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The price of oil jumped to an 11-month high yesterday, moving even closer to record levels hit last summer as fears mounted over shortages in supply.
Speculation in the world’s most actively traded commodity, rapidly rising demand and reports that production would slow over the next five years pushed Brent crude up to $77.07 briefly during early-afternoon trading, within $2 of the all-time high of $78.65 set last August.

Investors said hedge funds and pension funds were key drivers behind the latest rally. “This rally is very much fund driven,” said Graham Sharp, director at Trafigura, a commodities trading group. “The entry of long-only hedge funds into the market is a major factor this time around. We wouldn’t rule out Brent hitting $80 this summer.”

Maintenance work on oilfields in the North Sea has tightened supplies and helped push Brent, seen as the best indicator of the global market, significantly higher.
The unexpected closure of a North Sea pipeline this month cut oil output from at least one group of fields, operator ConocoPhillips said. Chevron’s Erskine field, which produced an average of 10,705 barrels a day in March, has also been affected by the shutdown.

The market has been jittery all week after the release of the International Energy Agency’s medium-term oil market report warning that demand would increase faster than expected over the next five years while production would struggle to keep up. Traders are nervously awaiting the IEA’s latest monthly report out today, which will give an updated snapshot of global oil demand and stocks.

Data from the US Energy Information Administration showed gasoline stocks in the world’s largest consuming country remained 8.2m barrels lower than a year ago, and the summer driving season there is expected to last at least another month.

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Oil prices settled above the psychologically important $70 a barrel mark on Friday for the first time since August 2006 on worries about gasoline supplies in the heart of the summer driving season.
 
Light, sweet crude for August delivery rose $1.11 to settle at $70.68 a barrel on the New York Mercantile Exchange after rising as high as $71.06 earlier in the session. Oil last closed above $70 a barrel on Aug. 31.

At the pump, gas prices continued to defy analyst expectations by falling 0.4 cent overnight to a national average price of $2.971 a gallon, according to AAA and the Oil Price Information Service. Retail gas prices, which typically lag futures markets, peaked at $3.227 a gallon on May 24.

Analysts have predicted for weeks that retail gas prices are bound to stop falling, and could even rise again, as demand picks up during the summer driving season. Demand is especially strong between the July 4 and Labor Day holidays.

Crude futures had fallen as low as $67.77 on Tuesday, the day before a government report showed gasoline fell when analysts had been expecting a big build. That Wednesday report fueled the late week rally into $70 territory.

The discovery of an unexploded car bomb in west London also boosted prices, analysts said.

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In energy on Monday June 11th

Crude oil prices bounced back from Friday’s drop as light, sweet crude picked up 77 cents to $65.53 a barrel on the New York Mercantile Exchange. Gasoline futures ticked higher, as well.

I am actually surprised that oil prices have actually fallen this summer, it is not so surprising that fuel prices have not followed the same course.  Gas prices have not risen as dramatically as we all may have suspected it would, but it is still early and if the crisis in the Middle East continues to heat up, we might just get that oil price increase as well.

With gas prices fluctuating with no apparent reason, we have been having numerous jokes sent in by our readership.

Even though we agree that gas prices are no laughing matter, we still have to appreciate the efforts of the artists who created these masterpieces…

Keep the jokes coming… we really like them.

 

All images retain their respective owners copyrights.  Though we do not know where these cartoons have come from, we in no way claim that they belong to us and only display them for the clever artwork they posses!!

 

 

With the ever increasing cost of fuel, some consumers feel it might just be unfair……

Gas prices are spiking again — to an average of $3.22 a gallon, and close to $4 a gallon in many areas.

And some oil executives are now warning that the current shortages of fuel could become a long-term problem, leading to stubbornly higher prices at the pump.

They point to a surprising culprit: uncertainty created by the government’s push to increase the supply of biofuels like ethanol in coming years.

In his State of the Union address in January, President Bush called for a sharp increase in the use of biofuels, along with some improvement in automobile fuel efficiency to reduce America’s use of gasoline by 20 percent within 10 years. Congress is considering legislation calling for a nearly fivefold increase in the use of ethanol.

That has forced many oil companies to reconsider or scale back their plans for constructing new refinery capacity.

