Michael Galvis: Oil Back Above $40 a Barrel

February 23, 2009

LONDON, Feb 23 (Reuters) — Oil rose above $40 a barrel on Monday, recovering from earlier losses, after sentiment was lifted by a report the U.S. government was in talks on increasing its stake in Citigroup.

Further evidence the Organization of the Petroleum Exporting Countries has enforced output cuts also provided support, although persistent worries about the weakness of the global economy limited gains.

U.S. front-month crude rose 29 cents to $40.32 by 6 a.m. ET, off a session low of $39.53. The contract ended 15 cents lower at $40.03 on Friday.

“For the moment, the crude market seems to be holding up within the $32-$50 trading range we suspect will be with us for some time to come,” MF Global said in its daily note.

“The upside remains sticky above $50 given the dreary macro situation, while the downside will be kept in check by OPEC’s ongoing efforts to cut production.”

European and Asian stocks rose and the dollar slipped on Monday after the Wall Street Journal reported the U.S. government could end up owning as much as 40 percent of Citigroup Inc.

A source familiar with the situation told Reuters talks were ongoing between Citi and regulators that could increase the government’s stake.

The Citigroup news cheered investors who cut their safety trades, prompting gold, a safe-haven investment, to fall after topping $1,000 an ounce last week.

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Michael Galvis: Oil Price Jump 14%

February 20, 2009

NEW YORK (CNNMoney.com) — Oil prices rose more than 14% Thursday after the government reported that the nation’s supplies of crude fell last week for the first time in two months.

Light, sweet crude for March delivery rose $4.86, or 14% to settle at $39.48 a barrel. That marks the biggest one-day jump since Dec. 31 when oil rallied $5.57 a barrel or 14.27%.

The April contract, which becomes the front-month contract when March expires Friday, rose $2.24, or 6%, to $39.64 a barrel.

Crude prices often spike in sessions leading up to the expiration of a contract, as traders not wishing to take delivery of physical oil roll their investments over into the next contract.

In its weekly inventory report, the Energy Information Administration said the nation’s supplies of crude oil fell 200,000 barrels in the week ended Feb. 13. It was the first decline since the week ended Dec. 19, when oil inventories shrank by 3.1 million barrels.

Analysts were expecting oil supplies to have grown by 3.5 million barrels, according to a survey by research firm Platts.

The decline in crude stocks comes amid an uptick in refinery utilization and a drop in oil imports.

Refineries consumed an average of 14.1 million barrels a day during the week, up 16,000 a day from the prior week. Oil imports fell by an average 859,000 barrels a day from the previous week.

The decline in imports could reflect recent production cuts by members of the Organization of the Petroleum Exporting Countries, according to Tom Pawlicki, an energy analyst at MF Global in Chicago.

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Michael Galvis: Oil Falls Due To Week Economy

February 17, 2009

LONDON (Reuters) — Oil in New York fell below $37 a barrel on Tuesday as bleak economic indicators turned the focus back to the worldwide slump in demand, outweighing lower supplies due to OPEC cutbacks.

A Reuters poll showed confidence among Japanese manufacturers remained near record lows. That came a day after data showing the country’s economy shrank by the most in 35 years.

“The economic outlook will continue to dominate the first half of 2009. The United States, eurozone and Japan are in synchronized recession,” said Harry Tchilinguirian, oil analyst at BNP Paribas.

OPEC supply cuts are only going to impact consuming country inventories with a lag,” he added.

U.S. crude for March delivery fell to $36.88 a barrel, 63 cents off last Friday’s settlement.

The New York Mercantile Exchange did not print a settlement price on Monday as its trading floor was closed for Presidents Day, although electronic trading continued as usual. The floor will reopen on Tuesday.

U.S. crude for March expires on Friday and it was trading at a $3.70 discount to April due to high inventories at the storage hub in Cushing, Oklahoma. Brimming U.S. stocks are also keeping U.S. crude at an atypical discount to Brent.

World oil demand has fallen in the last few months as recession triggered by the banking crisis spreads through all continents. Oil has collapsed from a record high above $147 reached last year.

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Michael Galvis: Gas Price on the Rise.

February 16, 2009

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NEW YORK (CNNMoney.com) — The days of cheap gas are retreating into the rearview mirror, as prices continue to flirt with the $2-per-gallon mark.

