Oil crosses $129 for first time, heads for $130

By ADAM SCHRECK, AP Business Writer 36 minutes ago

NEW YORK - Oil prices spiked to a new trading high Tuesday, sweeping toward $130 a barrel as supply concerns intensified the momentum buying that has lifted crude deeper into record territory.

The June contract for light, sweet crude traded as high as $129.58 on the New York Mercantile Exchange before settling back to $129.12, up $2.07. The imminent expiration of the June contract created additional volatility in the market, and raised the very real possibility that crude could hit $130 before the end of the day, when the contract was ending.

Oil's trek toward $130 coincided with the Labor Department's report of an unexpectedly sharp rise in wholesale inflation last month. The combination raised fears that inflation will slice into Americans' discretionary spending, and that sent stocks falling sharply on Wall Street.

Jim Ritterbusch, president of Ritterbusch & Associates in Galena, Ill., said prices were being supported by strong demand for diesel fuel in Asia, and a weakening of the U.S. dollar against the euro, which makes oil cheaper for some investors overseas.

"We're getting a combination of two price drivers this morning," he said.

Oil prices are now about twice as high as the were just a year ago. Prices have been propelled by a number of factors, including supply concerns, soaring global demand and a sliding dollar.

This latest surge comes after OPEC's president was quoted as saying his organization won't increase its output before its next meeting in September, adding to lingering worries about global supply.

The contract reached a new closing high of $127.05 Monday after Algerian Energy Minister Chakib Khelil, the current president of the Organization of Petroleum Exporting Countries, was quoted by a government newspaper as saying OPEC won't increase its output during the U.S. summer driving season, which begins this weekend. OPEC's next meeting is scheduled for Sept. 9.

Through Monday's close, the front-month contract has hit nine trading or closing records in 11 sessions. Analysts have said speculative buying has also contributed to oil's record high run.

In other news lifting prices, independent refiner Holly Corp. said a key unit at its New Mexico refinery was shut down for repairs, cutting estimated May gasoline production by as much as 756,000 gallons per day. The shutdown occurred while the fluid catalytic cracking unit was being brought back online from a previous shutdown May 7.

The refinery in Artesia, New Mexico, is Holly's largest.

As oil prices reach new heights, so have gasoline and diesel costs.

"Average gasoline prices in the U.S. rose for an eighth straight week and for the 15th time this year, up 1.8 percent or 6.9 cents to a record $3.791 a gallon," noted Stephen Schork in his Schork Report. "Gasoline at the pump is averaging 28.5 percent above last year's pace."

Drivers in some parts of the U.S. are paying considerably more, however. Gas pump prices in parts of California have been stuck above $4 a gallon for weeks now.

In other Nymex trading, heating oil futures rose 9.58 cents to $3.7709 a gallon while gasoline prices rose 5.92 cents to $3.2958 a gallon. Natural gas futures rose 29.1 cents to $11.245 per 1,000 cubic feet.

In London, Brent crude for July delivery added $2.46 to $127.52 on the ICE Futures Exchange.

___

Associated Press Writers Thomas Hogue in Bangkok, Thailand and George Jahn in Vienna, Austria contributed to this report.

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Don't hope for gas prices to drop, says oil economist

By Ángel González
Seattle Times business reporter

John Felmey, of the American Petroleum Institute(pic)

Most drivers think $4 per gallon of gasoline is too much to pay in a weakening economy. Sales for sport-utility vehicles are plummeting. And people are actually driving less.

But don't expect prices to fall anytime soon despite slackening domestic demand, American Petroleum Institute chief economist John Felmy said Wednesday. The API, based in Washington, D.C., represents the U.S. oil and gas industry.

Gasoline prices are driven by the high cost of crude oil, which surpassed $125 a barrel on Wednesday. That's in large part because the slowdown in U.S. oil demand is being offset by growing consumption in China, India and the Middle East, said Felmy, who came here for a speech to the Seattle Economics Council.

"You have 2 billion people who want cars," he said.continue.....

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Oil prices spike to record above $117 a barrel

By THOMAS HOGUE

BANGKOK, Thailand (AP) — Oil prices spiked to a record above $117 a barrel Monday in Asia following an attack on a key pipeline in Nigeria at the end of last week.

Comments over the weekend by an OPEC official that the group isn't likely to increase production also supported prices.

