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Oil rises to $64

All Reuters NewsLONDON (Reuters) - Oil climbed to $64 a barrel on Wednesday as investors feared that a rebound in demand would drain off stockpiles and spark a winter fuel shortage.

The slow recovery of hurricane-battered U.S. Gulf refineries and rigs only compounded concern. Washington said on Wednesday it would be "many months" before the U.S. energy hub recovered completely from Hurricanes Katrina and Rita.

U.S. crude oil futures were up 47 cents at $64.00 at 1530 GMT, having risen $1.73 on Tuesday. London Brent crude <LCOc1) was up 47 cents at $60.55.

"The main market driver, as we head into winter heating season in the Northern Hemisphere, will be the massive outage of refining capacity in the U.S. and the loss of 175 million barrels of output from the affected refineries," said Michael Wittner of Calyon.

The International Energy Agency, energy watchdog of the West, has said the worst was now behind world oil markets when it came to demand destruction.

Oil demand growth next year is on track for an even faster rate of 1.75 million barrels per day (bpd), up from an already strong 1.26 million bpd in 2005, the IEA said.

China, a major driver of oil demand, is expected to see growth of 600,000 bpd in 2006, up 100,000 bpd on this year, said the U.S. Energy Information Administration.

Quicker growth could lead to yet higher oil prices. The EIA, the statistical unit of the U.S. Department of Energy, sees crude costing $64-$65 next year -- up from $58 in 2005.

Some analysts said signs of an improving U.S. economy, such as smaller-than-expected job loss data for September, backed a healthy U.S. demand picture.

"The hurricanes which battered the U.S Gulf Coast did not have the impact on the labor market as was earlier expected," said Dariusz Kowalczyk, a Hong Kong-based senior investment strategist at CFC Seymour Securities.

But U.S. refining and production are still on the mend.

Some 71 percent of U.S. Gulf of Mexico's 1.5 million bpd of crude production capacity was offline along with 60 percent of the region's natural gas production.

The EIA expects some 560,000 bpd of refinery capacity to stay shut in November, falling to 300,000 bpd in December.

"A combination of market supply and demand reactions, combined with the luck of the outages coming in a slow demand period, have allowed the system to cope better than might have been expected," said PFC Energy.


Analysts said U.S government stock data due on Thursday is likely to give a clearer picture on whether fuel stocks would be sufficient for winter.

A Reuters survey of analysts forecast that distillate stocks, including heating oil, would have dropped 1.7 million barrels last week, which would be a third straight week down.

Gasoline stocks were expected to have fallen by 1.6 million barrels but crude is forecast to have risen 2.1 million barrels.

(Additional reporting by Luke Pachyumuthu in Singapore and Simon Webb in London)

Copyright 2005 Reuters

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Guest Charlie The Tramp

Well this guy said the days of cheap oil was over last March.

Chavez proclaims era of cheap oil over

ENERGY THREATS: The Venezuelan president said OPEC could set prices between US$40 and US$50, while the US said its oil imports from the country were replaceable


Monday, Mar 07, 2005,Page 12

Venezuelan President Hugo Chavez said Saturday that the Organization of Petroleum Exporting Countries could fix a price for oil in a range of US$40 to US$50 per barrel, adding low petroleum prices were a thing of the past.

Chavez's comments come ahead of a crucial OPEC meeting in Iran on March 16. Some analysts are expecting the cartel to cut production to boost oil prices, which have skyrocketed over the past year on supply worries.

Venezuela, the world's fifth-largest oil exporter, has been consistently pushing for higher oil prices. Venezuela currently produces more than 3 million barrels of crude oil a day.

"The era of cheap oil is over," Chavez told reporters in New Delhi.

"The world should forget about cheap oil. It will never go back to the US$10 per barrel rate that prevailed in those days," he added.

Chavez didn't elaborate on how OPEC would introduce a trading range for oil prices, which are currently set by the market.

Chavez, who is on a four-day state visit to India, said he was considering increasing oil trade with countries like India and China to ensure their fast economic growth.

"Venezuela will now help the Southern Hemisphere countries with its oil more than it has helped the United States," he said.

"America wants to keep all the good things in the world for itself. But we will not let them do it," he said.

