Reuters, 06.12.03, 9:38 AM ET
NEW YORK, June 12 (Reuters) - NYMEX crude futures were expected to move lower on Thursday, testing technical support and consolidating as traders take profits after pushing well above $32 on Wednesday.
"We were due for a corrective pull back," said a New York trader. "There's still concern over inventories."
NYMEX July crude
By Aaron L. Task Senior Writer 06/12/2003 07:19 AM EDT
Skeptics seemingly are worried about just about everything these days, be it a falling dollar, overly accommodative monetary policy, equity valuations, deficits, deflation and/or bubbles in housing and Treasuries.
Almost invariably, however, it's the things people don't worry about that gets them, which brings us to crude prices.
On Tuesday, Federal Reserve Chairman Alan Greenspan highlighted the risks of higher natural gas prices. Conversely, scant few seem terribly concerned about oil prices, Greenspan included. But those believing robust economic growth is imminent, and thus higher stock prices are justified, have reason to be at least a little concerned.
Crude futures did retreat from their prewar highs near $40 per barrel, but have risen steadily since late April and are up 13% in the past month. On Wednesday, crude futures rose another 2% to $32.36 per barrel, the highest close since March 17, after OPEC decided to leave production quotas unchanged at its meeting in Doha, Qatar.
Anticipation of OPEC keeping the status quo was but one factor pushing up oil prices recently, according to Mark Baxter, director of Southern Methodist University's Cox Maguire Energy Institute. Others include struggles getting Iraqi production back on line, concerns about possible conflict with Iran, supply glitches from Venezuela and Nigeria, and concerns about terror attacks on oil facilities.
"All that is keeping people nervous and is going to keep us around the $28-to-$35 [per barrel] range for the next six months," Baxter said.
Oil at those levels is not factored into the bullish forecast of equity strategists. "We still anticipate upside surprises because of a weaker dollar, lower energy prices and fiscal stimulus," Thomas McManus, equity portfolio strategist at Banc of America Securities, wrote on May 19 when he implored clients to "buy the dips." On Wednesday, McManus conceded crude has "moved up so much it's not as much of a positive," and that natural gas prices are "potentially a fly in the ointment."
Wed June 11, 2003 02:55 PM ET By Andrew Mitchell
NEW YORK (<a href=asia.reuters.com>Reuters) - Oil prices forged new post-Iraq war highs on Wednesday after the U.S. government reported another decline in low fuel stocks and the OPEC cartel decided to meet again next month to consider cutting supply.
U.S. light crude in New York CLc1 was up 60 cents at $32.33 a barrel, hitting a peak of $32.50, the highest level in 12 weeks and nearly 35 percent above last year.
In London, benchmark Brent crude LCOc1 was 29 cents higher at $28.37 a barrel.
Prices jumped as the Energy Information Administration said U.S. crude oil stocks fell 4.6 million barrels to 284.4 million barrels last week, dropping more than 12 percent below last year. Traders had expected a small stock build.
Low inventories and delays in the resumption of Iraq's postwar oil exports enabled a meeting of the OPEC producer cartel in Qatar on Wednesday to put off making fresh supply cuts.
The group which controls around half the world's oil exports decided to meet again in just seven weeks on July 31 in case recovering Iraqi exports undermine high prices.
"Because of the uncertainty at the moment on the world market we want to meet as often as possible," said Iran's OPEC governor Hossein Kazempour Ardebili.
"Frequent meetings convey to the market the message that OPEC is being very vigilant and will take measures if necessary, and that keeps prices up," Ardebili added.
Iraq will this month ship its first crude since mid-March but looting and sabotage at oil facilities means that exports will be well below prewar levels.
The 3-month halt to Iraq's crude exports have prevented U.S. crude inventories from rebuilding after disruptions in Venezuela and Nigeria ran down supplies earlier this year.
After falling from 12-year highs near $40 after Middle East oil facilities escaped the U.S.-led invasion of Iraq without much damage, prices have rebounded to levels which can further undermine already weak economic growth.
"Bottom line in this market is that people keep worrying about low stocks and today's statistics did nothing to allay those fears," said Peter Beutel, analyst at Cameron Hanover.
High natural gas prices are bolstering oil demand at a time when consumption normally takes a seasonal dip. Some utilities are able to switch to oil burning for power generation if natural gas prices get too high.
Federal Reserve chief Alan Greenspan warned on Tuesday that that tight natural gas supplies could force up prices across the energy complex in the event of a cold winter.
U.S. crude imports last week dropped 6 percent from near record levels above 10 million barrels per day in recent weeks. U.S. refiners have been running above 96 percent of capacity in recent weeks to prepare for summer vacation gasoline needs.
Gasoline inventories rose 2.6 million barrels to 209.9 million barrels -- easing supply concerns fueled by a recent spate of operational problems at U.S. refineries.
12:06 AM EDT Jun 21 BRAD FOSS
NEW YORK (AP) - Oil prices surged above $32 US a barrel for the first time since mid-March on Wednesday, as traders fretted about scant supplies, the rising price of natural gas and a signal from OPEC that production cuts might be on the horizon.
