Originally posted by normbenign
Focusing on something like speculators intentionally diverts attention from the basics. Supply has to increase at least equal with demand. This can be either by new petroleum, or by alternatives. Bottlenecks, and disincentives must be removed. Government policies that negatively impact the industry must be reduced or removed.
How nice that we get this news today regarding the drop in oil prices after investors find out crude supplies have increased 20% from last year. Looks like the investors headed for the exits today.
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Oil falls on report of stored surplus
Jun 03, 2009 03:00 PM
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Dirk Lammers
THE ASSOCIATED PRESS
SIOUX FALLS, S.D. – Oil prices slumped today when a U.S. government report on unused crude in storage suggested the month-long rally in energy prices may have been premature.
Crude and gasoline prices tumbled through most of the year as storage facilities filled up. Heavy industry and individual consumers had pulled back sharply on energy spending.
After rising for seven straight days and threatening to break the US$70 barrier, benchmark crude for July delivery tumbled more than four per cent, or $2.80 to $65.75 a barrel on the New York Mercantile Exchange.
The catalyst was a report from the Energy Department's Energy Information Administration, which said crude in storage rose by 2.9 million barrels to 366 million barrels, which is 20.3 per cent above year-ago levels.
Analysts had expected storage levels to fall as they had in the previous three weeks. Huge inventory levels earlier in the year had pushed energy prices to five-year lows.
The report sent a jolt through the market, which has been flooded in recent weeks by money from investors who have capitalized on a weak dollar. Because crude futures are priced in the U.S. currency, oil is relatively cheap.
But that strategy can go only so far if no one is buying oil.
There are few signs that energy demand has rebounded strongly, despite some glimmers of optimism from the manufacturing sectors in Europe, China and the United States. Heavy industry is a big energy consumer, particularly of natural gas.
Natural gas futures plunged 9 per cent today. Earlier this week, there was a rush of money into natural gas, which looked like a bargain next to oil, which had been on an extended rally.
That optimism, at least today, looks misplaced.
"It seems like the prices have gotten a little ahead of themselves," said Chip Hodge, managing director of MFC Global Investment Management in Boston.
The run-up has been felt at the pump, where prices rose by more than two cents overnight to hit $2.548, according to auto club AAA, Wright Express and Oil Price Information Service. That's more than 11 cents higher than last week and well above the $2.07 that gas cost just a month ago.
There is a danger that high energy prices could slow any economic recovery, beginning on the level of the individual consumer who must fill up the gas tank.
Hodge said he doesn't think oil prices will rise above $70 per barrel until there's some kind of uptick in demand.
http://www.thestar.com/business/article/644750
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uzless <------ wins again
The ugly Oil speculators Return??
03 Jun '09 20:23
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