Relations between the US and Venezuela have deteriorated steadily since Chavez took office in February 1999. He has repeatedly accused Washington of trying to destabilize his government. The US State Department has rejected the allegation.

Separately, the US will buy crude from another country if Venezuela follows through on President Hugo Chavez's threat to cut off supplies, the US ambassador to Caracas said in interviews with local media.

Venezuela supplies the US market with 1.5 million barrels of crude a day -- about 15 percent of its crude needs, or nearly as much as Saudi Arabia supplies to the US.

Chavez has threatened to cut off that supply if there is any US "aggression," such as a military invasion or an attempt on his life.

"If the United States does not buy oil from Venezuela, it will buy it from another country," US Ambassador William Brownfield said in an interview with Globovision television news. He gave a similar assessment in interviews with local newspapers that were published on Saturday.

In Caracas, Brownfield acknowledged that a suspension of Venezuelan imports would initially "distort" the US economy, but dismissed it as a minor blip. "In the end, a free market can accommodate such a distortion," he said.

Washington wants to maintain its current relationship with Caracas, Brownfield said, adding that the White House is "analyzing options" in the event that there is a cut in supplies


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Will oil drop below $60 again? I think so, I think $30 could happen... the fall in global demand caused by global recession would be more than enough to push the price down. The petrol will be there at 80p (2005 pence) a litre, but you won't be able or want to buy it since you'll be out of work and unable to afford it and without a job to drive to have no need for it anyway.

The post peak era will see high prices and low price as well as recessions and limited recoveries. The general trend will be a saw-tooth decline to who knows where over the next few decades.

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The post peak era will see high prices and low price as well as recessions and limited recoveries. The general trend will be a saw-tooth decline to who knows where over the next few decades.

I am sure this is true, and that will mask the actual basic problem of failing oil supplies. I wonder who they'll blame? The thing is, I work in the energy industry, yet only a tiny, tiny fraction of the engineers around me have any real idea of the problems of Peak Oil and Peak Gas. Even if you gently hint that all might not be well, they don't catch on to it, as their minds are not attuned to the concept of Peak Oil. The possiblity of a question mark against future oil supplies just isn't on the horizon. Until only a few months ago I was just as serenely ignorant - that's the trouble, you have to ask the question before your mind is receptive to a basic new paradigm like Peak Oil.

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How do they think we're (and especially the Americans) going to get through this winter regarding gas supplies? The facts are available and the situation looks dire to me.

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How do they think we're (and especially the Americans) going to get through this winter regarding gas supplies? The facts are available and the situation looks dire to me.

Americans will replace much of the lost gas with fuel oil in power stations. In other power stations they may even have to resort to using diesel and jet fuel. This will push oil prices even higher over the winter.

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Oil is still very cheap. Brace yourself.

Quite agree. I am expecting averages of $70-80 a barrel next year. I am also expecting a $1.60-1.70 pound next year. Things are going to get expensive very quickly.

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This oil cartel, in alliance with the City of London-Wall Street's biggest banks, has the final say on price. They dominate the two institutions where the world oil price is set: the London-based International Petroleum Exchange (IPE), and the New York Mercantile Exchange (NYMEX). The way this works, is that the trading companies that trade oil derivatives, push up the world oil price, through long positions and other manipulations, called "updrafting the market." The futures market determines the real world price. Most European oil contracts are based on the marker price of Brent Crude, which in turn is determined by the IPE. Speculators purchase futures contracts on the IPE and NYMEX exchanges; each single contract is a bet on 1,000 barrels of oil. More than 100 million of these oil derivatives contracts were traded on these exchanges in 2004, representing 100 billion barrels of oil. On the IPE, there are 570 derivatives contracts on Brent crude oil—"paper barrels of oil"—traded each year, for each physical barrel of oil produced in the North Sea.

There is some truth in this but it actually cuts both ways, often the manipulation is downwards rather than upwards, when big companies have large short positions. This is particularly apparent in the unregulated over-the-counter oil derivatives markets.

Many people would also be surprised to know that, while the very transparent futures markets provide the base for worldwide oil prices, the price in sales contracts (and therefore the price you pay at the pump) for specific products like petrol or diesel is an assessment made by a journalist based on observation of the much less transparent and liquid physical markets.

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  • 302 Brexit, House prices and Summer 2020

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      • down 5% +
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