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Oil rises 18 pct in October
Source: Agencies |
November 1, 2011, Tuesday
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OIL soared 17.7 percent in October on the expectation that the world's thirst for petroleum would keep growing despite economic struggles in the West.
West Texas Intermediate, the benchmark oil in the US, jumped from about US$79 to US$93 per barrel during the month as fears of another US recession subsided while Europe struck a landmark deal to reduce Greece's debt. Demand from emerging markets remains strong. And a strategy calling for traders to buy WTI futures contracts while selling another variety, Brent crude, also boosted the price of WTI.
The conditions that fostered the increase remain in place.
"Oil demand is higher worldwide," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service. "Other parts of the world, most notably South America, are consuming a lot of our (petroleum) products."
Independent oil analyst Andrew Lipow expects benchmark oil to hit US$100 per barrel by the end of the year. But this has been a year of pronounced swings in the price of oil. WTI hit a high of US$113.93 at the end of April, after starting 2011 at around US$91 per barrel.
Analysts say a number of factors will influence prices for the next two months and into next year:
-How much oil will Libya contribute? Oil demand is on track to exceed supply in the second half of 2012 by about 1 million barrels per day. But a return of Libyan oil to the market could fix the shortage. Libya was exporting 1.5 billion barrels of oil daily before the eight-month rebellion that ultimately ousted leader Moammar Gadhafi.
-Will Europe continue to struggle? Eurozone leaders hammered out an agreement last week to bolster the region's banks. The decision was regarded as a landmark development that put Europe on the path to resolving a lingering credit crisis. However, its banks are still weak, debts are still high, and investors are unsure if it has really turned the corner.
-More government stimulus in the US? The US economy is growing, but the 2.5 percent growth estimated for the third quarter is hardly a fervid pace. Analysts speculate that the Federal Reserve may try something similar to last year's US$600 billion bond-buying program to boost the economy. As a result of that program, the dollar fell and oil surged.
-Another Arab Spring? Oil traders are keeping a wary eye on unrest in the Middle East. In Syria, for example, protesters have clashed with the government for seven months, leaving an estimated 3,000 people dead. Continuing violence in Syria and other oil-rich nations could hamper world supplies and push prices higher.
On Monday, WTI slipped 13 cents to end the month at US$93.19 per barrel while Brent crude gave up 35 cents to US$109.56 per barrel in London.
Traders continue to be wary of an economic downturn in the West. The Organization for Economic Cooperation and Development said the European economy is headed for a "marked slowdown" next year. Analysts also note that Europe will need to slash spending and cut entitlement programs over the next several years to keep budgets in line, and that will hurt oil demand.
China, India and other developing nations are expected to buy whatever oil Europe doesn't use. The US expects daily global oil consumption to average at 88.4 billion barrels this year and 89.8 million barrels next year.
While US gasoline prices have held steady, it's a different story for heating oil and natural gas. Both are used to heat homes and business, and tend to get more expensive as the weather cools.
Heating oil and natural gas futures rose by 9.5 and 7.3 percent, respectively, during October. Prices are likely headed higher in coming months. A major snowstorm already blanketed the East Coast over the weekend, knocking out power to 3.1 million customers, and the National Weather Service predicted an especially chilly winter with above average snow and rain.
The Energy Information Administration said US homeowners will spend 3 percent more for natural gas than they did a year ago. Those who burn heating oil will spend about 8 percent more. About half of US households heat their homes with natural gas, though about 80 percent of homeowners in the Northeast use heating oil.
In other energy trading, heating oil slipped 1.63 cents to finish at US$3.0429 per gallon and gasoline futures lost 3.93 cents to end at US$2.6429 per gallon. Natural gas rose 1.1 cents to finish at US$3.934 per 1,000 cubic feet.
West Texas Intermediate, the benchmark oil in the US, jumped from about US$79 to US$93 per barrel during the month as fears of another US recession subsided while Europe struck a landmark deal to reduce Greece's debt. Demand from emerging markets remains strong. And a strategy calling for traders to buy WTI futures contracts while selling another variety, Brent crude, also boosted the price of WTI.
The conditions that fostered the increase remain in place.
"Oil demand is higher worldwide," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service. "Other parts of the world, most notably South America, are consuming a lot of our (petroleum) products."
Independent oil analyst Andrew Lipow expects benchmark oil to hit US$100 per barrel by the end of the year. But this has been a year of pronounced swings in the price of oil. WTI hit a high of US$113.93 at the end of April, after starting 2011 at around US$91 per barrel.
Analysts say a number of factors will influence prices for the next two months and into next year:
-How much oil will Libya contribute? Oil demand is on track to exceed supply in the second half of 2012 by about 1 million barrels per day. But a return of Libyan oil to the market could fix the shortage. Libya was exporting 1.5 billion barrels of oil daily before the eight-month rebellion that ultimately ousted leader Moammar Gadhafi.
-Will Europe continue to struggle? Eurozone leaders hammered out an agreement last week to bolster the region's banks. The decision was regarded as a landmark development that put Europe on the path to resolving a lingering credit crisis. However, its banks are still weak, debts are still high, and investors are unsure if it has really turned the corner.
-More government stimulus in the US? The US economy is growing, but the 2.5 percent growth estimated for the third quarter is hardly a fervid pace. Analysts speculate that the Federal Reserve may try something similar to last year's US$600 billion bond-buying program to boost the economy. As a result of that program, the dollar fell and oil surged.
-Another Arab Spring? Oil traders are keeping a wary eye on unrest in the Middle East. In Syria, for example, protesters have clashed with the government for seven months, leaving an estimated 3,000 people dead. Continuing violence in Syria and other oil-rich nations could hamper world supplies and push prices higher.
On Monday, WTI slipped 13 cents to end the month at US$93.19 per barrel while Brent crude gave up 35 cents to US$109.56 per barrel in London.
Traders continue to be wary of an economic downturn in the West. The Organization for Economic Cooperation and Development said the European economy is headed for a "marked slowdown" next year. Analysts also note that Europe will need to slash spending and cut entitlement programs over the next several years to keep budgets in line, and that will hurt oil demand.
China, India and other developing nations are expected to buy whatever oil Europe doesn't use. The US expects daily global oil consumption to average at 88.4 billion barrels this year and 89.8 million barrels next year.
While US gasoline prices have held steady, it's a different story for heating oil and natural gas. Both are used to heat homes and business, and tend to get more expensive as the weather cools.
Heating oil and natural gas futures rose by 9.5 and 7.3 percent, respectively, during October. Prices are likely headed higher in coming months. A major snowstorm already blanketed the East Coast over the weekend, knocking out power to 3.1 million customers, and the National Weather Service predicted an especially chilly winter with above average snow and rain.
The Energy Information Administration said US homeowners will spend 3 percent more for natural gas than they did a year ago. Those who burn heating oil will spend about 8 percent more. About half of US households heat their homes with natural gas, though about 80 percent of homeowners in the Northeast use heating oil.
In other energy trading, heating oil slipped 1.63 cents to finish at US$3.0429 per gallon and gasoline futures lost 3.93 cents to end at US$2.6429 per gallon. Natural gas rose 1.1 cents to finish at US$3.934 per 1,000 cubic feet.
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