According to Yahoo!News:
SIOUX FALLS, S.D. – Oil prices fell alongside the broader markets Tuesday with few details released about a Treasury Department program to raise more than $1 trillion in public and private funds to free up credit markets.
The Dow Jones industrials lost about 380 points after Treasury Secretary Timothy Geithner announced the rescue plan, and light, sweet crude for March delivery tumbled $2.01 to settle at $37.55 a barrel on the New York Mercantile Exchange.
It was the second day crude settled below $40, a price last seen three weeks ago.
President Obama’s $838 billion economic recovery plan, which was approved by the Senate on Tuesday, did little to reverse oil’s downturn.
Read the full article at Yahoo!News:
According to Reuters:
NEW YORK (Reuters) – Dwindling fuel demand, with the United States mired in recession, has led to a record oil supply glut at the world’s largest storage site — a factor that could soon trigger another fall in crude prices.
Inventories at the storage hub at Cushing, Oklahoma — the delivery point for U.S. crude futures — have surged a whopping 139 percent to near the available capacity since early October, as sliding energy demand makes holding oil more profitable than refining it.
Analysts say that once the hub’s tanks fill to the limit — which at current rates could happen any time — the scramble by suppliers to unload excess barrels could knock already depressed U.S. crude benchmark prices down further.
Read the full article at Yahoo!News:
- After finally unveiling the US rescue plan, the people suddenly drop the idea of stocks but goes to the save heaven of buying GOLD instead?
The Nymex Light Crude Oil price crashed from above $41 to lower than $37.55 per barrel which is unacceptable to several industries!
The non-conventional oil companies such as Canada Tar sands MIGHT be considering downsizing their manpower & reducing their operation significantly if the oil price remains at this low region of $35 to $40 which is the cost of operation in these locations.
Canada use costly natural gas to boil the mixture of tar sands & fresh water to extract the precious oil from the mixture and the that is after using super trucks to mine the land 24 hours a day 7 days a week.
Deep sea drilling platform is extremely costly to lease and if the oil proven reserve in that well is too low to be profitable in the long run, many may simply abandon these deep sea oil wells leaving more oil under the sea bed!
Imagine USA used to be the number 1 oil exporter in the world in the 1960s to 70s but had forced to abandoned oil depleted oil wells that may still have oil inside but because it’s too costly to extract the remaining left over oil.
Now USA had to import well over 20% of their oil demand from overseas especially from Canada & middle east.
If the oil price continue to be low, I fear the OPEC and oil producing countries MAY start their own little plan to spice up the prices.
The can do the following…
- Artificial oil supply embargo against countries that they don’t like.
- Global Oil supply embargo or oil supply cut by 20% to create artificial shortages.
- Buy their own oil to create artificial demand?
- Pour money back into the economy to boost global economy hence the oil demand.
- Start a war?
Well, the above is just a speculation and hence do not think it will definitely happen however it’s great to see that actual demand of oil seems to had dropped since the last year but unless it’s because of conservation effort and switching over to alternative fuel such as renewable energy…it’s going to be hard on the people when the economic growth starts to sputter to life…in the near future.
The low oil supply from OPEC countries and non OPEC oil producing countries will curb future economic growth but if there is a shortage…it might cause stagflation (stagnant growth & hyperinflation).
If there is a war in an oil producing countries, it might not means the oil price to spike but it may simply means oil may not be available even if you have the money to buy them.
Refinery now are choosing to stock piling oil instead of refining them to usable plastic, paint, diesel and other ordinary materials.
Bots = Terminator
It won’t before long that the oil producer make their action clear that they cannot operate below cost for long…OPEC meeting in march may suddenly become emergency meeting to cut more oil supply to “stabilize” the oil market.
However, Opec had proven many times that they cannot influence the market by their “speeches” until they fulfill their obligation of supply cut which they recently did but the people or speculators did not feel the impact for now.
There are also serious numbers of automated trading bots that control the market much like a terminator gripping the neck of the market and say “alasvista baby”.
Prepare for crude oil roller coaster ahead!
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