Dave, what say you?
Oil Drops on Forecasts for Above-Normal Northeast Temperatures
By Robert Tuttle
Dec. 11 (Bloomberg) -- Crude oil fell for a second day on forecasts that milder weather moving into the U.S. will reduce demand for heating fuels.
Higher-than-normal temperatures will persist for at least the next six to 10 days in the U.S. northeast, where 80 percent of U.S. heating oil is burned, National Weather Service forecasts show. New York and Philadelphia temperatures will average 57 degrees Fahrenheit (14 degrees Celsius) on Dec. 19, 20 degrees above normal, according to MDA Federal Inc.'s Earthsat Energy.
``When people see the weather forecast being warm, especially in the Northeast, that reduces the demand for heating oil, which, in turn, reduces the demand for crude oil,'' said Andy Lipow, president of Lipow Oil Associates LLC, a consulting company based in Houston. ``At this time of year, it's all about the weather.''
Crude oil for January delivery fell 26 cents, or 0.4 percent, to $61.77 a barrel at 11:19 a.m. on the New York Mercantile Exchange. Prices fell as low as $61.25 earlier, the lowest since Nov. 29.
Brent crude oil on the London-based ICE Futures Exchange was up 5 cents to $62.25 a barrel.
Heating demand in the Northeast through Dec. 18 will be 37 percent below normal, according to forecaster Weather Derivatives in Belton, Missouri.
``A lot of people will be saving on heating costs in the mid part of the month,'' said Dale Mohler, senior meteorologist at AccuWeather Inc. in State College, Pennsylvania. ``As we get out toward Christmas, there might be some cooling off in the East but no prolonged cold.''
Crude oil accounts for about 60 percent the retail price of heating oil. Heating oil for January delivery fell 1.67 cents, or 1 percent, to $1.7406 a gallon in New York.
Output Reduction
The Organization of Petroleum Exporting Countries, the producer of 40 percent of the world's oil, meets in Nigeria on Dec. 14 to consider making a second output reduction this year. Crude oil inventories in the U.S., the world's largest consumer, were 14 percent above the five-year average the week ended Dec. 1.
``There is more than adequate crude oil supply, so OPEC actually needs to cut inventories just because the world is running out of room to store the oil,'' Lipow said. ``Judging from what they did in October and November, they weren't very successful.''
OPEC production dropped by 550,000 barrels a day in November, according to a Bloomberg survey last week of oil companies. In October, the group agreed to cut output by 1.2 million barrels a day, starting in November. The group will review its quota policy at this week's meeting.
Ammunition
``It's always very dangerous to announce another cut before the first has been fully implemented, and too many cuts for the first quarter may leave OPEC short of ammunition in the second,'' said Frederic Lasserre, head of commodities research at Paris- based Societe Generale.
``OPEC may say that they agree in principle to cut but that they'll leave the precise timing'' to a later date, he said.
With U.S. oil prices at about $62 a barrel, the group will probably leave quotas unchanged, said Andrew Harrington, a commodities analyst at Australia & New Zealand Banking Group Ltd. in Sydney.
OPEC President Edmund Daukoru, who is also the Nigerian oil minister, said last week he's ``not comfortable'' with current oil prices and Nigeria will seek a cut at the meeting in Abuja. Officials from Venezuela and Iran said within the past two weeks that the group should reduce supply because of rising inventories.
The biggest oil exporter, Saudi Arabia, said on Dec. 1 that stockpiles are too high.
``Unless we see a very, very defined cut of another 500,000 barrels a day at least, the market is going to sell off very, very strongly,'' said Dominick Chirichella, an analyst at Energy Management Inc. in New York.
OPEC convenes this week in Abuja, Nigeria, its first conference in Africa's largest oil-producing nation since 1972.
http://www.bloomberg.com/apps/news?pid=20602099&sid=a0He2aOOua58&refer=energy
Oil Drops on Forecasts for Above-Normal Northeast Temperatures
By Robert Tuttle
Dec. 11 (Bloomberg) -- Crude oil fell for a second day on forecasts that milder weather moving into the U.S. will reduce demand for heating fuels.
Higher-than-normal temperatures will persist for at least the next six to 10 days in the U.S. northeast, where 80 percent of U.S. heating oil is burned, National Weather Service forecasts show. New York and Philadelphia temperatures will average 57 degrees Fahrenheit (14 degrees Celsius) on Dec. 19, 20 degrees above normal, according to MDA Federal Inc.'s Earthsat Energy.
``When people see the weather forecast being warm, especially in the Northeast, that reduces the demand for heating oil, which, in turn, reduces the demand for crude oil,'' said Andy Lipow, president of Lipow Oil Associates LLC, a consulting company based in Houston. ``At this time of year, it's all about the weather.''
Crude oil for January delivery fell 26 cents, or 0.4 percent, to $61.77 a barrel at 11:19 a.m. on the New York Mercantile Exchange. Prices fell as low as $61.25 earlier, the lowest since Nov. 29.
Brent crude oil on the London-based ICE Futures Exchange was up 5 cents to $62.25 a barrel.
Heating demand in the Northeast through Dec. 18 will be 37 percent below normal, according to forecaster Weather Derivatives in Belton, Missouri.
``A lot of people will be saving on heating costs in the mid part of the month,'' said Dale Mohler, senior meteorologist at AccuWeather Inc. in State College, Pennsylvania. ``As we get out toward Christmas, there might be some cooling off in the East but no prolonged cold.''
Crude oil accounts for about 60 percent the retail price of heating oil. Heating oil for January delivery fell 1.67 cents, or 1 percent, to $1.7406 a gallon in New York.
Output Reduction
The Organization of Petroleum Exporting Countries, the producer of 40 percent of the world's oil, meets in Nigeria on Dec. 14 to consider making a second output reduction this year. Crude oil inventories in the U.S., the world's largest consumer, were 14 percent above the five-year average the week ended Dec. 1.
``There is more than adequate crude oil supply, so OPEC actually needs to cut inventories just because the world is running out of room to store the oil,'' Lipow said. ``Judging from what they did in October and November, they weren't very successful.''
OPEC production dropped by 550,000 barrels a day in November, according to a Bloomberg survey last week of oil companies. In October, the group agreed to cut output by 1.2 million barrels a day, starting in November. The group will review its quota policy at this week's meeting.
Ammunition
``It's always very dangerous to announce another cut before the first has been fully implemented, and too many cuts for the first quarter may leave OPEC short of ammunition in the second,'' said Frederic Lasserre, head of commodities research at Paris- based Societe Generale.
``OPEC may say that they agree in principle to cut but that they'll leave the precise timing'' to a later date, he said.
With U.S. oil prices at about $62 a barrel, the group will probably leave quotas unchanged, said Andrew Harrington, a commodities analyst at Australia & New Zealand Banking Group Ltd. in Sydney.
OPEC President Edmund Daukoru, who is also the Nigerian oil minister, said last week he's ``not comfortable'' with current oil prices and Nigeria will seek a cut at the meeting in Abuja. Officials from Venezuela and Iran said within the past two weeks that the group should reduce supply because of rising inventories.
The biggest oil exporter, Saudi Arabia, said on Dec. 1 that stockpiles are too high.
``Unless we see a very, very defined cut of another 500,000 barrels a day at least, the market is going to sell off very, very strongly,'' said Dominick Chirichella, an analyst at Energy Management Inc. in New York.
OPEC convenes this week in Abuja, Nigeria, its first conference in Africa's largest oil-producing nation since 1972.
http://www.bloomberg.com/apps/news?pid=20602099&sid=a0He2aOOua58&refer=energy