Oil prices rise ahead of “fiscal cliff” talks

BANGKOK The price of crude rose today, following stock markets in Asia higher hours ahead of a last-ditch effort in Washington for political leaders to strike a budget deal before the year-end deadline. Benchmark crude for February delivery rose 13 cents at late afternoon Bangkok time to $91 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell yesterday following a reported drop in U.S. consumer confidence and growing pessimism that President Barack Obama and Republican lawmakers will reach a compromise on ways to avoid the so-called "fiscal cliff" -- hundreds of billions of dollars in government spending cuts and tax increases that take effect automatically in 2013 unless lawmakers act. Continue Reading

Gold surges as risk of 1979-style oil shock rises

A combination of factors, including an upsurge in violence in Iraq, is causing a spike in the price of precious metals, which on Thursday posted their best one-day gain since September. The strength of the move was impressive, with both gold and silver moving clear of their 50-day and 200-day moving averages. The Gold Trust (GLD) gained 3.5 percent while the iShares Silver (SLV) added 4.6 percent. Gold futures have moved back over the $1,300 an ounce threshold. Mining stocks also surged, with the Market Vectors Gold Miners (GDX) jumping 5.4 percent yesterday to bring its month-to-date gain to nearly 16 percent as it returns to its early March trading levels. It looks like additional gains lies ahead as the factors contributing to the rise all look set to continue. Mainly, it's the rising risk of runaway inflation. Wholesale gasoline prices have already jumped near 2013 highs and are only 10 percent from the all-time highs hit in 2011 and 2012. Driving the volatility is a military push by the Islamic State in Iraq and Syria (also known as ISIL), Sunni militants that have seized several major cities in the country as they advance toward Baghdad. It's now armed with Iraqi military hardware and $429 million from the Bank of Mosul. This is not easily undone, with experts warning that Iraq could tip into a full-blown civil war. Iraq may very well end up permanently fractured. For the West, this is the worst-of-all-possible outcomes and risks a repeat of the oil shock of 1979 that led to a surge of inflation, twin recessions and 20-percent-plus interest rates. Politicians aren't exactly helping with talk of a new 12 cent increase to the federal gas tax. The situation in Iraq is putting into play the one thing that central bankers -- who've been busily juicing the economy with cheap-money stimulus -- fear most: an energy-price-fueled spike in inflation. A near trebling of crude-oil prices between early 2007 and the middle of 2008 is now widely seen as one of the main Continue Reading

How long will oil prices scrape bottom?

If American motorists are enjoying the cheapest gas in years, oil companies are taking a big hit from slumping crude prices. Royal Dutch Shell (RDS.A) said Thursday that its profits in the last three months of 2015 had fallen $1.4 billion, a whopping 44 percent drop from the year-ago quarter. In a call with Wall Street analysts to discuss the latest results, company executives sought to emphasize that the company is moving to cut costs to adapt to what CEO Brian Van Beurden described as a "challenging industry environment." Exxon Mobil (XOM) also reported a sharp downturn in earnings this week, as its fourth-quarter profits fell to their lowest level in more than a decade. BP's (BP) earnings took an even bigger dive, plunging 91 percent in its latest quarter and spurring the British oil giant to announce thousands of job cuts. Over the longer term, the question for consumers and energy players is the same: How long will low oil prices last? "There is a reasonable probability oil prices hit bottom in January 2016," Wells Fargo Securities oil analyst Roger Read said. He sees oil prices rising "toward $45 a barrel" in the second half of 2016. Finance Professor Gianna Bern of Notre Dame University, who studies the oil market, also foresees "a modest rebound" from the low of $27.10 a barrel on January 20 to "the 40's" by year end. The stock and oil markets seem to be heading in that direction, too. The price of West Texas Intermediate crude, the U.S. benchmark, jumped over $30 a barrel on Wednesday and is now at $32.48. But predicting oil pricing is always a dangerous game. "This downturn has run deeper and longer than almost anyone would have guessed two years ago," said Pavel Molchanov, oil analyst with Raymond James. As late as October 2015, big oil executives were still predicting their cash flow at $50 a barrel. The latest catalyst for lower oil prices came last month when weaker-than-expected Chinese manufacturing data intensified concerns about slowing growth in Continue Reading