Abdullah el al-Badri, secretary-general of the Organization of Petroleum Exporting Countries, said Sunday that oil prices would likely go higher and that the group was ready to raise production if the price pressure was due to a shortage of supply — something he doubted.

"Oil prices, there is a common understanding that has nothing to do with supply and demand," al-Badri said on the sidelines of an energy conference in Rome.

Light, sweet crude for May delivery rose as high as $117.05 a barrel in Asian electronic trading on the New York Mercantile Exchange early Monday. At midday in Singapore, the contract was trading at $116.73 a barrel, up 4 cents from the end of last week.

On Friday, May crude surged $1.83 to $116.69 a barrel following the attack on the Royal Dutch Shell PLC pipeline by the Movement for the Emancipation of the Niger Delta — the main militant group in Nigeria's restive south.

The group also promised further attacks on the petroleum industry in Africa's largest producer of crude oil.

Last Friday, Shell confirmed a pipeline leak that it said appeared to have been caused by explosives. It said it had isolated the line for repairs and that a small quantity of production had been shut.

Attacks since early 2006 on Nigerian oil infrastructure by the militant group have cut nearly one-quarter of the country's normal petroleum output, boosting oil prices. Nigeria is a major supplier of oil to the U.S.

A host of other supply and demand concerns in the U.S. and abroad, along with the dollar's weakness, have served to support prices, even as record retail gasoline prices in the United States appear to be dampening demand. Crude prices rose nearly 6 percent last week.

Analysts believe the weaker dollar is the primary reason oil has soared well past $100 a barrel this year. A sinking dollar draws investors to hard commodities such as oil and gold as hedges against inflation. Also, a weak dollar makes the commodities less expensive for buyers operating in other currencies.

OPEC Secretary-General al-Badri said Sunday that the group "will not hesitate" to increase production if it thought the higher prices were due to shortages. But he said more oil will not solve the high prices.

Also over the weekend, Iran's hard-line President Mahmoud Ahmadinejad was quoted Saturday as saying crude oil prices at $115 a barrel are too low, and that oil must "discover its real value."

"The oil price of $115 a barrel in today's global markets is a deceiving figure. Oil is a strategic commodity that needs to discover its real value," the Web site of Iran's state-run television quoted Ahmadinejad as saying.

The Iranian president made the remarks during a visit to an oil and gas exhibition in Tehran late Friday.

In other Nymex trading, heating oil futures were flat at $3.2923 a gallon while gasoline prices fell 0.18 cent to $2.9875 a gallon. Natural gas futures rose 1.3 cent to $10.60 per 1,000 cubic feet.

Brent crude futures for June rose 3 cents to $113.95 a barrel on the ICE Futures exchange in London.

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Oil Falls a Second Day on Signs Prices Will Curb U.S. Demand

By Christian Schmollinger

April 11 (Bloomberg) -- Crude oil fell for a second day in New York on signs that high prices and a slowing economy will curb U.S. fuel consumption.

The four-week average of implied U.S. fuel demand was less than last year for the 10th straight week, the Energy Department reported on April 9. Gasoline use may drop this summer for the first time in 17 years, the agency said. Crude reached a record $112.21 a barrel on April 9.

``You look at the supply and demand fundamentals in the transportation fuel market, demand has been weak,'' said Victor Shum, senior principal at Purvin & Gertz Inc. in Singapore. ``The fundamentals don't support the rally in oil pricing so some caution has returned to the market.''

Crude oil for May delivery fell as much as 62 cents, or 0.6 percent, to $109.49 a barrel in after-hours trading on the New York Mercantile Exchange. It was at $109.92 at 2:59 p.m. Singapore time. Yesterday, futures fell 76 cents, or 0.7 percent, to settle at $110.11 a barrel. Prices are up 77 percent from a year ago.

Crude oil in New York rose to a record $112.21 a barrel on April 9 after an unexpected decline in U.S. oil inventories.

``The demand situation is deteriorating all the time,'' said Rowan Menzies, head of research at Commodity Warrants Australia Ltd. in Sydney. ``There is a disconnect between the price of oil right now and what the data is telling us in terms of demand slowing down.''

Weak Dollar

Brent crude for May settlement was at $108.29 a barrel, up 9 cents, on London's ICE Futures Europe exchange at 3 p.m. Singapore time. The contract yesterday declined 0.3 percent to settle at $108.20, after reaching a record $109.98.