In hearings before Congress last year, oil executives outlined plans to increase fuel production by expanding existing refineries. Those plans would add capacity of 1.6 million to 1.8 million barrels a day over the next five years, for an increase of 10 percent, according to the National Petrochemical and Refiners Association.

But those plans have since been scaled back to more than one million barrels a day, according to the Energy Information Administration, an arm of the federal government.

“If the national policy of the country is to push for dramatic increases in the biofuels industry, this is a disincentive for those making investment decisions on expanding capacity in oil products and refining,” said John D. Hofmeister, the president of the Shell Oil Company. “Industrywide, this will have an impact.”

The concerns were echoed in a recent report by Barclays Capital, which said the uncertainty about the ethanol growth “will do little to accelerate desperately needed investment in complex United States refining units.”

“Indeed, it is likely to deter and further delay investment, if not rule out many refinery investments completely.”

Even so, the current cost of gas — which in real terms is approaching the old peak of $1.42 a gallon in March 1981, or $3.31 adjusted for inflation — has renewed suspicions that the oil industry is looking for ways to keep profits high by delaying much-needed investments. Senator Charles E. Schumer, Democrat of New York, began hearings yesterday on the topic “Is Market Concentration in the U.S. Petroleum Industry Harming Consumers?”

And the House voted yesterday by a narrow margin to penalize any oil companies, traders or retailers found to be charging “unconscionably excessive” prices for gasoline and other fuels. President Bush will probably veto the measure because the White House has said such legislation would amount to price controls.

Experts point to many short-term reasons the United States is running low on gasoline, causing prices to rise: many oil companies are doing maintenance work on refineries; new federal rules make fuels cleaner but costlier; and a string of delays, fires and accidents in the industry have reduced supplies just when drivers are starting to hit the road for summer vacations. Many analysts predict prices will keep rising, then soften later in the summer as demand trails off.

Energy executives dismissed any suggestions that they were intentionally keeping gasoline off the market.

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Gasoline prices hit a new record at the pump on Monday, but gas futures prices fell on concerns that $3 gas will crimp demand. Oil prices, meanwhile, rose on reports of refinery problems in the U.S. and abroad.

The average national price of a gallon of gas hit $3.073 on Monday, up almost a penny from Sunday’s also record-setting price, according to AAA and the Oil Price Information Service. Gasoline is now well above the previous record of $3.057, set on Sept. 5, 2005, soon after Hurricane Katrina.

But gasoline futures for June delivery fell 5.09 cents to settle at $2.3012 on the New York Mercantile Exchange. Light, sweet crude for June delivery rose 9 cents to settle at $62.46 a barrel on the Nymex.

Heating oil futures fell 1.55 cents to settle at $1.8668 per gallon on the Nymex, while natural gas prices gained 5.3 cents to settle at $7.952 per 1,000 cubic feet.

Brent crude for June settled unchanged at $66.83 a barrel on the ICE Futures exchange in London.

Chip Hodge, energy portfolio manager at John Hancock Financial Securities, in Boston, thinks gasoline futures traders may be reacting psychologically to the fact that pump prices are setting new records.

“You just get a feeling that $3 a gallon. … It’s got to have an impact from a demand standpoint,” Hodge said. “So, maybe there’s a little bit of a selloff on those pressures.”

While oil prices rose on the day, they settled well off their earlier highs on news that Chevron Corp. plans to restart a 42,000 barrels-per-day Nigerian oil facility, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.

“There was good news out of Nigeria after a lot of bad news,” Flynn said. “They’re pumping oil again.”

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U.S. gasoline prices shot above $3.00 per gallon on Friday, within striking distance of record highs, as the creaking domestic refinery system strained to keep up with rising demand.

Average retail gasoline prices in the world’s top consumer reached $3.012 a gallon, the AAA travel group said, up more than 30 cents since early April and near the record of $3.057 hit after hurricanes slammed Gulf Coast oil installations in 2005.

This year, companies struggling to retool refineries to meet new environmental standards, have faced longer, more extensive maintenance and serious outages, draining gasoline inventories ahead of peak summer demand.

“The problem this year is our continuing and increasing inability to refine enough gasoline to meet growing demand,” said Geoff Sundstrom of AAA. “I think it is very possible that we will set a new record high price this month.”