The weak U.S. dollar is also making it more expensive to buy oil, analysts said.
Crude for July delivery was up 62 cents to $32.35 US on the New York Mercantile Exchange Wednesday afternoon, down from an intraday high of $32.50.
The last time Nymex oil prices closed higher than $32 a barrel was March 17, a few days before the start of the U.S.-led war in Iraq.
Prices then fell sharply after U.S.-led forces quickly secured Iraq's most abundant oil fields and analysts speculated that the country's supply would make up for lost production elsewhere.
As the military conflict wound down, crude futures dropped as low as $25.24 on April 29. But prices have risen steadily since then as it became clear that Iraq's oil industry was in bad shape and that the country's crude would not flood the global market anytime soon.
"The market is starting to wake up to the fact that while Iraq is going to be a big deal down the road, near-term it isn't going to be much" of a contributor to world supplies, said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago.
Iraq, which pumped around 2.1 million barrels a day before the war, is now producing below one million barrels a day.
On the domestic front, the Energy Department reported Wednesday that commercial inventories of crude fell last week by 4.6 million barrels to 284.4 million barrels, or 37 per cent below year ago levels.
Refiners are drawing down inventories in order to meet the nation's gasoline needs at the start of the busy summer driving season. Supplies were already extremely low because of a two-month strike that paralyzed oil production in Venezuela, the world's fifth largest petroleum exporter.
Flynn also cited the rising price of natural gas, a problem that was highlighted before Congress on Tuesday by U.S. Federal Reserve chairman Alan Greenspan. Greenspan warned that high natural gas prices could be a drag on the economy, particularly in the manufacturing sector.
With natural gas futures trading higher than $6 US per 1,000 cubic feet, or roughly double what they were a year ago, manufacturers are choosing to run their plants on crude-derived fuels instead of natural gas and that, too, is driving the price of oil higher.
The Organization of Petroleum Exporting Countries offered little relief to the market on Wednesday, when ministers meeting in Doha, Qatar, decided to keep production levels steady through July. The oil cartel left open the possibility of a production cut at its next meeting on July 31.
Fahnestock & Co. oil analyst Fadel Gheit said that while OPEC ministers publicly expressed fears about the potential for an oil glut once Iraqi production reaches pre-war levels, privately they are "laughing all the way to the bank."
Still, he said speculation by U.S. traders is driving prices higher more than anything else. "It's not because there is a physical shortage," he said. "It's all psychology."
<a href=www.khilafah.com>Khilafah
The Middle East has in many senses been the fulcrum of western interest since the end of the Second World War. Oil functions as the world’s most important commodity, when most western companies largely own the oil resources in the various Middle-Eastern states the aim is to maintain direct control of the production and distribution of this oil and its resulting profits.
Despite the fact that American forces turned a blind eye to the looting of Iraq’s archaeological treasures, they moved quickly to gain control over oilfields, refineries and pipelines. Even before Iraqi resistance had been routed, top U.S. officials were already boasting that Iraq’s oil infrastructure was safely in American hands.
Iraq alone possesses the world’s second largest proven oil reserves, currently estimated at 112.5 billion barrels, about 11% of the world total and its gas fields are immense as well. Experts in the West believe that Iraq has additional undiscovered oil reserves, which might raise the total well beyond 250 billion barrels when serious prospecting resumes, putting Iraq closer to Saudi Arabia and far above all other oil producing countries. Iraq’s oil is of high quality and it is very inexpensive to produce ($1), making it one of the world’s most profitable oil sources.
No doubt oil companies hope to gain production rights over these rich fields of Iraqi oil, worth hundreds of billions of dollars. In the view of an industry source it is “a boom waiting to happen. As rising world demand depletes reserves in most world regions over the next 10-15 years, Iraq’s oil will gain increasing importance in global energy supplies. There is not an oil company in the world that doesn’t have its eye on Iraq.” Geopolitical rivalry among major nations throughout the past century has often turned on control of such key oil resources and its access.
In a world that runs on oil, the nation that controls the flow of oil has considerable strategic power, not only over the terms of its own consumption but over other nations. US policymakers want leverage over the economies of bigger competitors, Europe, Japan and China, which are more dependent on Middle Eastern oil.
Last year, world demand was 75 million barrels a day, with more than half going to the West, and the International Energy Agency (IEA) forecasted a rise of 2.4% this year. The reason for the raise in demand for oil is simply economic growth in the rich nations. As their industrial production increases, industry needs more energy. It also needs more fuel to transport its products and raw materials. By 2020, the Gulf will supply between 54% and 67% of the world's crude oil, making the region -vital to U.S. interests.
Moreover, shops and offices need increasing amounts of energy to provide heat, lighting and air conditioning. Economic growth also brings with it consumers who spend more on energy-hungry leisure activities, such as motoring. Oil is the biggest single source of the world's energy, - it’s bloodline.