Oil prices also fell as the euro declined from a record against the dollar. The dollar's drop has encouraged investors to buy commodities and made oil cheaper for buyers in other currencies.

Federal Reserve officials anticipated the U.S. economy will shrink in the first half of the year and expressed some concern about ``a prolonged and severe economic downturn'' as they cut interest rates last month, according to minutes of the March 18 Federal Open Market Committee meeting, released April 8.

U.S. implied fuel demand averaged 20.5 million barrels a day in the past four weeks, down 0.4 percent from a year earlier, the Energy Department said.

``Everyone seems to be blithely ignoring the fundamentals of supply and demand at the moment,'' said Commodity Warrants' Menzies. The economic situation in the U.S. ``should be having an impact on people's perceptions of what demand will do in the next three months.''

Crude oil may fall next week as imports increase and U.S. refiners operate at below-average rates, bolstering inventories.

Fifteen of 28 analysts surveyed by Bloomberg News, or 54 percent, said prices will drop through April 18. Eleven of the respondents, or 39 percent, said futures will rise and two forecast that prices will be little changed. Last week, 47 percent said oil would decline.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.

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Oil Prices Fall on Supply Report

By PABLO GORONDI

Oil prices fell further Thursday after dropping by more than a dollar in the previous session on larger-than-expected increases in U.S. crude and gasoline supplies.

Prices were still not far from Tuesday's record close of $100.88 a barrel as the U.S. dollar traded at fresh lows against the euro. Worries about the American economy is driving more money into energy futures as a hedge against inflation.

The report by the U.S. Energy Department's Energy Information Administration showed that country's crude oil inventories rose by 3.2 million barrels, or 1 percent, to 308.5 million barrels.

Although that number is slightly lower than levels a year ago, it is well ahead of the 2.4 million barrel gain analysts had been expecting, according to a survey by Dow Jones Newswires. It was the seventh straight week the report showed a rise in crude inventories, suggesting the U.S. at least has more than enough oil to meet demand.

Light, sweet crude for April delivery lost 39 cents to $99.25 a barrel in electronic trading on the New York Mercantile Exchange, midday in Europe.

The contract fell $1.24 to settle at $99.64 a barrel Wednesday after surging as high as $102.08 a barrel, a trading record. On Tuesday, the contract jumped $1.65 to settle at a record $100.88 a barrel.

In London, Brent crude fell 7 cents to $98.20 a barrel on the ICE Futures exchange.

The EIA data showed gasoline inventories also jumped more than expected — by 2.3 million barrels to 232.6 million barrels; analysts had expected a more modest rise of 400,000 barrels. Refinery activity also increased much more than expected.

The weakening U.S. dollar also helped prop up prices. The 15-nation euro jumped to a record $1.51 against the greenback, meaning that crude remains a relative bargain for buyers overseas. Gold — another commodity seen as a hedge against inflation — also struck a record Wednesday.

In his testimony to the U.S. Congress Wednesday, Federal Reserve Chairman Ben Bernanke warned of sluggish business growth ahead, and signaled a willingness by the central bank to cut interest rates again. But Bernanke also noted that the Fed must keep a close watch on inflation given the sharp rise in energy prices and other costs.

Heating oil futures lost 1.16 cents to $2.7595 a gallon (3.8 liters) while gasoline futures dropped 1.32 cents to $2.4645 a gallon.

Natural gas futures rose 4.5 cents to $9.105 per 1,000 cubic feet.

Associated Press writer Gillian Wong in Singapore contributed to this report.

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Oil prices fall back from $100 barrel

updated 3:29 p.m. ET Jan. 4, 2008(A.P)

NEW YORK - Oil futures retreated further from their record levels above $100 a barrel Friday after the government reported lower-than-expected job growth in December, adding to fears of a recession that could crimp demand for oil. Gas prices, meanwhile, rose 2.2 cents a gallon overnight, following crude’s recent rally.

The Labor Department said employers created just 18,000 jobs last month, far less than the 70,000 analysts expected and the smallest increase since August 2003. The government also said the unemployment rate jumped to 5 percent in December from 4.7 percent in November, more than the 4.8 percent analysts expected and the highest level since November 2005.

While energy traders could have interpreted that data positively — in the past energy investors have seen reasons to buy in any economic news likely to prompt the Federal Reserve to cut interest rates — traders are becoming more concerned that record high energy prices are helping to push the economy into recession.

