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Oil Below $38 on Weak Economic Reports

Started by cathryn, December 23, 2008, 04:16:31 PM

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cathryn

Oil Below $38 on Weak Economic Reports

By CHRIS KAHN, AP
(Dec. 23) - Oil prices tumbled below $38 a barrel Tuesday on fresh evidence of weakness in the U.S. housing market and a shrinking gross domestic product that suggests the recession may be worsening.
A report by the Commerce Department showed that sales of new homes fell in November to the slowest pace in nearly 18 years, while new home prices dropped by the biggest amount in eight months.
"The energy markets are reacting first and foremost to bad economic news, and it seems like they're almost waiting for something bad to occur," said oil analyst Peter Beutel of Cameron Hanover.
A steady outpouring of gloomy economic news has pushed to the background events that over the summer may have led to price spikes, like OPEC's announcement this month of unprecedented production cuts, Beutel said.
Prices have fallen 73 percent since July, with massive job layoffs and weak consumer spending eating away at energy use.
"Boy, it really looks ugly for the start of 2009," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
"It's really difficult to find something between now and inauguration time that says people are going to feel better, they're going to drive more, they're going to ship more packages," Kloza said.
Light sweet crude for February delivery fell nearly 5 percent, or $1.89, to $38.02 on the New York Mercantile Exchange. Prices fell as low as $37.79 earlier in the day.
Overnight, the February contract fell $2.45 to settle at $39.91 a barrel after Toyota Motor Corp. projected its first-ever operating loss since it began reporting such numbers in 1941.
Economists now believe a small decline in economic activity in the third quarter has worsened significantly.
The Commerce Department said Tuesday that the gross domestic product, the broadest measure of economic health, declined at an annual rate of 0.5 percent in the July-September quarter. Corporate profits fell 1.2 percent.
Some economists believe the economy's decline in the October-December period could be as large as 6 percent. If so, that would be the worst quarterly drop since 1982.
The pain appears to have spread through almost every level of the economy. On Tuesday, shares of card maker American Greetings Corp. shares sank to their lowest level in 21 years after the company reported that it swung to a loss in its third quarter.
On Monday, Ogden, Utah-based oil company Flying J Inc. and two of its subsidiaries filed for Chapter 11 bankruptcy protection, citing a steep drop in oil prices and the lack of available financing due to the disruption in credit markets.
Flying J operates 250 travel plazas and fuel stations in 41 states and six Canadian provinces.
"They won't be the last marketer or refiner that may have to go the bankruptcy route in the next year or so," Kloza said. "It's been pretty rugged out there."
Toby Hassall, an analyst at investment firm Commodity Warrants Australia in Sydney, predicted crude prices could fall as low as $25 a barrel next year before any recovery occurs.
OPEC said last week it would slash production by 2.2 million barrels a day, its largest cutback ever, reducing the amount of oil produced each day by 4 million barrels in all when earlier cuts are included.
"It will take time for output cuts to flow through, but there's some doubt about whether there will be full compliance," Hassall said. "I wouldn't be surprised if OPEC cut again in January or February. There's been quite a significant demand side deterioration."
Meanwhile, Iraq's Oil Ministry announced it will open its second licensing round for developing its vast oil and gas fields. Iraq sits on more than 115 billion barrels of oil, but decades of war, U.N. sanctions, violence and sabotage have battered its oil industry.
The Iraqis are betting that oil will eventually rebound. But even if it stays low, it doesn't matter, Beutel said.
"They need the money," he said. "They can't get anywhere near the same amount of money by selling dates."
Oil's downward curve has brought down gasoline prices, providing consumers with one of the few bright spots in a deteriorating economy.
Retail gasoline prices have now fallen for the 23rd week since the July 4 weakened, reaching a national average of $1.653 a gallon as of Monday, according to the U.S. Energy Information Administration.
"That is the lowest price at the pump in nearly five years, i.e. since February 2004," trader and analyst Stephen Schork wrote in his Schork Report.
Gasoline futures on the Nymex tumbled 5.3 cents to 83.3 cents a gallon. Heating oil fell 2.7 cents to $1.3141 a gallon while natural gas for January delivery rose nearly 17 cents to $5.462 per 1,000 cubic feet.
In London, February Brent crude tumbled more than 4 percent, or $1.73, to $39.72 a barrel on the ICE Futures exchange.


