Support NeoGAF

[XiaNaphryz]

Oil Drops Below $80 to Eight-Month Low on U.S. Supply, Europe

June 21 (Bloomberg) -- Oil tumbled below $80 a barrel for the first time in eight months in New York as U.S. inventories surged amid concern that the European debt crisis will drag down the global economy, reducing fuel demand.

Futures dropped as much as 1.9 percent in New York to $79.92 a barrel, the lowest intraday level since Oct. 6. Prices have slumped 27 percent from this year's settlement high as U.S. stockpiles rose to the most in almost 22 years and growth slowed in the U.S., Europe and China. Federal Reserve policy makers lowered the outlook for U.S. economic growth and employment, while a preliminary reading of Chinese manufacturing by HSBC Holdings Plc and Markit Economics pointed to a contraction for an eighth month.

"There's negative momentum in the market, which is being accelerated by the inventory data, bad economic sentiment and a stronger dollar," said Eugen Weinberg, head of commodities research at Commerzbank AG, who correctly forecast prices would fall after this week's Fed meeting. "I see markets bottoming in late summer, until then further slippage is likely."

Crude futures for August delivery fell 78 cents, or 1 percent, to $80.67 a barrel in electronic trading on the New York Mercantile Exchange as of 12:59 p.m. London time. Prices peaked at a settlement high of $109.77 on Feb. 24.

Brent oil for August settlement decreased 87 cents, or 0.9 percent, to $91.82 a barrel on the London-based ICE Futures Europe exchange. The European benchmark contract was at a premium to West Texas Intermediate of $11.20 after closing at $11.24 yesterday, the lowest level since January.

Rising Supply

Inventories increased 2.9 million barrels to 387.3 million barrels in the week ended June 15, the highest level since July 1990, as crude production climbed to 6.35 million barrels a day, the most since February 1999, the Energy Department reported yesterday. Inventories of distillate fuel and gasoline also increased.

Crude supplies from the Organization of Petroleum Exporting Countries rose in May to the highest level since October 2008, a Bloomberg survey showed earlier this month, adding pressure to global prices. Saudi Arabia pumped crude at the fastest pace in at least 23 years. The country's oil minister, Ali al-Naimi, said on June 15, a day after OPEC members met, that Saudi Arabia will continue to prevent any shortages.

"There is no catalyst here to spike the price," said Rich Ilczyszyn, chief market strategist and founder of Iitrader.com in Chicago. "We know that demand is still going to be relatively weak and we know that we have plenty of supply."

Growth Slows

Oil demand in the U.S., the world's largest consumer, will drop for a second year in 2012, the Energy Department said in its Short-Term Energy Outlook June 12.

Federal Reserve officials yesterday cut their estimates for 2012 growth after last month's slowdown in hiring and see little progress on unemployment during the rest of the year. The central bank lowered its central tendency estimate for U.S. 2012 gross domestic product growth to 1.9 percent to 2.4 percent from 2.4 percent to 2.9 percent in April.

China, the second-biggest user of oil after the U.S., cut borrowing costs this month for the first time since 2008 to combat a deepening slowdown.

Euro-area services and manufacturing output contracted for a fifth month in June, suggesting Europe's economy may fail to grow in the current quarter, London-based Markit Economics said today, citing an initial estimate of 46 for its composite index. A reading below 50 indicates contraction.

Europe's Debt Crisis

The European sovereign debt crisis that began in Greece and then moved to Ireland, Portugal, Italy and Spain has reduced economic growth and fuel consumption.

Antonis Samaras, head of Greece's New Democracy party, was sworn in as prime minister yesterday after Greek political leaders agreed on a coalition that will seek relief from austerity measures tied to international loans.

European officials have held out the prospect of flexibility over fiscal austerity for Greece after the country's election amounted to a referendum on remaining in the 17-nation euro currency union.

"The European debt crisis is still not over and any kind of strength you get could prove transitory if they can't successfully implement what they said they are going to do," said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant.

Oil consumption in Europe will fall both this year and next, according to the U.S. Energy Department.

 

[iclash]

Yet gas prices remain artificially high. The last time gas prices were this high, oil was around 150$ a barrel. Time to call oil execs in front of congress again?

 

[ConfusingJazz]

Right before an election, how convenient!

