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Stocks Tumble as Oil Tops $55 Per Barrel on Supply Fears

The world's available production capacity is just slightly above 1 percent of the daily diet of 82.4 million barrels, leaving little wiggle room in the event of a supply disruption.

 http://biz.yahoo.com/ap/041022/wall_street_15.html

 http://biz.yahoo.com/ap/041022/oil_prices_8.html
NEW YORK (AP) -- Worried investors sent stocks tumbling Friday as crude oil futures topped $55 per barrel and tepid earnings from Microsoft Corp. and the Coca-Cola Co. offset Google Inc.'s strong third-quarter report. The Dow Jones industrials fell nearly 108 points, while the Nasdaq composite index dropped 2 percent. The major indexes finished the week mixed.

Oil prices again pressured the market, casting doubt not only on fourth-quarter earnings, but also on the health of the economy as a whole. A barrel of light crude was quoted at $55.17, up 70 cents, on the New York Mercantile Exchange.

Oil Tops $55 Per Barrel on Supply Fears

Friday October 22, 3:37 pm ET
By Brad Foss, AP Business Writer

Crude Oil Futures Surge Above $55 Per Barrel As Concerns Mount Over Global Supply, Heating Oil

Oil futures prices surged to new heights above $55-a-barrel on Friday as concerns about the global supply of heating oil persist ahead of winter in the Northern Hemisphere.

Crude for December delivery climbed 70 cents to settle at $55.17 per barrel on the New York Mercantile Exchange, surpassing the previous record close of $54.93. Heating oil futures rose 1.85 cents to an unprecedented $1.598 per gallon.

The rally in heating oil has also spilled over into natural gas futures, which soared 50.3 cents Friday to $8.20 per 1,000 cubic feet. Natural gas futures are now about 67 percent higher than a year ago, even though analysts agree that supplies of this mostly-domestic fuel are ample.

"The primary concern now is the heating oil inventory level in the U.S," said Victor Shum, an analyst at Texas-based energy consultants Purvin & Gertz.

On Wednesday, the Energy Department reported that U.S. inventories of distillate fuel, which include heating oil and diesel, shrank for the fifth consecutive week, leaving supplies nearly 10 percent below year ago levels.

Fears of a cold Northern Hemisphere winter have further stoked the price of heating oil, as dwindling stocks have also been reported in Western Europe and Japan.

Demand for jet fuel -- kerosene and additives -- also typically rises during the Christmas season because of extra flights, adding even more pressure.

"Production of heating oil has to ramp up fast as there is a lot of catching up to do," said Shum.

Yet some analysts believe heating-oil supply fears have been somewhat overblown.

Inventories are "not catastrophically low by any means," said Andrew Lebow, senior vice president at Man Financial, a New York-based brokerage.

"The market has been so wracked with anxiety by it. It's really difficult to explain," he added. "What could be problematic for the market is if it's an early cold, if November ends up being cold."

Also Friday, December Brent crude futures on London's International Petroleum Exchange traded at $51.22 per barrel, up 50 cents.

While crude futures prices are more than 80 percent higher than a year ago, they still need to reach $80 per barrel in order to surpass the all-time peak -- in inflation-adjusted terms -- set in February 1981.

Still, disruptions in production and turmoil in key producers Iraq, Venezuela, Nigeria and Russia continue to haunt the market.

The world's available production capacity is just slightly above 1 percent of the daily diet of 82.4 million barrels, leaving little wiggle room in the event of a supply disruption.

"Geopolitical tensions have eased ... but they are certainly in the background, and the fact that we have a slim supply buffer is always a problem," Shum said.

Oil prices have gone up more than $10 a barrel since mid-September because of production snags in the Gulf of Mexico, where more than 23 million barrels have been lost since Hurricane Ivan hit.

Australian Prime Minister John Howard joined German Chancellor Gerhard Schroeder as the latest in a string of world leaders to express fears over how skyrocketing oil prices will affect economic growth.

"If it goes on indefinitely, of course it will have an effect on the economy," Howard said on Melbourne radio station 3AW. "It will mean that we have slower growth than might otherwise be the case."

Economists already have begun to lower their estimates for global economic growth in 2005, with Morgan Stanley saying last week it had changed its forecast to 3.6 percent from 3.9 percent, warning that there may be "more cuts to come."