http://money.aol.com/news/articles/_a/bbdp/oil-below-38-on-weak-economic-reports/286216

FinsnFur

I got a feeling it'll be down to $20 a barrel before this country gets back up off the ground, and brushes itself off.
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Bills Custom Calls

At this rate gas should be selling for about $1.00 a gal And when it gets down below the $30's it should be below a dollar,but you can bet the oil compianies ain't gonna let that happen.

They helped create the money problems here but they won't admit it
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KySongDog

The Democrats created the problem and the Republicans went along with the program.   

If you give away money, you get reelected.  Simple as that.

At some point, however, there has to be a day of reckoning.   

NASA

A simple search of posts 2-3 years ago shows the frustration and outrage all of you expressed as the price of a gallon of gas creeped over $2 then $2.50 and everyone winced at $3, and screamed bloody murder when it hit $4 a gallon.

The price of gas is finally getting back down to where it was before the gouging started, and yet nobody is pleased.  Why is everyone disappointed in lower gasoline prices?  Is everyone here each holding on to 1,000 shares of Exxon stock??  Where's the rejoicing?

Personally, I'm glad to once again be paying $1.36 a gallon.  And I do hold shares of Exxon and Valero.

Todd Rahm

If I was paying that I wouldn't be complaining Tom, but its still $2.50 a gallon here.  :shck:

NASA

Todd, but you're out there on the fringes of civilization, right?  Gas has probably NEVER been $1.36 up there in the frozen north.   :nono:

FinsnFur

I'm glad to be paying it, but it looks like a disgusting motion to make things better, and it's way too little way too late.
We are in big trouble.
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alscalls

$1 or $5 a gal. :shrug: If I loose another job......and thier saying I might......My wife has been cut back to two days a week......
I may loose everything .......so who will need gas and who can pay for it will decide a chain reaction like none has ever seen....
:rolleye: I am glad for many things but right now I just hope we all come out of this real soon.......and we are all OK.
I know some have never lost a job to something like this.......all I can say is if I loose this one it will be the third in 8 years or so and I would not wish it on anyone. :sad:
You have to have a home and a vehicle and food and bill money then have enough left over for clothes and gas and.......$ per gal.?........ I just hope we can have that luxury of being glad to pay...again someday.
May God be with us all if it dont turn around soon.......This is not a recession....its a modern day depression and it has only started to show its teeth.
AL
              
http://alscalls.googlepages.com/alscalls

NASA

Quote from: FinsnFur on December 23, 2008, 09:01:51 PM
1)  it looks like a disgusting motion to make things better
I don't understand.  Better is bad?  Who do you see as responsible for the "motion"?

2)  it's way too little way too late
We're back to 2001 gas prices.  Should it be even less?

3)  We are in big trouble.
You bet we are.  The Arabs want to return to $140 (or more) per barrel.  They will keep cutting back on exports until worldwide demand drives prices back up to their desired price.  Enjoy cheap gas while you can.  OPEC will get its way within 12 months.

FinsnFur

No I dont see it as a "better is bad situation".  I see it as a belittling pat on the head with a voice dripping with sarcasm saying Shhhh, it'll be ok now".

Should it be even lower?  Again, it wouldn't matter. It's too little too late. If they make gas free tomorrow it's not going to help this countries economy.
Gas prices through my eyes anyway,  are strongly effected  by supply and demand. Right now the majority of Americans do not have any extra money, a lot dont even have what it takes to keep their mortgages alive, let alone make a car payment.