Light, sweet crude for February delivery fell $1.27 to settle at $97.91 a barrel on the New York Mercantile Exchange Friday.

Gas prices, meanwhile, jumped overnight to a national average of $3.074 a gallon, according to AAA and the Oil Price Information Service. Gas prices have risen in recent weeks, following oil’s rise into record territory. Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service, said gas prices are likely to add another 5 cents over the next week or so, but will likely then slide as demand ebbs in January and February.

Indeed, the Energy Information Administration on Thursday reported that gasoline demand rose a tepid 0.1 percent over the last four weeks.

“It’s just a terrible time of the year for demand,” Kloza said.

But in the spring, when demand picks up and refiners start cranking out gasoline to meet expected strong summer driving demand, gas prices will likely rebound and could set new records. The EIA predicts gas prices will peak over $3.40 a gallon this spring, well above the record price of $3.227 set last May.

Of course, while demand is a factor in the cost of gasoline, much of the price Americans pay at the pump is based on the price of crude oil. In recent months, oil prices have often moved higher after the government reported dismal economic data because traders believe signs of economic weakness raise the chances that the Fed will cut interest rates. Lower interest rates also weaken the dollar, whose decline has contributed to more expensive oil.

“Oil is in a Federal Reserve induced oil bubble,” said Phil Flynn, an analyst at Alaron Trading Corp., of Chicago, in a research note. “The Fed’s response to the housing crisis been essentially to aggressively cut rates but that has come at the expense of the dollar and has fed directly in to commodity price inflation.”

But traders will only stick with that investment strategy for so long. A recession is seen as much more important to long-term energy prices than the easy money that is a byproduct of lower interest rates, Kloza said. Reflecting this, oil prices reacted little Friday afternoon to the Federal Reserve’s plans to increase the amount of money available to banks under the auction process it created to try to ease the credit shortage.

Other energy futures also fell Friday. February heating oil futures fell 3.56 cents to settle at $2.6835 a gallon on the Nymex while February gasoline futures dropped 3.04 cents to settle at $2.511 a gallon.

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Petronas to purchase Italian lubricant maker

By Denise Kee / Bloomberg News

SINGAPORE: Petroliam Nasional, the state oil company in Malaysia, plans to borrow €800 million, or $1.1 billion, to buy Italian lubricant maker FL Selenia from Kohlberg Kravis Roberts, according to a banker familiar with the deal.

Petronas, as the company is known, has hired its adviser, Dresdner Kleinwort, the investment-banking unit of Allianz, to arrange the 364-day loan, according to the banker, who declined to be identified before a public announcement. Petronas will decide on the longer term funding plan later, the banker said. Azman Ibrahim, a spokesman for the firm, did not return telephone messages.

Petronas is getting the one-year loan instead of committing to longer-term funding as the cost of borrowing euros for three months held near the highest in more than six years. The European Central Bank said Friday in its quarterly survey that banks were likely to remain unwilling to lend in the next quarter.

Dresdner Kleinwort is selling the loan to other banks, offering them an all-in pricing, including fees and interests, of 22 basis points, according to the banker. A basis point is 0.01 percentage point.

"The absolute yield they are paying is not high," said Jeffrey Yap, a credit trader at Rabobank International in Hong Kong. "It is quite prudent of them to get a bridge loan and decide on the longer term funding later given the uncertainties in the credit markets now."

Petronas will pay an interest margin of 7.5 basis points more than the Euribor for the first four months. The interest margin will increase to 10 basis points for the next four months and to 12.5 basis points for the last four months, according to the banker. Three-month Euribor, or the Euro interbank offered rate, and a benchmark for borrowing costs, was at 4.775 percent on Friday.

Investors demand a premium of 114 basis points on Petronas 7.75 percent bonds maturing August 2015 more than the U.S. Treasuries of similar maturity or a yield of 5.5 percent, according to Deutsche Bank. Petronas has a total debt of $10 billion comprising loans and bonds, according to Bloomberg data.

KKR bought the maker of lubricants from Vestar Capital Partners, a buyout firm, for €835 million at the end of 2005. FL Selenia has more than 15,000 customers with product ranges including transmission and engine fluids for trucks, automobiles and tractors. The sale to Petronas was announced on Sept. 20.

The loan will be by a unit of Petronas butMalaysian oil company has spent more than $1.4 billion buying assets in Europe and Australia this year. Petronas is rated A- by Standard & Poor's and two levels higher at A1 by Moody's Investors Service.