Iraq, however, has said it may be able to pump out 3 million barrels per day in 2005, with 1.8 million for export, a move that may ease prices.

Associated Press writers Jane Wardell in London and Yeoh En-Lai in Singapore contributed to this report.
it's merely coincidence isn't it... 22.Oct.2004 14:40

this thing here

>Iraq, however, has said it may be able to pump out 3 million barrels per day in 2005, with 1.8 million for export, a move that may ease prices.<

is that right.

interesting there's a western friendly occupying army in that nation as we speak, rather than a troublesome dictator with his damn oil embargo. at exactly the same time, there's also a corporation specializing in petroleum production infrastructure by the name of halliburton/KBR in iraq too, and they've been given a blank check to provide their services.

hmm... i wonder if any of these events, an occupation in a certain country that has a lot of oil, an oil industry in that country that needs rebuilding, a corporation who's only purpose is to rebuild it, at the very same time as dramatically "fluctuating" (read: rising) oil prices due to supply/demand concerns... all of this happening at the same time... i wonder if they might, just might, be related? hmm....

no, of "course" not. how could i possibly get such messed up ideas in my head. everything that ever happens is mere coincidence, "isn't" it...

hard to 22.Oct.2004 15:21

state the cause

the uncertainty of the election could play a roll. Consider that many of these so called american companies couls see some real Justice with a new administration in office. No I am not talking about Ralph nader.Perhaps p/e ratios being historically out of line could spell trouble too.

Oil price is controlled buy the suppliers at this time. Its supply did not suddenly dissappear buy 2/3rds. Not Gas price has stayed flat since mid-summer as oil climbed like hell. Thats a real concern realizing you will be paying nearly 3 dollars after this election at the pump may be possible.

Merry cristmas

The Devil and George Warmonger Bush 22.Oct.2004 15:27

The Devil and George Warmonger Bush

George Warmonger Bush to the World: Sorry to Oil the Market but Oil Profits come first. Gouge ya Later."

BAN SUVS NOW 22.Oct.2004 17:08

Sam

"The upshot: The quickest way to ease the world's current petroleum crunch would be to quickly and significantly improve the fuel economy of the U.S. automotive fleet."

THE WALL STREET JOURNAL: Efforts to Reduce U.S. Addiction To Oil Are Few
September 28, 2004

With oil prices topping the $50-a-barrel mark, a long-simmering question is boiling up again: What is the world's biggest petroleum user, the U.S., going to do about its addiction?

The answer, at least in the short term, appears to be: Not much.

The U.S. accounts for 25% of global oil use, and nearly half the petroleum it burns goes to power its cars and trucks. Though oil consumption is rising faster in developing nations such as China and India than it is in the U.S., the U.S. remains by far the biggest piece in the global petroleum puzzle. The average American uses about 16 times as much petroleum each year as the average Chinese. That's largely because that American is likelier to drive a car -- and drive it longer distances every year.

The upshot: The quickest way to ease the world's current petroleum crunch would be to quickly and significantly improve the fuel economy of the U.S. automotive fleet.

But there's little to suggest that will happen anytime soon. For all the talk about the fuel-saving potential of new gasoline-and-electric hybrid vehicles, for instance, hybrids remain a minuscule part of the U.S. auto market, and most analysts predict it will be decades before they're driven in numbers large enough to make an appreciable dent in U.S. oil consumption. The typical U.S. consumer, given the choice between a smaller or larger engine when shopping for a new vehicle, still typically picks the bigger -- and thirstier -- one. REST OF ARTICLE>

 http://www.ran.org/news/newsitem.php?id=1177&area=finance

journalists ! 22.Oct.2004 20:16

hrmph

> The upshot: The quickest way to ease the world's current petroleum crunch
> would be to quickly and significantly improve the fuel economy of the U.S.
> automotive fleet.

This is the quick-and-brainless static analysis. What makes anybody think, if American cars were more efficient, that "the market" or some other factor wouldn't just motivate American drivers to drive even further every damn day. If such out-of-control dynamic factors hadn't already progressed far beyond reason, Americans could just drive less when the prices went up, because the population distribution wouldn't have already mutated past recognition over the last 80 years.

It's like thinking you can alleviate congestion by building wider freeways.