Oil Drops

[imported_elp6n]

Saw on msnbc.com just now that oil has dropped more than $9 per barrel - down to about $136 on the Mercantile Exchange.

Just found this AP piece (varies slightly from msnbc report):

Jul 15, 11:18 AM (ET)

By ADAM SCHRECK

NEW YORK (AP) - Oil prices are tumbling as traders dump the commodity amid concerns about the economy that are also driving the stock market sharply.

Prices dropped more than $10 a barrel from highs earlier in the day, and are now down more than $6 from Monday's closing price. Light, sweet crude is trading at $139.03, down $6.15.

Earlier, it rose as high as $146.73 and fell down to $135.92.

The turnaround may not signal a lasting shift in sentiment - prices have swung violently in recent days as they flirted with record highs. But it does underscore investor uncertainty about whether sky-high oil prices can be sustained and their effect on the broader economy.

[neutral88]

Could it be that ban that was lidted yesterday??? I doubt it, but could be...

[imported_elp6n]

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: neutral88</div><div class="ubbcode-body">Could it be that ban that was lidted yesterday??? I doubt it, but could be...</div></div>
a CnnMoney.com article does alude to that.

NEW YORK (CNNMoney.com) -- Oil prices plummeted Tuesday, down as much as $9.26 a barrel, as investors feared that the nation's financial woes could cut into demand.

Light, sweet crude fell $6.35 to $138.83 a barrel in electronic trading on the New York Mercantile Exchange. Earlier prices dipped to $135.92.

Prices began to fall after Federal Reserve Chairman Ben Bernanke warned that high energy prices have sapped the purchasing power of U.S. households.

"It seemed to pick up steam after President Bush spoke about drilling off shore," said Phil Flynn, senior market analyst with Alaron Trading in Chicago.

In a press conference Tuesday, President Bush called for more drilling on the East and West Coasts, as well as Alaska, to combat high oil prices. He also underscored the severity of the mortgage crisis by touting a plan announced Sunday to stabilize mortgage finance companies Fannie Mae and Freddie Mac.

The mortgage crisis and high energy costs will remain a drag on the U.S. economy for the rest of the year, Bernanke told the Senate Banking Committee Tuesday.

"How big ultimately is the spillover of the financials into the overall GDP or the demand picture of the U.S.?" asked Peter Beutel, oil analyst with Cameron Hanover.

Inflation: The dollar fell against major currencies, and sank to a record low against the euro overnight Tuesday, weighed down by concerns about the U.S. credit market.

The weakened dollar has been blamed for much of crude's runup, as investors buy oil and other commodities to hedge against inflation. But that behavior may be changing for oil as many begin to see it weighing on demand.

There's "definitely a reverse of what the rationale was even 2 to 3 weeks ago," said Beutel.

Federal Reserve: The Federal Reserve, which has the power to quell runaway inflation by raising a key interbank lending rate, has been rendered inert, since the banks and other institutions that prop up the U.S. economy need the liquidity, according to Tom Orr, head of research for Weeden & Co.

In addition to offering plans to shore up Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), the government took control of mortgage lender IndyMac Bank (IMB) to prevent it from going bankrupt Monday.

"They've got to keep rates as low as they can, though they really should be tightening... They know they need to tighten, but they just can't," said Orr.

"This is starting to feel like Jimmy Carter and the 1970s all over again," he added, describing a time when inflation was high due in large part to soaring energy prices.

OPEC demand: The Organization of Petroleum Exporting Countries lowered its demand forecast for 2008 to an increase of 1.2% from 1.28%, blaming economic strife and high fuel prices.

Gasoline prices in the U.S. maintained their record highs at $4.109 a gallon, according to a daily survey from motorist group AAA.

Concerns about lower demand even overshadowed the tight supply picture, which has been at the forefront of oil's price surge.

Brazil: The five-day strike by Brazilian oil workers in the Campos basin at 33 offshore rigs operated by state-run oil company Petrobras entered its second day, cutting into supply.

Petrobras stated that only two rigs had been totally shut down, but that production had been reduced by 4%, according to the Associated Press.

Iran: Investors also remained concerned about tensions between Iran, the second-largest exporter in OPEC, and the United States and Israel over its nuclear program.

Iranian president Mahmoud Ahmadinejad blamed high oil prices on threats from the West in an interview with state television, according to reports. However, he said that talks with the United States were possible.

[neutral88]

I was just wondering, your right it prolly doesn't

Mae and Mac
"Now think about that for a minute. Regulators essentially said: We'll let you borrow 30 times your assets. If you blow it, we'll back you and give you more. If your bets work out, you get to keep the winnings.

Who in their right minds wouldn't have taken that directive and gone straight to Las Vegas? And that is essentially what the executives at Fannie Mae and Freddie Mac did, ultimately buying up to half of all mortgages written in America and using the proceeds of the bond sales to provide lavish incomes to themselves, rich consulting fees to former congressmen and government officials and big donations to current representatives and senators."
"Institutional research firm Bridgewater Associates has estimated that U.S. and European banks need $1.6 trillion to fill the hole blasted by losses in mortgages. But the analysts another top firm, TIS Group in Minneapolis, believe the real amount of new capital needed is $3 trillion to $5 trillion.