Actually, it is. Probably the deciding factor in the election will be the price of oil and its affect on the economy.

Yet gas prices remain artificially high. The last time gas prices were this high, oil was around 150$ a barrel. Time to call oil execs in front of congress again?

Refining takes a while.

 

[spiderman123]

Right before an election, how convenient!

Actually, it is. Probably the deciding factor in the election will be the price of oil and its affect on the economy.



Refining takes a while.

mmmmmmmmmm, maybe

 

[dave is ok]

It's bullshit how as soon as barrel prices go up, pump prices go up - but when barrel prices go down we pay inflated pump prices for weeks. What a scam

 

[Gaborn]

Refining takes a while.

agreed, we need to open more refineries.

 

[Plinko]

Yet gas prices remain artificially high. The last time gas prices were this high, oil was around 150$ a barrel. Time to call oil execs in front of congress again?

Nailed it. I came here to post this.

It's a huge scam. Oil drops $10 a barrel and gas takes weeks to drop 15 cents. Oil raises $3 a barrel and gas prices jump 10 cents THE NEXT DAY.

If there was any reasonable way to regulate this I'd vote for it in a heartbeat.

We do need more refineries, though, and the oil companies refuse to open them up because of the outrageous profits they're making by keeping refining capacity low.

 

[kehs]

Thank you Newt!

 

[ConfusingJazz]

agreed, we need to open more refineries.

No one wants to, and for a reason: They smell like ass and have a tendency to explode.

 

[Chichikov]

agreed, we need to open more refineries.

Why do you think that?

 

[Az987]

I love how I'm paying $3.64 a gallon and I'm happy about it because 2 months ago it was like $4.15.

I'm going to sell my car for a horse; can you ride a horse on the interstate?

 

[ToxicAdam]

Almost all refinery capacity in America (and there aren't many left) is owned by a small handful of companies. They pretty much control the whole process from the time they drill it, until the time you fill it. Real easy to manipulate retail prices that way.

 

[spiderman123]

Why do you think that?

http://i.imgur.com/ngF9W.png[/QUOTE]

I was actually looking for this

[quote="ConfusingJazz, post: 39107262"]No one wants to, and for a reason: They smell like ass and have a tendency to explode.[/QUOTE]


only if you Texas city or Exxon valdez or BP or Norco or Union oil

 

[Liquidsnake]

Yet gas prices remain artificially high. The last time gas prices were this high, oil was around 150$ a barrel. Time to call oil execs in front of congress again?

I agree with this 100%.

 

[Subitai]

We have an infrastructure problem where refineries are in the wrong place or can't refine the right type of oil.

http://www.forbes.com/sites/energysource/2012/06/21/oil-price-differentials-caught-between-the-sands-and-the-pipelines/

 

[Javaman]

I really hope some of those speculators that have been jacking up the price the past few years are now taking a huge bath on this drop.

 

[Bay Maximus]

I really hope some of those speculators that have been jacking up the price the past few years are now taking a huge bath on this drop.

You and me both, Javaman. You and me both.

 

[Flo_Evans]

Gas has been pretty cheap this summer.

 

[iclash]

I really hope some of those speculators that have been jacking up the price the past few years are now taking a huge bath on this drop.

anyone remember several years ago when gas prices spiked downward? The big investment firms (places like Goldman Sachs) were on life support, then we bailed them out so they could speculate gas prices right back up. Something that affects the economy as directly as gas prices shouldn't be subject to speculation.

 

[Keru_Shiri]

It's bullshit how as soon as barrel prices go up, pump prices go up - but when barrel prices go down we pay inflated pump prices for weeks. What a scam

This. Gas isn't shy about jumping up $0.10 a day, but barrel prices hit an 8-mo low? Still paying above $3.20/gal.

 

[Ace 8095]

The crack spread is still about $15 higher than it should be.

 

[RukusProvider]

It's bullshit how as soon as barrel prices go up, pump prices go up - but when barrel prices go down we pay inflated pump prices for weeks. What a scam

Yep. This is exactly it. They take their time to slowly trickle down the prices with the hope that the oil bounces up even slights and gives them an excuse to not drop prices further.

 

[Cake Boss]

Yay I guess.

 

[magicstop]

I love how I'm paying $3.64 a gallon and I'm happy about it because 2 months ago it was like $4.15.