People are losing their jobs in huge masses by large companies all over the country folding up while grass and weeds take over their parking lots. God help the people that lost their health insurance along with their jobs and end up sick or hurt.
And now while everyone is face down, dazed in a financial stupor, Christmas and tax time come walking across our backs. :yoyo:

There is no demand for gasoline right now especially the kind of demand they have been used to, because a lot people dont have a car or truck left to drive. Every corner you past six months ago had a vehicle for sale on it, as folks fell financially stricken they began to sell off.
Now how are low gas prices going to help that?  It not. It's going to be appreciated by the few left standing and that's it.
Maybe in time those few left standing with a dollar in their pockets can slowly create a cash flow again to give some of those downed, a breath of fresh air, but it would be a long painful process.
Too little too late in my opinion.

The Arabs want it back to 140 a barrel?
Why wouldnt they? It isn't any different then those folks from the closed GM plant that want their paychecks back. The problem is we had to sell what we had that required their gasoline. Therefore the demand for gasoline is going nowhere real fast.
It's a domino effect, and we are in big trouble, and I dont think gas prices mean squat to a lot of people right now. I didn't say everyone, I said a lot.
I for one, and I bet I have a following larger then the Verizon network when I say, I would sell every one of my vehicles which require this $140 dollar a barrel oil, if it meant the difference between feeding my children and not. And you can bet it's already started with a lot of folks.
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NASA

I guess I haven't been exposed to the harsh realities you describe.  I have been laid off, and no prospects for employment.  My medical and hospitalization ran out the last day of Oct.  I have a hospital bill for $27,000.00 sitting on my coffee table that I cannot pay.  I require $730 worth of prescription medications each month to stay alive.   And I have a 10 cylinder F-250 sitting in the driveway.  On the plus side, I'm receiving a $142 a week unemployment check.   So a buck thirty-six for gas is a big help right now.  I don't have much else to be happy about.

slagmaker

I feel your pain NASA. I lost my job in September and have nothing as far as employment "I am a maintenance man". I do have unemployment benefits but those barley make the house payment.  but then there are the utilities and child support, insurance on my vehicle the list goes on and on. My health insurance ran out long ago and here I sit with a case of the flue that makes me wonder if I should even get out of bed. Oh I know that right now there are people that are a lot worse off than me but when your trying to figure out where the next meal is gona come from that is a strange feeling


Lower gas prices will help but as it was said "too little too late"
Don't bring shame to our sport.

He died for dipshits too.

alscalls

I feel your pain fellas I am right there with ya......Take any job you can even if its sweeping floors......jobs will be even more scarce soon and we need to survive......I took a lesser job myself and am slowly trying to get a raise as I do not make enough to pay the bills so I am trying to get rid of all the bills I can. Eliminating credit cards went first. Now I am working on paying off the one truck I owe on....$$$$hospital Bills will have to wait for now and my daughter has the flu right now.
My roof started leaking in this last storm and I repaired it best I could.....I work all day and make calls at night when I can.
My grand dad used to smoke hams and sell them as well as make axe handles and such to get buy.....now I understand why.
We must make our own way and come out of this thing together.
AL
              
http://alscalls.googlepages.com/alscalls

pitw

Gas is $.71/litre or x3.78 = $2.68/US gal here right now and we produce it.  Our government take's more from us than I like but everything I own is paid for, my credit card's balances will show a zero when they come in[except for a $35 charge].  I'm lucky on the health issue so far and try to live frugally at all time's.  I hope that we can all get through this together and I for one will help where needed.
Barry
I say what I think not think what I say.

claimbuster

Just got back from a nine day Christmas trip to Dallas.  We drove, heading down US287 through southeastern Colorado, across the panhandle of Oklahoma, then Amarillo, Wichita Falls, etc.  On the entire trip I did not find gas prices lower than what we find here in Denver.

We drove my wife's little piggy Jeep Wrangler with the Hemi.  Mid-grade at an average $1.65 sure was nice.