How could it be that big? It's the leverage. At a 30-1 ratio of real assets to loans, you only need a 4% default rate on the loans for all your capital to disappear"

http://articles.moneycentral.msn.com...mentid=8620163
Or it could be that the bottom has fallen from the entire country. Dow closed under 11000 yesterday.
"But crude oil abruptly fell under $138 a barrel on worries that a slowing U.S. economy would sharply curtail demand for gasoline. A similar concern was raised in a new forecast from the Organization of Petroleum Exporting Countries"
http://articles.moneycentral.msn.com...15markets.aspx

[imported_elp6n]

Wonder how long this will last before it rebounds and hits more record highs...

http://money.cnn.com/2008/07/16/mark...ex.htm?cnn=yes

Oil's 2-day decline: $11 a barrel
Futures plummet after surprise growth in crude, gasoline stockpiles hints at impact of high prices on usage.

By Kenneth Musante, CNNMoney.com staff writer
Last Updated: July 16, 2008: 11:22 AM EDT

NEW YORK (CNNMoney.com) -- Oil prices plummeted Wednesday, bringing a two-day selloff to more than $11 a barrel, after the government's weekly inventory report suggested record high gasoline prices may be reducing the nation's energy consumption.

At 11:19 a.m. ET, light, sweet crude for August delivery was down $5.09 to $133.65 a barrel in electronic trading on the New York Mercantile Exchange.

Oil was down $1.17 before the report's release. Wednesday's drop followed a $6.44 plunge Tuesday that was the second largest decline ever on a dollar basis.

The government's weekly stockpile report showed that crude supplies rose by 3 million barrels in the week ended July 11. Analysts were looking for a drop of 3 million barrels according to a poll by energy research firm Platts.

Gasoline supplies rose by 2.4 million barrels, rather than the 1.1 million decline analysts expected.

Distillates, used to make diesel fuel, jet fuel and heating oil, rose by 3.2 million barrels. Analysts were looking for an increase of only 1.7 million barrels.

Bernanke: The two-day oil selloff also reflected the gloomy economic picture being painted by Federal Reserve Chairman Ben Bernanke in his Congressional testimony.

On Tuesday, Bernanke told the Senate Banking Committee that high energy prices and slower economic growth have limited ability of U.S. households to purchase fuel and other necessities. Bernanke appeared Wednesday before the House Financial Services Committee.

The price of gasoline and diesel fuel in the U.S. touched new records Wednesday, according to a daily survey from motorist group AAA. Gasoline is more than 35% more expensive than last year.

"The weaker economic outlook, the inventory build all contribute," said Amanda Kurzendoerfer, commodities analyst with Summit Energy. However she warned that long-term investors may see the price decline as a buying opportunity.

"The one thing we can be sure of is that we're looking at a lot of volatility going forward," she said.

OPEC, Brazil: The Organization of Petroleum Exporting Countries, which supplies about 40% of the world's oil, cut its demand forecast for 2009 Tuesday to an increase of 900,000 barrels a day, 100,000 barrels less than 2008.

There were also reports that production in Brazil had not been hurt as much as originally feared by a labor strike in the Campos Basin, which supplies about 80% of the country's oil, and tensions eased with Iran, the second largest producing member of OPEC.

State-owned oil company Petroleo Brasileiro SA said production had not been affected by the ongoing strike at 33 offshore platforms that began on Monday

[BlueWahooChambordDevil]

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: neutral88</div><div class="ubbcode-body">Could it be that ban that was lidted yesterday??? I doubt it, but could be... </div></div>
absolutely

the speculators are taking their profits right now waiting to see if congress gets off their ass and actually springs into action on this

lifting the ban paves the way for that to happen

if they come back and tell bush to get bent oil will climb right back because they will put their cash back to work

if congress agrees to act on this more and more will start to take more money off the table and prices will drop even more

[MikeJones]

It will be the same oil companys in control of any new oil found. So lets just grab the world by the balls till we get our way. When they give, we give em a carrot.

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: neutral88</div><div class="ubbcode-body">Could it be that ban that was lidted yesterday??? I doubt it, but could be... </div></div>

You do know it was only the presidential part of the ban that was lifted?

"On Monday Bush lifted the presidential moratorium on offshore drilling, a largely symbolic move since Congress had imposed its own ban on new ocean drilling."
http://www.nccoast.org/oildrilling

[imported_elp6n]

<div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: Spuds</div><div class="ubbcode-body"><div class="ubbcode-block"><div class="ubbcode-header">Originally Posted By: neutral88</div><div class="ubbcode-body">Could it be that ban that was lidted yesterday??? I doubt it, but could be... </div></div>

You do know it was only the presidential part of the ban that was lifted?

"On Monday Bush lifted the presidential moratorium on offshore drilling, a largely symbolic move since Congress had imposed its own ban on new ocean drilling."
http://www.nccoast.org/oildrilling

</div></div>

Congress's stance yesterday was they weren't going to lift the ban. And seeing that oil fell again after Congresses reported that, so now we can see that perhaps the offshore drilling wasn't a major factor in the drop after all.