I'm going to sell my car for a horse; can you ride a horse on the interstate?

http://www.youtube.com/watch?v=oGO-OupENC4

 

[Crystalkoen]

I really hope some of those speculators that have been jacking up the price the past few years are now taking a huge bath on this drop.

They probably are, and plan on swimming in it Scrooge McDuck style. Gotta use up that excess supply as quickly as possible, y'know?

 

[Chichikov]

We have an infrastructure problem where refineries are in the wrong place or can't refine the right type of oil.

http://www.forbes.com/sites/energysource/2012/06/21/oil-price-differentials-caught-between-the-sands-and-the-pipelines/

I read articles coming on both sides of the issue, I honestly have no way to evaluate them.

But that particular writer was dead wrong about that shit in the past, he's been predicting 200$ a barrel for a while now.
That doesn't mean he's wrong now, just something to consider.

 

[andycapps]

Refining takes a while.

This is true, yet they often use current events as an excuse to raise prices. You can't have it both ways. If you're going to base price increases at the pump on what happens overseas today, you can't say that for us to see any decrease we have to wait 3 months.

Basically, shit needs to stop but it won't. They can fall back on the refineries excuse, but if as an example, OPEC says they're cutting down their production we feel that shit today.

 

[ConfusingJazz]

This is true, yet they often use current events as an excuse to raise prices. You can't have it both ways. If you're going to base price increases at the pump on what happens overseas today, you can't say that for us to see any decrease we have to wait 3 months.

Basically, shit needs to stop but it won't. They can fall back on the refineries excuse, but when OPEC says they're cutting down their production we feel that shit today.

The average price of gas nationally has dropped 20 cents throughout May and June, it's not supposed to do that. It's fighting the annual cycle of energy prices shooting up during the summer, and doing a significant job at that.

 

[The Technomancer]

Almost all refinery capacity in America (and there aren't many left) is owned by a small handful of companies. They pretty much control the whole process from the time they drill it, until the time you fill it. Real easy to manipulate retail prices that way.

But aren't those companies competing with each other in the free market? Surely they wouldn't decide that its more profitable to game the system then to adjust their prices in a competitive back-and-forth that benefits consumers, would they?

 

[Link]

I love how I'm paying $3.64 a gallon and I'm happy about it because 2 months ago it was like $4.15.

I'm going to sell my car for a horse; can you ride a horse on the interstate?

You could, but probably just the one time.

 

[andycapps]

The average price of gas nationally has dropped 20 cents throughout May and June, it's not supposed to do that. It's fighting the annual cycle of energy prices shooting up during the summer, and doing a significant job at that.

This is true, we haven't hit the national average of $4 yet, that I'm aware of. At least not for a prolonged period like they called for. The price of gas has gone down some. The frustration comes from what I said above though. That the excuse in raised gas prices is lowered oil production from OPEC, or from any other source, yet if our reserves are high and prices of oil are at extreme lows, we don't see proportionate relief at the pump. While $.20 lower during the summer months is great, I think our national average is at least $.40 artificially inflated. Nothing to back that up, though.

 

[The Technomancer]

This is true, we haven't hit the national average of $4 yet, that I'm aware of. At least not for a prolonged period like they called for. The price of gas has gone down some. The frustration comes from what I said above though. That the excuse in raised gas prices is lowered oil production from OPEC, or from any other source, yet if our reserves are high and prices of oil are at extreme lows, we don't see proportionate relief at the pump. While $.20 lower during the summer months is great, I think our national average is at least $.40 artificially inflated. Nothing to back that up, though.

The sentiment I expressed back during the serious price spike in the late 2000s was basically "reporting record profits during an oil shortage is tantamount to a food company reporting record profits during a famine. Oil has surpassed being a luxury, it is a necessity, and to take advantage of people's needs like that is reprehensible"

 

[SRG01]

We have an infrastructure problem where refineries are in the wrong place or can't refine the right type of oil.

http://www.forbes.com/sites/energysource/2012/06/21/oil-price-differentials-caught-between-the-sands-and-the-pipelines/

Definitely. There are the same arguments up here in Canada as well, with some people saying it's cheaper to ship it down south (past the border) for refining. What these people don't tell you is that there are different kinds of refineries, not to mention upgraders, that we desperately need. Case in point, our bitumen and crude-like products from the oil sands don't fetch the Brent price across the Alberta border.