Why AutoZone, Nutrisystem, and Carrizo Oil & Gas Slumped Today

Tuesday was a down day on Wall Street, with major benchmarks falling more than 1% after several days of gains. Most of those following the market focused their attention on Capitol Hill, where new Federal Reserve Chair Jerome Powell gave testimony to Congress. Fears of as many as four interest rate increases from the Fed spooked investors, sending bond yields back upward and prompting new concerns about a longer-term stock market correction. Bad news from several individual companies also didn't help improve sentiment. AutoZone (NYSE: AZO), Nutrisystem (NASDAQ: NTRI), and Carrizo Oil & Gas (NASDAQ: CRZO) were among the worst performers on the day. Here's why they did so poorly. AutoZone deals with slower growth Shares of AutoZone fell 11% after the auto parts giant reported its fiscal second-quarter financial results. Same-store sales grew 2.2% compared to the year-earlier quarter, but the impact on the company's bottom line was less than some had hoped, with adjusted net income climbing just 4%. Stock repurchases helped to boost the pace of per-share earnings growth, but despite ongoing new store openings, AutoZone didn't succeed in overcoming the negative sentiment that has surrounded the auto parts retail industry for more than a year now. Until the company can address the threat posed by e-commerce retail specialists, AutoZone could see further pressure. Image source: AutoZone. Nutrisystem can't keep up resolution momentum Nutrisystem stock plunged more than 21% in the wake of the nutrition and weight-loss industry giant's financial report for the fourth quarter of 2017. Nutrisystem said that revenue climbed 20%, spurring gains in earnings per share of more than 20% compared to year-ago levels. Yet first-quarter guidance was weak, particularly given that the first few months of the calendar year tend to be among the best for Nutrisystem and its peers to capitalize on those making New Year's resolutions. With strong competition from rivals and Continue Reading

Is the current oil price rally a “head fake?”

With oil prices at their highest level since 2015, the next stop along the way seems to be $70 per barrel. However, some analysts see the more likely scenario as a retracement back down to lower levels.A “perfect storm of events” helped push oil prices to their current levels, according to Barclays analysts in a recent research note. However, those factors — cold weather in North America, unrest in Iran, strong economic growth and technical buying from hedge funds and other money managers — may not be enough to keep the oil rally going, the investment bank says.The risk to oil prices is “skewed to the downside from here as fundamentals on the horizon suggest a reversal is in order,” Barclays analysts, led by Michael Cohen, said in a January 5 research note. While the recent oil price rally was bolstered by some unexpected events, the forces that will spark a reversal are more predictable — rising U.S. oil production will lead to another surplus of inventories in 2018. More: In stark reversal, Trump administration removes Florida from offshore drilling targets More: Trump administration proposes massive increase in off-shore drilling More: Energy dominance without sacrificing safety WTI rising up above $60 per barrel only magnifies that trend, a price level that will likely spark a deeper drilling response. A recent survey of U.S. shale industry executives by the Dallas Fed suggests that the rig count will “substantially increase” with crude prices between $61 and $65 per barrel. At the start of this week, WTI stood at about $61.50.The line preached by a long list of shale companies at the close of 2017 was one of capital discipline — a renewed focus on profits and not simply one of growth-at-all-costs. Pressure from shareholders has raised the prospect of a more conservative approach to drilling, which could limit the response from shale companies even as oil prices rise. Continue Reading