While it is true there is a mammoth wealth in oil, the economic gap in terms of the flow of petro-dollars between the rich countries and the oil states has always been uneven. The price of oil is lower in real terms since the Second World War; lower than a bottle of mineral water. This has been beneficial to the U.S. It has always wanted the oil price to remain within a set range, though if too low it will harm American manufacturers and if too high will be harmful to the profits of the energy producers. In Britain the government generates more money in oil through taxes than Saudi Arabia. Further-more, maintaining low oil prices, allows oil money to flow right back to America in the form of U.S. security treasuries [bonds], construction projects and military production, and so on. In effect, it allows the US to have their oil and guzzle it. While corrupt and repressive regimes, poor technological know-how within the oil industry, abject poverty, environmental pollution, unemployment and low remunerations characterise those living in the oil nations.
The fairy tale that the oil states can use oil as a weapon over the West through OPEC by threatening to cut off supplies whenever they wish is now indisputably ebbing away through the deal the U.S. signed at the UN, giving her full control over Iraq’s oil money, and a governmental system of her choice, which certainly signals the final death of OPEC. An organisation that the US has previously indirectly controlled in any event. Moreover, Thomas Friedman in the New York Times, stated that “bringing Iraq fully back into the oil market could lead to a sharp fall in oil incomes throughout OPEC that could seriously weaken the oil cartel and rob its many autocratic regimes of the income they need to maintain their closed political systems. In fact, give me sustained $10-a-barrel oil and I'll give you revolutions from Iran to Saudi Arabia, and throw in Venezuela. If that scenario prevails, you could look at an invasion of Iraq as a possible two-for-one sale: destroy Saddam and destabilise OPEC at the same time. Buy one, get one free”.
Surely U.S. policymakers must be exultant for the naivety displayed by the Muslim rulers so far, who did not know what hit them. The control of Iraq’s oil is just part of the grand plan, which is eliminating the will of any state to defy US global hegemony, and to directly control the region and all its resources. The ruling royal family of Saudi Arabia (numbering by some estimates as few as 7,000, by others as many as 30,000), depend on oil money to support the lifestyles of thousands of indolent princes, while at the same time continuing to bribe the country's work-averse young masses with free telephones, water, almost-free gasoline, and other goodies that keep them from overthrowing the monarchy. Saudi Arabia's budget, which counts on oil exports for 70 percent of its revenues, will be in deficit this year, in good part because of princely payments to the royal family and handouts to the restless and unemployable graduates in traditional studies being churned out by the state.
The Muslim rulers collaborate with the West to keep the Ummah’s wealth to themselves, from Saddam Hussein to Paul Bremer, the current U.S. administrator. The Ummah must continue to call for a regime change across the Muslim world, just like Rasul-ul-Allah (SalAllahu Alaihi Wasallam) across Jazeeratul Arab.
Defence Secretary Donald Rumsfeld in response to the Iraqis demands of an Islamic state said it “will be aggressively put down”. The Ummah should disregard such threats and exert their utmost to establish such a state for it is Fard upon her. This entity will surely seek to gain political control for the Ummah and her resources. Simultaneously oil must seem to be used as a weapon, thereby bringing an end to Western hegemony over the Muslim world, this will be the true guarantor of a fair oil cash flow to the Ummah.
The U.S. would be doing the future Dowla Islamia (Islamic state) a great favour by confining OPEC to the dustbin of history; equally the state should not recognise OPEC as it harms the interest of the Ummah and the ownership of Western companies over the Ummah’s resources. Rather it must use its military might to secure the Ummah’s resources as stipulated by Rasul-ul-Allah (SalAllahu Alaihi Wasallam):
“People share in three things: Water, Pasture, and Fire” (oil).
Consequently, this would send the West a clear message to keep their hands off our wealth.
Al-Dowla Islamia will generate public awareness against the one way flow of oil profits maintained by Western financial institutions over the issues of low pricing, through public debates, foreign policy propaganda etc. The forceful seizure of Iraqi oil fields can be brought to the forefront of the world public arena in order to remove America’s control.
The oil sector can be strengthened through technological expertise in petroleum engineering, deep-studies in inland and offshore exploration, and petro-chemical processing by providing funds in education, universities and new technical centres, whilst utilising the expertise of those already in this field. Furthermore, technological transfer from less hostile states, like Japan and N. Korea in the future can be sought through oil deals. This must be backed by a clear industrial policy to build heavy and light industries that would at all times meet the energy demands of the Ummah.
The largest markets of oil trading are in London and New York. The state can change the direction of the flow of oil profits by repositioning and renewing the terms of trade on her turf. It must replace the current financial rules with Islamic trading rites, a fair market rather than free market should prevail by the re-pricing of crude oil to reflect its true value, whilst insisting on a quarterly allocation system depending on favourable political circumstances should produce the desired result of a fair flow of oil profits to the Ummah, and this can all be achieved only after Dowla Islamia has been established.
Abdulwahab Jibrin Khilafah.com Journal 11 Rabee Ath-Thanee 1424 Hijri 11 June 2003
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