The national average price for a gallon of unleaded gasoline edged down 0.1 cent to $1.965 Monday, according to the motorist group AAA. This is bad news for the growing ranks of jobless Americans, who are pinching pennies and looking for ways to cut costs.

The current price would have been welcomed by summertime drivers, because it’s less than half the all-time high of $4.114 per gallon, achieved last July 17.

But since gas prices slumped to a low of $1.616 per gallon on Dec. 30, they’ve jumped more than 20%. At their current rate, prices could easily eclipse $2 per gallon.

This is occurring as crude oil prices are trading well below $40 a barrel.

“I think what you’re seeing now is a backlash of a period, from the end of the summer until the end of the year, when refiners were selling gas into the consumer market at a discount to crude oil,” said Ben Brockwell, director of data pricing for OPUS.

Brockwell said refineries lost money last year, despite the surge in gas prices. The refineries in the latter half of 2008 were paying top dollar for oil, and then producing gasoline in a low-demand economy, he said. Now, refineries are producing less, driving up prices in even this low-demand economy, while stockpiling discount oil, he said.

It’s hard to tell how this impacts Americans, who have been cutting back on driving since last year, and who have avoided the gas-guzzling larger vehicles, said Moody’s chief economist John Lonski.

“You’d rather see energy prices lower, but it doesn’t serve right now as one of the primary worries that affects consumer spending,” said Lonski. “I would think that of the list of things to worry about, it does not yet rank as high as it did this spring or early summer, when gas prices were at stratospheric levels.”

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Michael Galvis: Could We Have a Supply Crunch on Oil Next Year?

February 16, 2009

LONDON (Reuters) — The International Energy Agency said on Monday there could be an oil supply crunch from 2010 once global demand recovers and the impact of delayed investment crimps future supplies.

The agency, which advises 28 industrialized countries, is concerned that some oil producers are deferring projects to expand supply. It expects oil demand growth to resume next year after its first drop in a generation.

“Currently the demand is very low due to the very bad economic situation,” the IEA’s executive director, Nobuo Tanaka, told reporters on the sidelines of a conference in London.

“But when the economy starts growing, recovery comes again in 2010 and then onward, we may have another serious supply crunch if capital investment is not coming,” Tanaka said.

Oil’s rally from below $20 in 2002 to a record high near $150 last year was fueled in part by growing demand from China and other emerging economies which strained supplies.

The Paris-based IEA has often warned that investment in new supply is too low.

Tanaka said he expected world oil demand to rise by 1 million barrels per day (bpd), or about 1%, in 2010 as growth resumes outside of the Organization for Economic Co-operation and Development.

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Michael Galvis: Oil Jumps With Stimulus Approval.

February 16, 2009

NEW YORK (CNNMoney.com) — Oil prices jumped Friday by the largest amount in a single-day since the end of 2008 as a $787 billion stimulus bill designed to jump-start the economy moved one step closer to full congressional approval.

U.S. crude for March delivery ended the trading day up $3.53 to $37.51 a barrel in New York. The largest previous single-session increase came on Dec. 31, 2008, when prices rose by $5.57 a barrel.

The final version of the hotly debated bill was approved by House of Representatives by a vote of 246 to 183 Friday.

The bill is expected to be approved by the Senate as well, and given to President Obama to sign by Monday, Presidents Day.

“To some extent that may be contributing to some willingness to take on more risk,” said Rachel Ziemba, energy analyst with research firm RGE Monitor.

Concern about the U.S. economy and its corresponding demand for petroleum-based fuels has helped send crude prices plummeting from a record high of $147.27 a barrel last summer.

The Obama administration’s economic team says the stimulus plan will create or save 3 million to 4 million jobs.

However, some say the package doesn’t go far enough to address the economy’s underlying problems.

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Michael Galvis: Oil Prices Slip With Grim Economic Outlook.

February 10, 2009

NEW YORK (CNNMoney.com) — Oil prices slipped Tuesday as investors focused on the dour economic outlook, waning global demand for energy and uncertainty regarding the Obama administration’s plans to revitalize the economy.

U.S. crude for March delivery fell 63 cents to $38.93 a barrel.

Treasury Secretary Tim Geithner on Tuesday outlined the administration’s plan to prop up the financial industry, saying the program could provide U.S. banks with up to $1 trillion in new capital.

“People are worried about the trillion dollar number,” said Mark Waggoner, president of trading firm Excel Futures in Huntington Beach, Calif. “Where is this money coming from? That’s really what it boils down to.”