This giant oil trader sees upside for oil prices

More than three years after Bob Dudley said that oil prices would be lower for longer, BP’s chief executive still thinks “a price of $50 a barrel looks like the right number to plan on for the rest of the decade.”The majority of oil executives and industry analysts still believe that $50-$60 oil will continue as the new normal, with U.S. shale supply growing stronger every time oil prices rise above $50.However, recent encouraging data about global oil demand growth is making some observers and players in the industry more bullish on oil prices. One small group thinks that lower for longer could end soon because U.S. shale can’t keep a lid on prices forever and can’t catch up with expected robust demand — all the more so that investments in conventional supply around the world have slumped since the oil prices started crashing. More: Follow USA TODAY Money and Tech on Facebook Until a month or two ago, the market was weary of OPEC’s continuous jawboning and calls for patience while waiting to see markedly reduced global oil inventories. Then Q2 oil demand growth figures started coming in, and showed that demand growth was stronger than expected and would continue to be robust in the months to come. Also, the oversupply is now dropping faster and more consistently on the back of strong oil demand growth and the Brent futures flipping to backwardation, which discourages traders from keeping oil in storage.  “Commercial oil stocks in the OECD fell further in August and the difference to the latest five-year average has been reduced by 168 million barrels since the beginning of this year, however, there remains another 170 million barrels of stock overhang to be depleted,” OPEC said at the end of last month.At this year’s Asia-Pacific Petroleum Conference (APPEC) in Singapore last week, the mood was the most bullish since the 2015 APPEC annual gathering, with most executives polled by Bloomberg Continue Reading

With oil prices, we’re all over a barrel

I told Your Money readers in November that I thought oil would rocket to $120 a barrel, but even I was surprised how quickly it occurred. Oil could stabilize or even drop in the short term, but I believe prices could reach $200 in the next few years unless we act now. People are blaming the surge on everyone from hedge fund managers to greedy oil execs. While they have contributed a bit, the increases are simply the law of supply and demand. Let's start with supply. I subscribe to the notion that Mideast reserves are limited. Older fields are getting tapped out. While higher prices encourage drilling in marginal areas, countries can't turn on supplies at will. Instability in places like Iraq and Nigeria further limits supply. We could get more oil from Alaska and other areas, but many believe protecting the environment is worth the cost of higher prices. The demand side of the equation is more problematic - because it's out of our control. The last time an oil crisis struck, we were the world's dominant country. When our economy slowed and we mandated better fuel efficiency for cars, demand declined and prices retreated. But the world has changed significantly. Demand for oil in countries like China and India is growing dramatically, and that is out of our control. In 2003, China produced about 4 million cars, while the U.S. produced about 16 million. Production of cars in China is increasing 25% a year. By 2020, there should be at least 100 million more cars than there are today. The same patterns apply in India and other countries. This means more demand for the same dwindling resources. We can add corn to our gas tanks, drive a few less miles and turn down our thermostats in winter, but it will be a drop in the bucket when compared to the increases in demand from other countries. This tells me oil prices could keep increasing. Most of the responses of our leaders to the crisis are counter-productive pandering for votes. Lowering gas taxes and pulling Continue Reading

Oil prices pass $134 after report of supply drop

Runaway oil prices blew past $130 a barrel for the first time Wednesday and kept going, while gasoline prices persisted in their own relentless climb, rising above $3.80 a gallon. Supply worries, rising demand and a slumping dollar are conspiring to make filling up the car — and paying for just about everything else — a growing burden for Americans. With gas and oil prices setting new records on a daily basis, many analysts are beginning to wonder whether anything can stop prices from rising. There are technical signals in the futures market, including price differences between near-term and longer-term contracts, that crude may soon fall. But with demand for oil growing in the developing world, and little end in sight to supply problems in producing countries such as Nigeria, few analysts are willing to call an end to crude's rally. Oil's Wednesday rally was fed in part by a report from the Energy Department's Energy Information Administration, which said crude inventories fell by more than 5 million barrels last week. Analysts had expected a modest increase. Light, sweet crude for July delivery rose $4.19 to settle at $133.17 a barrel on the New York Mercantile Exchange, but prices rose as high as $134.42, up $5.44, in after-hours electronic trading. It was crude's largest one-day price advance since March 26. Investors seized on the inventory report to boost prices Wednesday, but traders interested in pushing prices higher are increasingly picking and choosing which news they wish to pay attention to, analysts say. "Even if this report was bearish, with the momentum the way it is right now, it wouldn't matter," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. Crude prices first passed $130 overnight on concerns about demand and a weaker dollar. Analysts say crude has been boosted in recent days by especially strong demand for diesel in China, where power plants in some areas are running desperately short of coal and certain Continue Reading

