Oil Hovers Near $77 On US Economy, Crude Demand

From the Associated Press:

Oil prices hovered near $77 barrel Thursday in Asia amid signs of a slowing U.S. economy and weak demand for crude.

Benchmark crude for September delivery was up 16 cents at $77.15 a barrel at midday Singapore time in electronic trading on the New York Mercantile Exchange. The contract fell 51 cents to settle at $76.99 on Wednesday.

Oil has traded near $75 most of this year on mixed U.S. economic news — corporate earnings have rebounded but the unemployment rate remains high. On Wednesday, a Federal Reserve report said the economic recovery is slowing in some parts of the country.

Oil consumption also appears to be sluggish. Crude supplies grew by 7.3 million barrels last week, according to the Energy Department's Energy Information Administration. Analysts expected a drop of 2.3 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Supplies of gasoline and distillates, which include diesel and heating oil, also rose.

Barclays Capital said in a report that the main driver of oil prices has been skittish sentiment about the economic recovery. "It may take a while before the ghosts from the previous crisis go away entirely."

Stocks gain as confidence rebounds

The stock market has been a concern for many lately; especially when it comes to retirement nest eggs. You might rest easier tonight knowing that the stock market is doing better today than its intimidating dip yesterday. According to CNNMoney.com, markets were up for U.S. stocks led by a rebounding energy sector. The Dow Jones rose 225.5 points, or 2.3%, the S&P 500 index added 28 points (2.6%) and the Nasdaq is up 59 points, also 2.6%.

It seems the markets are being “driven by minute-to-minute reporting” of the news. Many people bailed out of BP stock yesterday upon hearing there would be a criminal investigation of the Gulf of Mexico oil spill and the latest attempt to plug the spill failed. Yet, as many lumped together all of the oil companies, it was realized BP made a mistake but not all oil is a bad investment.

Technology shares also increased as people realized their value. The National Association of Realtors said its pending home index which measures existing home sales, rose 6% in April when it was only expected to rise by 4.3%. General Motors and Ford Motor both posted large increases in May sales of their brands, as well as Toyota, only less.

In world markets, Japan’s index slid 1.1% after the nation’s prime minister resigned. Hong Kong’s Hang Seng index fell even lower. In the meantime, the euro rose against the dollar at $1.2247, bouncing back from the four-year low it had yesterday. Treasury bond prices are also lower. Sleep well U.S. investors, even if only for a night.

You can read the full article on CNNMoney.com here. If you are an investor or interested in investing, let me know what you think of this blog.

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Obama Calls for Rolling Back Oil 'Tax Breaks'

As the now well-known BP leak continues to spew oil into the Gulf of Mexico, President Obama has announced that it is time to begin reducing tax breaks for oil companies. According to this Washington Post story, the White House hopes to use the funds to develop and research clean energy sources.

Obama made the comments Wednesday in prepared remarks for a speech at Carnegie Mellon University in Pittsburgh.

He said the catastrophic Gulf oil spill shows the country must move toward clean energy by embracing energy efficiency, tapping natural gas and nuclear power and eliminating tax breaks for big oil.

Obama said that the Gulf spill "may prove to be a result of human error - or corporations taking dangerous shortcuts that compromised safety" - but that deepwater drilling is inherently risky and America cannot rely solely on fossil fuels.

Top U.S. official pledges to reform ties to Big Oil

Almost one month from the day the U.S. oil rig, Deepwater Horizon, exploded and sank in the Gulf of Mexico, Secretary of the Interior Ken Salazar says he’s ready to address the problem head on, finding who is to blame for the massive oil spill and reform the way the government does business with the oil industry. Salazar seems to feel that the oil company BP should be held accountable, but others argue it is the Department of Interior agency MMS who might have “dramatically underestimated the potential risks” of drilling in the Gulf of Mexico. In fact, in an article on CNNMoney.com, Senator Ron Wyden of Oregon stated that MMS (Minerals Management Service) who is responsible for managing natural resources in the waters of the Gulf of Mexico have been in denial about safety problems for years and are the ones who may be responsible.

The horrible truth is that this massive oil explosion on April 20, 2010 killed 11 workers and continues to leak oil undersea at a rate of 210,000 gallons per day. No matter who is at fault, Secretary of the Interior Ken Salazar is still proposing legislation that would give the Department of Interior an additional $29 million to what he says, “inspect offshore oil and gas platforms, create new safety regulations, and to study the spill’s impact”. The secretary has also stated that his department, along with the Department of Homeland Security, plan to offer “robust” recommendations in a 30-day safety review as mandated by the White House.

Until then, the good news is that the government has ceased issuing any permits for new drilling projects in the Gulf until a full explanation for what caused the spill in the first place can be brought to light.

Read the full article here.

Volatile Swings for Price of Oil Hobble Industry

From the NY Times.com:

The extreme volatility that has gripped oil markets for the last 18 months has shown no signs of slowing down, with oil prices more than doubling since the beginning of the year despite an exceptionally weak economy.

The instability of oil and gas prices is puzzling government officials and policy analysts, who fear it could jeopardize a global recovery. It is also hobbling businesses and consumers, who are already facing the effects of a stinging recession, as they try in vain to guess where prices will be a year from now — or even next month.

A wild run on the oil markets has occurred in the last 12 months. Last summer, prices surged to a record high above $145 a barrel, driving up gasoline prices to well over $4 a gallon. As the global economy faltered, oil tumbled to $33 a barrel in December. But oil has risen 55 percent since the beginning of the year, to $70 a barrel, pushing gas prices up again to $2.60 a gallon, according to AAA, the automobile club.

“To call this extreme volatility might be an understatement,” said Laura Wright, the chief financial officer at Southwest Airlines, a company that has sought to insure itself against volatile prices by buying long-term oil contracts. “Over the past 15 to 18 months, this has been unprecedented. I don’t think it can be easily rationalized.”