Meanwhile, the Senate approved an $838 billion plan to stimulate the economy through new spending programs and tax cuts. The measure needs to be reconciled with one passed last month by the House, and passed again by both houses of Congress. Democrats want President Obama to be able to sign the final measure on Presidents Day, next Monday.

Concern about falling demand due to the troubled economy has sent oil prices down more than $100 from a record high of $147.27 a barrel last summer.

Oil inventories: As demand for oil has dropped off, supplies of unused crude in the United States, the world’s largest oil consumer, have been building. Stockpiles of crude oil have grown by millions of barrels per week over the past month.

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Michael Galvis: Oil Prices Rise Due To OPEC Cuts.

February 9, 2009

NEW YORK (CNNMoney.com) — Oil prices climbed towards $42 a barrel on Monday, after the Organization of Petroleum Exporting Countries said it continued to cut crude supply and hinted that more cuts may be coming.

U.S. crude for March delivery rose $1.34 to $41.51 a barrel on the New York Mercantile Exchange.

Abdullah al-Badri, secretary-general of OPEC, told reporters that about 80% of the previously agreed-upon cuts were complete. In December, the cartel’s member nations decided to cut 4.2 million barrels a day in oil production, but some countries that rely on oil exports have been reluctant to trim supply.

Analysts said that OPEC’s aim was to stabilize the price of oil, which has leveled off since mid-December, but is down sharply from last year’s all-time high above $147 a barrel. Still, al-Badri said that the group may take more action at its meeting scheduled for March 15.

“OPEC is the catalyst for investors to come back into the market,” said James Cordier, founder of brokerage OptionSellers.com. But oil prices remain pressured by weak demand and a supply glut in the United States, he added.

“I think we’ll continue to trade in a sideways direction,” Cordier said.

The oil market is also focused on the potential benefits of a massive economic stimulus plan being debated in Washington.

Senate lawmakers are set to vote on a key measure Monday to end debate on the $827 billion plan, which could face a final vote Tuesday. The package is aimed at boosting the economy by funding infrastructure spending and lowering taxes.

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Michael Galvis: Oil Falls towards $39 A Barrel!

February 6, 2009

LONDON (Reuters) — Oil fell $2 a barrel towards $39 on Friday after news of more job losses in the United States heightened the prospect for still weaker demand in the world’s biggest oil consumer.

Nearly 600,000 workers lost their jobs in the United States last month – more than Wall Street economists had expected.

The global economic slowdown has curbed demand for fuel around the world, knocking oil prices sharply lower since they peaked at almost $150 in July.

“It gets worse and worse and worse,” said Greg Salvaggio of Tempus Consulting in Washington. “The economy is just falling into oblivion.”

U.S. light crude for March delivery fell $1.93 to $39.24 a barrel by 9:43 a.m. ET.

U.S. crude is trading well below Brent as inventories in Cushing, Oklahoma – the delivery point for the U.S. crude contract – are at record levels. U.S. crude for delivery in two months time is trading just above $44 a barrel.

The head of Italy’s largest oil company predicted on Friday that oil could stay as low as $40 for the rest of 2009.

“A price of $40 a barrel, it’s roughly my forecast for this year,” Eni Chief Executive Paolo Scaroni said.

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Michael Galvis: Oil Prices Slip Back Under $40 A Barrel.

February 5, 2009

LONDON (Reuters) — Oil slipped under $40 on Thursday as investors took in U.S. data showing a 26-year record high in the number of workers filing new unemployment benefit claims.

The U.S. Labor Department said initial claims for state unemployment insurance benefits rose 35,000 to a seasonally adjusted 626,000 on the week ending Jan. 31, the highest since the week ending Oct. 30, 1982.

Analysts polled by Reuters had forecast 585,000 new claims.

U.S. light crude for March delivery fell 20 cents to $40.12 a barrel at 9:18 a.m. EST after briefly trading down at $39.80. London Brent crude for the same month gained 69 cents to trade at $44.84 a barrel.

U.S. Crude has been locked between $39 and $49 a barrel for the past two weeks.

“The number of jobless people keeps mounting and this will weigh again on the energy complex,” said Phil Flynn, analyst at Alaron Trading in Chicago.

“If the jobless ranks continue to rise, it will be difficult for OPEC to do much to keep oil prices from further falling.”

On Friday the Labor Department will issue the employment report for January, and analysts are expecting a drop of 525,000 payroll jobs.

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