Big Oil has learned to live with lower oil prices

Big Oil is seemingly adjusting well to lower-for-longer oil prices, and the deep cost cuts every oil company — big or otherwise — had to make over the last two years have finally started to pay off.According to an estimate from Jefferies LLC, the world’s top-five oil producers generated cash of $34 billion during the third quarter of the year, an annual increase for all of them. Four of the five — BP, Total, Exxon, and Chevron — also booked quarterly increases in their cash position. Shell was the only one whose third-quarter cash fell from the second quarter of the year.Higher oil prices certainly have something to do with that, but it’s not the only factor. Over the last couple of years, Big Oil has demonstrated more than once that it’s set on becoming more flexible, leaner, and more efficient. It has notably said goodbye to the “growth at all costs” approach, simply because it has seen it crash and burn during the price downturn.Now oil prices are even higher than in the third quarter, and they’re likely to remain higher at least until November 30, when OPEC meets in Vienna to — most likely — announce another extension of the oil production cut. That’s more good news for Big Oil, but there’s still another milestone to hit: cash dividends. The five must again start paying cash dividends and make new investments, even if oil falls to $40 or $30 a barrel, at least according to BP’s Bob Dudley. More: Gas prices: Why you'll keep paying less at the pump this year More: Analysts raise oil price forecasts on possibility of supply restriction More: Can oil prices go above $60? U.S. shale output a pivotal factor That’s quite an ambitious goal for the world’s largest oil producers, but it seems like a sensible one in light of changing patterns of energy demand and supply. Big Oil can no longer ignore renewable energy and electric vehicles, Continue Reading

Gas prices rise for most Americans — especially in the Midwest. Here’s why.

Gasoline prices have spiked for most of the U.S. — and especially the Midwest — during a period in which motorists are usually experiencing relief at the pump.Amid rising oil prices and ongoing refinery maintenance due to the lingering effects of Hurricane Harvey, fuel prices have jumped over the last week in 43 states and the District of Columbia, according to consumer-information service GasBuddy.The average national price of $2.52 per gallon on Friday morning was up 30 cents from a year ago and up 5 cents from a week ago, according to AAA.A 12-cent gas tax increase in California that took effect Wednesday is contributing to the spike.But the pain at the pump is particularly sharp in the Great Lakes states after the Explorer Pipeline, which carries gasoline from the Gulf Coast to the Upper Midwest, was forced to operate on reduced capacity in late October.Explorer said it had completed repairs on the pipeline and returned to pumping at normal levels Wednesday. But the Midwest is still reeling from tight gasoline supplies that have driven up prices, partially caused by local refinery maintenance that was delayed after Harvey ravaged the Houston region."It may get a little worse in the Great Lakes before it gets better," GasBuddy petroleum analyst Patrick DeHaan said.Average retail prices in Illinois, Indiana, Michigan and Ohio on Friday morning were $2.76, $2.75, $2.72 and $2.65, respectively, according to the Oil Price Information Service.Those figures were up 58 cents, 67 cents, 60 cents and 59 cents from a year earlier.Those markets "became absolutely unmoored," OPIS analyst Tom Kloza said.Another factor driving up prices: high demand for gasoline. With the economy strong, Americans are hitting the road. Gasoline inventories fell by 4 million barrels this week to 212.8 million, much faster than analysts were expecting, according to research firm Capital Economics.Also, oil prices have edged upward in recent weeks, briefly Continue Reading