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Petronas reports record annual profit

KUALA LUMPUR: Petroliam Nasional Bhd reported a record annual profit Thursday.

Petronas said its net profit rose 7.7 percent to 46.4 billion ringgit (US$13.3 billion; euro9.9 billion) in the financial year ended March 31 from 43.1 billion ringgit in the previous year.

Revenue rose 10 percent to 184.1 billion ringgit (US$52.6 billion; euro39.1 billion) from 167.4 billion ringgit, said Petronas, Malaysia's only Fortune 500 company and the country's most profitable firm.

With global oil prices remaining high, Petronas said in a statement that it sold Malaysian crude oil at an average of US$68.50 per barrel during the fiscal year, up 11.2 percent from US$61.60 in the previous year.

Petronas Chief Executive and President Hassan Marican declined to forecast crude oil prices for this year but said "the consensus is that prices will remain firm in the short term.''

Hassan also warned that if demand in Malaysia continues to grow at four percent annually, the country will be a net importer of crude oil by 2010.

As at Jan. 1, 2007, Malaysia had 5.36 billion barrels of crude oil and condensate reserves.

As a state-owned enterprise, Petronas' earnings help boost government coffers.

For the just-ended year, Petronas paid 48.3 billion ringgit (US$13.8 billion; euro10.3 billion) in taxes, royalties, dividends and export duty, making it the single biggest tax payer in Malaysia. - AP

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Fortune Global 500

Petronas
Rank: 121 (Previous rank: 120)
CEO: Mohamed Hassan Marican
Employees: 33,439
Address: Tower 1, Petronas Twin Towers
Kuala Lumpur 50088
Malaysia
Phone: 60-3-205-15000
Website: www.petronas.com.my

$ millions % change from 2005
Revenues 50,987.5 15.1
Profits 12,862.8 11.2
Assets 85,200.6 --
Stockholders' Equity 49,424.5 --

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Petronas posts 50% profit rise

By Stephanie Phang Bloomberg News

FRIDAY, JULY 1, 2005
KUALA LUMPUR Petroliam Nasional, Malaysia's state oil and gas company, posted a record full-year profit Thursday, up 50 percent from a year earlier because of the surge in crude oil prices.

Net income for the year that ended on March 31 rose to 35.6 billion ringgit, or $9.4 billion, from 23.7 billion ringgit a year earlier. Sales gained 41 percent to 137 billion ringgit.

"The year under review proved to be a good year for integrated oil and gas companies," the chief executive, Hassan Marican, told reporters in Kuala Lumpur. "Sustained global economic growth driven by China and the U.S. contributed to the upward pressure on oil demand."

Petroliam Nasional, or Petronas, and bigger rivals including BP and Exxon Mobil, are benefiting from oil prices that have risen 55 percent in the past year as demand for oil has grown faster than the increase in supply.

Oil futures, which reached an all-time high of $60.95 a barrel in New York on June 27, traded at $57.29 a barrel on Thursday. The average price for Malaysian crude oil rose 46 percent in the past year, to $45 a barrel, Hassan said.

For the company's second half, Petronas profit rose 28 percent to 18.8 billion ringgit from 14.7 billion ringgit a year earlier.

"The search for strategic oil reserves by China and India will disproportionately benefit companies like Petronas," said Michael Preiss, director of the Asian Bond Market Forum, which advises on bond-market issues and infrastructure development. "It gives Petronas an advantage that they are where others are not going."

Hassan expanded oil and gas production by increasing exploration in countries like Egypt and Chad to make up for stagnant Malaysian output. Hassan said June 13 that the company was in talks to explore for oil and gas in Iraq and that it would begin producing oil in Turkmenistan by the end of the year.

By volume, Petronas's sales of crude oil and condensate rose 6.6 percent to 194.2 million barrels in the year through March 31. Condensate is a hydrocarbon mixture similar to light oil.

Revenue from the oil company's international operations and exports from Malaysia rose 40 percent to 106 billion ringgit, accounting for 77 percent of total sales. Malaysia is the largest oil and gas producer in Southeast Asia after Indonesia.

Total assets grew 18 percent to 239.1 billion ringgit while borrowing fell 8.3 percent to 52.9 billion ringgit. Petronas's international operations involve 59 ventures in 26 countries.

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