The sentiment I expressed back during the serious price spike in the late 2000s was basically "reporting record profits during an oil shortage is tantamount to a food company reporting record profits during a famine. Oil has surpassed being a luxury, it is a necessity, and to take advantage of people's needs like that is reprehensible"

And the irony of oil being a necessity is that Western society should be saving petroleum as a building material instead of burning it.

 

[Liquidsnake]

And yet this morning, I paid $4.20 per gallon. What is wrong with this picture?

 

[ToxicAdam]

But aren't those companies competing with each other in the free market? Surely they wouldn't decide that its more profitable to game the system then to adjust their prices in a competitive back-and-forth that benefits consumers, would they?

You're probably being sarcastic, but it's not really unusual for companies to collectively work together to keep prices artificially high. Especially when the product is in constant demand and when there are very few of them.

You look at the food industry and price fixing (or charges of) happens frequently. Overt like with the vitamin/food additive companies and subtle like with the cereal companies.

 

[Woody Invincible]

Holy shit dude, I filled up at $2.89/gallon this morning.

 

[andycapps]

You're probably being sarcastic, but it's not really unusual for companies to collectively work together to keep prices artificially high. Especially when the product is in constant demand and when there are very few of them.

You look at the food industry and price fixing (or charges of) happens frequently. Overt like with the vitamin/food additive companies and subtle like with the cereal companies.

What incentive do the oil companies have to price their products lower? The only way it changes is if one of the majors like BP just suddenly decides to slash prices by say, 10%. But why would they do that? Gas isn't expiring in the pumps. People are still buying it because it's a commodity.

 

[The Technomancer]

You're probably being sarcastic, but it's not really unusual for companies to collectively work together to keep prices artificially high. Especially when the product is in constant demand and when there are very few of them.

You look at the food industry and price fixing (or charges of) happens frequently. Overt like with the vitamin/food additive companies and subtle like with the cereal companies.

Yup, my sarcasm was meant to reflect what you said directly.

 

[M-PG71C]

I can't afford Mountain Dew. The economy is tough, OBBBBBAAAAMMMMAAA.

Oh wait, this is just oil companies being oil companies. :/

 

[Culex]

Holy shit dude, I filled up at $2.89/gallon this morning.

3.51 in CT this morning for regular

 

[PhoenixDark]

But oil is supposed to be high because Obama won't authorize the Keystone pipeline!

 

[aronnov reborn]

where's my $1.99 gas!!!

 

[ConfusingJazz]

This is true, we haven't hit the national average of $4 yet, that I'm aware of. At least not for a prolonged period like they called for. The price of gas has gone down some. The frustration comes from what I said above though. That the excuse in raised gas prices is lowered oil production from OPEC, or from any other source, yet if our reserves are high and prices of oil are at extreme lows, we don't see proportionate relief at the pump. While $.20 lower during the summer months is great, I think our national average is at least $.40 artificially inflated. Nothing to back that up, though.

Resources from the AAA on average gas prices, currently at $3.47: http://fuelgaugereport.aaa.com/?redirectto=http://fuelgaugereport.opisnet.com/index.asp

 

[Orbis Tabula]

Yeah, it's 3.17 where I am. A far cry from the just shy of 4 dollars a few months back

 

[Awesome Animals]

http://www.clevelandgasprices.com/Price_By_County.aspx

Interesting.

 

[Flo_Evans]

Resources from the AAA on average gas prices, currently at $3.47: http://fuelgaugereport.aaa.com/?redirectto=http://fuelgaugereport.opisnet.com/index.asp

seems to track pretty well with crude...

 

[Mudkips]

$3.20?
I just paid $4.09.

 

[Liquidsnake]

Yeah, it's 3.17 where I am. A far cry from the just shy of 4 dollars a few months back

In Los Angeles, it was just shy of $5.00 a few months ago.

 

[ToxicAdam]

What incentive do the oil companies have to price their products lower? .

They have to keep an eye on profit margins. If they get too much out of wack, they will get investigated.

 

[AdventureMike]

They have to keep an eye on profit margins. If they get too much out of wack, they will get investigated.

And yet we, as casual forum go-ers, can look and see funny business going on to no avail :/