U.S gasoline stocks have dropped by 15 percent in three months, with refineries now running at around 88 percent of capacity, well below the 92 percent analysts say is normal this time of year to build up summer gasoline stocks.

“By this point in the season, nationwide gasoline inventories should be building, or at a minimum plateauing,” Stephen Schork of the Schork Group said in a report.

New lower sulfur fuel specifications have forced refiners to increase the complexity of their equipment, making them more prone to outages.

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The week-old standoff between London and Tehran over the Iranian detention of 15 British naval personnel sent oil prices surging past 69 dollars here — a near seven-month high — and analysts warned they could rise further.
 
British Prime Minister Tony Blair said Friday that Britain wanted Iran to be “increasingly isolated” but vowed to be patient in managing the crisis.

In London trade, the price of Brent North Sea crude for May delivery reached 69.14 dollars a barrel — the highest level since September 4 last year.

It later Friday stood at 68.91 dollars in electronic trading, up 1.03 dollars.

New York’s main oil futures contract, light sweet crude for delivery in May, climbed 63 cents to 66.66 dollars in electronic deals before the official opening of the US market.

New York crude had Tuesday soared to 68.09 dollars — a level last seen in early September — on rumours of military conflict with Iran.

“It wouldn’t surprise me if we saw 70 (dollars a barrel) quite easily or beyond,” said Simon Hayley, senior international economist at Capital Economics.

Iran is the world’s fourth biggest producer of crude oil and some analysts believe there is a risk that the Islamic Republic could move to disrupt its exports should the crisis with Britain escalate.

“This has the potential to escalate into a full-blown crisis,” Bank of Ireland analyst Paul Harris said.

“The fact that the (strategic Iran-dominated) Straits of Hormuz could come into play is a risk, given that the majority of oil traffic goes down this channel.”

Prices have surged this week as Britain froze ties with Iran after it refused to release 15 British sailors and marines it had captured on March 23. Iran insists that the personnel were detained for being in Iranian waters but Britain maintains they were inside Iraqi waters.

Further fuel has been added to oil prices since Thursday when Iran decided against releasing the only female British sailor held among the 15.

A defiant Iran said it would not release as promised Faye Turney because of Britain’s “incorrect” attitude in the growing crisis between the two countries.

Oil prices are also being supported by Iran’s refusal to bow to international pressure over its disputed nuclear programme.

Traders said some people were guilty of widening the geopolitical premium by pushing the price up prematurely.

Hayley of Capital Economics said prices were trading at about 5.0 dollars above the level they would be if traders reacted solely to the fundamental factors of crude’s current supply and demand.

Despite the week’s spike to crude — prices have shot by about 6.0 dollars or more than 9.0 percent since last Friday — they remain a long way off record highs of above 78 dollars a barrel struck last year.

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Gulf rumours send US crude to six-month high

Escalating geopolitical tensions and tightening supply caused a jump in oil prices Wednesday, taking US crude futures to a six-month high.

The initial spike was dramatic. Traders said the oil price jumped $5 a barrel – more than 7 per cent – in just seven minutes shortly after the close of US trade on Tuesday, caused by rumours that Iran had fired a missile at a US warship in the Persian Gulf.

The rumour was swiftly denied by the US, but crude prices remained more than 2 per cent higher Wednesday, reminding investors of the fragile geopolitical situation in the Gulf. Edward Meir at Man Financial said: “Although the missile story turned out to be false, the Iranian abduction of British sailors is very real and has yet to play itself out.”

Markets have become increasingly nervous after 15 British sailors and marines were captured last week. Since then, Nymex crude has risen by nearly 13 per cent on fears the situation would not be solved diplomatically.

Oil prices were also supported by an unexpectedly sharp tightening in supply as data from the US energy department showed stockpiles of crude in the US decreased by 900,000 barrels last week. Crude inventories were expected to have increased by about 1.1m barrels during the period.

Kevin Norrish at Barclays Capital said: “The nervousness of the market in response to the steady ratcheting up of tension with Iran, and a tightening fundamental background provides further evidence that oil price risks are becoming heavily skewed to the upside.”

By midday in New York, Nymex West Texas Intermediate for May delivery was up $1.53 to $64.46 a barrel, while May ICE Brent climbed $1.53 to $66.13.

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