5 million barrels a day. OPEC cut 1.5 million barrels a day from global production in late October that went into effect November 1.
While OPEC expects cheap oil prices to help curb weak consumption slightly through the end of the year, they only expect increased consumption in 2009 predominantly in the Middle East, Asia, and China. “OECD [Organization for Economic Co-operation and Development] countries are expected to experience a decline in oil demand which is likely to pull total world oil demand growth down by more than 0.5 mb/d in 2009…”
The American Petroleum Institute (API) reported that U.S. petroleum deliveries were down 4% in October, and down 5% from January to October of this year — a decline in demand not seen since the early 1980’s. From January to October, daily deliveries averaged 19.6 million barrels a day — the lowest level since 2000.
Despite such a large decrease, the API reports that over 50% of the production that was disrupted by hurricanes Gustav and Ike has been restored. All of the refineries shut down during the two storms are once agin fully operational.
Oil futures finished the day down $4.53, or seven percent, to settle at $60.77. Earlier today futures sank as low as $60.16, down nearly eight percent:
