Oil Drops Near $100 on Stronger Dollar

Oil prices fell to hover above $100 a barrel Tuesday as a stronger U.S. dollar made energy futures less attractive to investors.

Many analysts including Tarek El Hewehi believe the dollar's recent depreciation was the primary reason oil surged to a record near $112 a barrel last week, since dollar-denominated oil and other commodities are seen as a hedge against inflation and a falling dollar. Now that the dollar is rising, the effect is reversing.

Light, sweet crude for May delivery fell 59 cents to $100.27 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract fell 98 cents to settle at $100.86 a barrel Monday.

The recent decline in oil prices has been far from decisive, and there are signs that some investors are willing to look beyond the dollar for future price direction. Some investors have sold contracts on concerns that a slowing U.S. economy would dampen crude oil demand. Last week, oil prices dipped in part on worry that Bear Stearns Cos.' near-collapse was a sign of significant economic problems.

Some analysts believe oil's recent declines are temporary -- a correction in a bull market -- and that prices will forge higher again when the Federal Reserve cuts interest rates again, as is widely expected. Lower interest rates tend to weaken the dollar.

"It's quite possible for the conditions that have pushed oil prices higher to be re-established," said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney. "U.S. interest rates are low and they will be cut further. In this situation it's possible we'll see renewed vulnerability of the U.S. dollar at some point."

But there is an opposing school of thought that argues prices have risen far higher than can be justified by the oil market's underlying supply-and-demand fundamentals. These analysts believe prices will fall soon and sharply -- regardless of what happens to the dollar.

"One of the things that may count against oil somewhat is the fact that we're now entering into a sort of lower demand part of the year, and they will see some inventory building occurring," Moore added.

In other Nymex trading, heating oil futures lost 1.41 cents to $2.949 a gallon while gasoline prices dropped 0.5 cent to $2.6362 a gallon. Natural gas futures rose 2.1 cents to $9.35 per 1,000 cubic feet.

In London, Brent crude fell 46 cents to $99.40 a barrel on the ICE Futures exchange.

7 Stocks You Need to Know for Tuesday

Stocks endured a third straight day of heavy selling, as investors dumped financial stocks with renewed vigor. Oil surged above $108 per barrel, another record high, and the dollar continued its downward spiral.

The Dow lost -153.54, the Nasdaq Composite -43.15, and the S&P 500 -20.00.

Here are 7 stocks to watch

Bear Stearns (NYSE:BSC) plunged more than 11%, its largest fall since the '87 crash, on liquidity concerns. BSC's Short Term PowerRating is 6.

Blackstone Group (NYSE:BX) reported an 89% decline in Q4 profit, but its shares rose nearly 3%.

Texas Instruments (NYSE:TXN) cut its Q1 revenue and profit forecasts. TXN's Short Term PowerRating is 4.

WellPoint (NYSE:WLP) lowered Q1 and full-year guidance. WLP's Short Term PowerRating is 5.

After the close, homebuilder Hovnanian Enterprises (NYSE:HOV) missed earnings estimates by -$0.11. HOV's Short Term PowerRating is 5.

And before the market open, Kroger (NYSE:KR) is expected to report earnings of $0.47. KR's Short Term PowerRating is 4.

McDonald's (NYSE:MCD) reported an 11.7% rise in same store sales for the month and an 8.6% rise year-to-date. MCD's Short Term PowerRating is 5.

Oil Prices Spike to Record $105.10

Oil prices hit a record $105.10 a barrel Thursday, a day after a surprise drop in U.S. crude supplies and a decision by OPEC not to boost production

Prices gave up some ground by midday trading in Europe. Light, sweet crude for April delivery was still up 11 cents to $104.63 a barrel in electronic trading on the New York Mercantile Exchange.

On Wednesday, the April contract had jumped $5 to settle at a record $104.52 a barrel and later rose to $104.95 in post-settlement electronic trading.

Earlier this week, oil prices broke the previous inflation-adjusted price record of $103.76, set in 1980 during the Iran hostage crisis.

In London, Brent crude fell 21 cents to $101.43 a barrel on the ICE Futures exchange.
"The primary factor causing the surge in oil prices is the surprising drawdown in crude inventories, which caused traders to really react quite dramatically," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Most analysts had expected the U.S. Energy Department's Energy Information Administration to report oil stocks rose last week for the eighth straight time. Instead, the stocks fell 3.1 million barrels.

In Vienna, the Organization of Petroleum Exporting Countries said Wednesday it would hold production levels steady, at least for now. OPEC ministers cited falling demand in announcing their decision to hold production steady.

The EIA report and OPEC announcement fed a new frenzy of investing in oil futures, which have risen to new inflation-adjusted records this week as the falling dollar drew investors to the market.

"Five dollars is an incredible gain," Shum said. "The overall oil market fundamentals are supportive of strong oil prices but not at this level, above $100. I would expect some profit taking to put a temporary halt to this rather large surge in pricing."

The dollar, meanwhile, fell to a new low against the euro, with the EU's shared currency climbing to $1.5329 before dropping back slightly. The euro set its previous high mark of $1.5302 on Wednesday.

Analysts noted that U.S. oil inventories are at historical highs despite last week's decline in crude supplies. Meanwhile, demand for gasoline is falling, and several forecasters have cut their oil demand growth predictions for this year.

Traders also worried about the escalating of tensions between oil producing countries in Latin America. Colombia's weekend attack on leftist rebels hiding in Ecuadorean territory has sparked a growing crisis as Venezuela moved tanks and soldiers to the Colombian border Wednesday.

Ecuador said Monday it had sent 3,200 soldiers to its border with Colombia.

In other Nymex trading, heating oil futures fell 1.04 cents to $2.9327 a gallon (3.8 liters) while gasoline prices lost 0.63 cent to $2.6358 a gallon. Natural gas futures added 3.9 cents to $9.78 per 1,000 cubic feet.

Hewehi Thinks Oil To Reach $120

Oil futures retreated from a new overnight record above $103 as the dollar gained strength and Turkish forces withdrew from northern Iraq, removing two of the reasons underpinning crude's dramatic 19 percent rise from earlier this month.

But many analysts believe the declines may be temporary, and that oil is poised to rise above $103.76 a barrel. That's the price many believe to be oil's all-time high on an inflation-adjusted basis, set in early 1980 during the Iranian hostage crisis.

Gasoline and diesel prices, meanwhile, continued to soar. Gas prices rose 0.3 cent overnight to a national average of $3.164 a gallon, creeping closer to last May's record of $3.227 a gallon, according to AAA and the Oil Price Information Service. Diesel prices jumped 1.5 cents to a new record national average of $3.642 a gallon.

While most Americans fuel their cars with gasoline, most of the products they buy are transported by trucks, trains and ships that burn diesel. While gas prices are unlikely to rise as high as $4 a gallon, diesel may well pass that psychologically important level this spring, boosting prices of nectarines, computers, clothing and virtually every other consumer product, said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service in Wall, N.J.

"It's everything that gets shipped," Kloza said of diesel fuel's impact on the economy. "That is the one that is much scarier."

Gas and diesel prices are following crude oil, which spiked to a new record of $103.05 overnight. In midday trading on the New York Mercantile Exchange, light, sweet crude for April delivery fell 44 cents to $102.15 a barrel.

The dollar rose against the euro Friday, reversing one of the factors that has attracted huge flows of investment capital to the oil market. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling. That logic tends to reverse itself when the dollar weakens.

Also giving investors reason to sell was Turkey's decision to withdraw its forces from northern Iraq, which they invaded earlier this week in search of Kurdish rebels. Turkish attacks on Kurds in northern Iraq -- and the concern that Kurds would retaliate by cutting off oil supplies -- have helped propel oil to new records in recent months.

Traders also continue to fret over OPEC, which meets next week to consider production levels. The prospect that the Organization of Petroleum Exporting Countries might cut production levels has helped fuel oil's recent rise. But with prices holding above $100, most analysts now expect OPEC to hold production steady.

Despite oil's modest retreat Friday, many analysts believe the investment flows that have pushed prices higher this year are not about to dry up.

"We've just got a huge, huge speculative drive going on here," said Jim Ritterbusch, president of Ritterbusch and Associates, an energy consultancy in Galena, Ill. "The fresh buying brings in new buying."

Many analysts believe the underlying fundamentals of oil supply and demand do not justify such high prices. Some predict speculative investing could push oil prices as high as $120, while others argue prices have formed a bubble, and could crash back to the $70 range.

Other energy futures also fell Friday. In other Nymex trading, March heating oil fell 0.35 cent to $2.8421 a gallon while March gasoline futures fell 1.57 cents to $2.48 a gallon. April natural gas futures fell 8.8 cents to $9.355 per 1,000 cubic feet.

In London, Brent crude futures fell 52 cents to $100.38 a barrel on the ICE Futures exchange

Oil $100

Oil prices held near $100 a barrel Thursday after hitting a record overnight as investors poured more cash into crude and other commodities as a hedge against inflation.

Oil futures on Wednesday pushed briefly past $101 a barrel after the U.S. Federal Reserve lowered its forecast for U.S. economic growth this year, convincing energy investors that the central bank will slash interest rates further.

"Investors are going into commodities for a safe haven, because they think commodities may perform better than equities and also may be hedges against inflation," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore.

Lower interest rates can help the economy but tend to weaken the dollar, encouraging investors to shift funds into hard assets like gold or oil as a safeguard against inflation. After oil rallied above $100 a barrel, precious metals such as gold and silver also hit records.

The possible rate cut is also viewed as hopeful of bolstering a flagging U.S. economy, which would assuage fears of weakening crude demand.

"We are expecting the U.S. Federal Reserve will cut interest rates further," said David Moore, a commodity strategist with the Commonwealth Bank of Australia in Sydney. "That will help mitigate against the risks of U.S. recession, and would likely be supportive for the oil price."

The March light, sweet crude oil contract, which expired Wednesday, rose overnight as high as $101.32 a barrel, a new trading record. It settled at a record close of $100.74 a barrel.

On Thursday, light, sweet crude for April delivery added 43 cents to $100.13 a barrel in Asian electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. It was unchanged Wednesday at $99.70 a barrel.

Analysts said the rise this week in oil prices was not based on supply and demand fundamentals and that they expected increasing price volatility.

"We are in the spring season, when worldwide demand is typically lower and inventories are building. Yet we see a strengthening of oil," Shum said. "It's really a divergence."

Prices have surged on geopolitical factors such as the possibility that the Organization of Petroleum Exporting Countries may cut its output at a March 5 meeting.

"What that all means is that investors could move out of oil as quickly as they moved in and so this situation could be unstable and pricing could drop as fast as it has gained," he said.

Weighing on prices Thursday were expectations that the U.S. Department of Energy would report later in the day that U.S. crude inventories rose in the seven days to Feb. 15 for the sixth straight week in a row.

"The general expectation is that you'll see another increase in U.S. crude oil inventories," Moore said. "If there was an increase that would just take a bit of the edge off oil prices."

Crude oil inventories were expected to rise 2.9 million barrels, according to a Dow Jones Newswires survey of analysts' estimates.

Gasoline inventories were seen growing 1 million barrels while stocks of distillates, which include heating oil and diesel fuel, were expected to fall 1.5 million barrels.

Heating oil futures rose 0.33 cent to $2.7579 a gallon while gasoline prices added 0.53 cent to $2.5905 a gallon. Natural gas futures rose 0.5 cent to $8.97 per 1,000 cubic feet.

Brent crude added 36 cents to $98.78 a barrel on the ICE Futures exchange in London.

Associated Press business writer Thomas Hogue contributed to this story from Bangkok, Thailand.

Oil Prices Steady

Oil Is Steady After Talk of OPEC Cuts



Oil price were steady Monday in Asia, rising slightly after further hints that OPEC may cut production if global supplies continue to rise amid forecasts for slower growth in demand.



The Organization of Petroleum Exporting Countries has trimmed its demand forecasts for this year by 100,000 barrels a day, but it has also hinted it may cut production if global supplies of crude continue to rise, according to Dow Jones Newswires.

Several reports in recent days, though, have suggested that global economic conditions may not be deteriorating as quickly as feared. The U.S. Federal Reserve said Friday that industrial production in the world's largest economy rose last month in line with expectations. On the other hand, the Energy Department, the International Energy Agency and now OPEC have all cut demand forecasts.

Light, sweet crude for March delivery rose 23 cents to $95.73 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore.

The Nymex crude contract rose 4 cents Friday to settle at $95.50 a barrel after alternating frequently between positive and negative territory. Oil prices have risen more than $8 in little more than a week.

On Sunday, Venezuelan President Hugo Chavez soothed American motorists, saying that Venezuela is not preparing to cut off oil shipments to the United States.

The socialist leader rattled oil markets when he threatened a week ago to halt shipments to the United States in retaliation for Exxon Mobil Corp.'s success in convincing courts in the U.S. and Europe to freeze Venezuelan assets.

"We don't have plans to stop sending oil to the United States," Chavez said Sunday during a visit to heavy-oil projects in Venezuela's petroleum-rich Orinoco River basin that were nationalized last year.

But he added that Venezuela could cut off supplies to the United States if Washington "attacks Venezuela or tries to harm us." Chavez has repeatedly warned against a possible U.S. invasion to seize control of Venezuela's immense oil reserves. U.S. officials have denied any such plan exists.
The United States relies on Venezuela for about 10 percent of its oil imports.

Chavez's administration is locked in a legal battle with Irving, Texas-based Exxon Mobil over compensation for the nationalization of one of four heavy-oil projects in the Orinoco River basin.
Exxon Mobil, the world's largest publicly traded oil company, is seeking to freeze billions of dollars in Venezuelan assets in the United States and Europe to guarantee a payoff if it wins a decision by an international arbitration panel.

Last month, a British court injunction ordered the temporary freezing of up to $12 billion in assets of state-run Petroleos de Venezuela SA, or PDVSA.

Brent crude for April delivery rose 26 cents to $94.89 a barrel on the ICE Futures exchange in London.

Heating oil futures rose 0.81 cent to $2.655 a gallon while gasoline prices gained 0.59 cent to $2.4997 a gallon. Natural gas futures rose 15.1 cents to $8.811 per 1,000 cubic feet.

Oil Falls

Oil prices dropped Friday after rising more than $2 a barrel in the previous session as new U.S. trade deficit figures spurred hopes that the U.S. economy might escape a serious downturn.

The U.S. Commerce Department said Thursday the trade deficit fell in December and for 2007 as a whole -- an indication the U.S. is exporting more goods. This led investors to think U.S. energy demand would not be as weak as feared.

U.S. Federal Reserve Chairman Ben Bernanke's suggestion that the central bank is prepared to again cut interest rates also helped boost light, sweet crude to settle at $95.46 a barrel Thursday, an increase of $2.19 on the New York Mercantile Exchange.

That was its highest close since Jan. 9. The contract has risen in 4 of the past 5 sessions, adding more than $6 in a little over a week.

On Friday, the March contract lost 36 cents to $95.10 a barrel in Asian electronic trading by midafternoon in Singapore.

Bernanke said the Fed is ready to act again in response to deteriorating economic conditions. Interest rate cuts support oil prices because they tend to weaken the dollar. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.

Energy investors were also buying after a federal judge's decision Wednesday to confirm an earlier ruling freezing $300 million in a bank account owned by the Venezuelan state oil company.

Exxon Mobil is challenging Venezuela's nationalization of an oil project. A British court's earlier decision to temporarily freeze up to $12 billion in Venezuelan oil assets drew threats from President Hugo Chavez to cut off all oil sales to the U.S.

Weighing on oil prices were forecasts this week from the Energy Department and the International Energy Agency, an energy policy adviser to the industrialized world, that call for slower demand growth this year due to weakening economies.

Heating oil futures dropped 1.08 cents to $2.6558 a gallon while gasoline prices declined 0.83 cent to $2.4678 a gallon.

Natural gas futures lost 0.7 cents to $8.765 per 1,000 cubic feet.

Brent crude futures fell 38 cents to $94.78 a barrel on the ICE Futures exchange in London.

Oil Prices Fall Below $89 a Barrel

Oil prices seesawed Monday as gains in global stock markets failed to cancel out worries of a possible U.S. recession that would stunt oil demand.

European stock markets rose again, following last week's rise on Wall Street.

By the afternoon in Europe, London's FTSE index was up 0.5 percent, the CAC-40 in Paris gained 0.7 percent and Frankfurt's DAX was 1.2 percent higher.

Asian stock markets also climbed Monday. China's benchmark Shanghai Composite Index rose 8.1 percent, Hong Kong's Hang Seng index jumped 3.8 percent and Japan's Nikkei 225 index rose 2.7 percent.

Energy investors often view stocks as a proxy for economic growth, and in some recent sessions, movements in the oil market have closely followed that of global equities.

But Monday investors appeared to remain focused on weak economic data in the U.S. that pushed oil futures down nearly $3 a barrel at the end of last week.

"The high volatility in equities at a time when the oil markets are lacking a clear fundamental picture, has led to a greater oil-to-equity correlation in recent weeks," said Olivier Jakob of Petromatrix in Switzerland.

Light, sweet crude for March delivery was down 13 cents to $88.83 a barrel in electronic trading on the New York Mercantile Exchange by midday in Europe. Earlier Monday, the contract rose as high as $89.39 but also was as low as $88.07.

In London, Brent crude futures rose 1 cent to $89.45 a barrel on the ICE Futures exchange.
The Nymex contract dropped $2.79 to settle at that level Friday after the U.S. Labor Department reported that employers cut 17,000 jobs last month, the first reduction in more than four years and a sign that the economy continues to weaken.

Construction spending also fell by a record amount, according to the Commerce Department, reflecting a sharp pullback in residential building.

Responding to recent oil price declines, the Organization of Petroleum Exporting Countries said Friday it will maintain current oil output levels due to concerns that a weakening global economy will result in softer demand.

However, looking ahead to the next meeting in March, Qatar's Abdullah bin Hamad Al Attiyah said "all the possibilities are there" -- shorthand for a possible cut in production, if the U.S. economy weakens enough to cut into demand.

Other issues affecting the market were an attack by Turkish troops on Kurdish rebel targets in northern Iraq and a battle between gunmen and government troops near a petroleum-pumping station in Nigeria's lawless southern oil region.

Neither incident appeared to have disrupted oil flows, but analysts said both were causes for concern.

Heating oil futures rose 0.06 cent to $2.4495 a gallon while gasoline prices fell 0.02 cent to $2.2832 a gallon and Natural gas futures lost 7.9 cents to $7.661 per 1,000 cubic feet.

Stocks Higher As Investors Await Fed

Wall Street was mostly higher Tuesday as the Federal Reserve opened a two-day meeting expected to bring another interest rate cut to revitalize the U.S. economy.

The Fed's rate decision is clearly the market's focus this week, and trading is marked by investors' conjectures about policymakers' thoughts on the weak economy and crunched financial industry. With an announcement not expected until Wednesday afternoon, the market in the meantime digested data on earnings, consumer spending and durable goods.

Investors did get some encouragement about the economy after the Commerce Department said orders for big-ticket items rose 5.2 percent in December, the widest jump in five months. In addition, the Conference Board reported consumer confidence fell in January -- pretty much as expected.

Economic data will continue to be scrutinized as investors try to determine what the Fed's take is on the economy. Investors are angling for a half-point cut following its emergency three-quarter-point cut last week.

"The market is just in a holding pattern," said Todd Leone, managing director of equity trading at Cowen & Co. "It seems we've hit a short-term bottom, and the market has been stabilizing as we wait to hear what the Fed says."

In early afternoon trading, the Dow Jones industrial average rose 37.64, or 0.30 percent, to 12,421.53.

Broader indexes were mixed. The Standard & Poor's 500 index rose 2.20, or 0.16 percent, to 1,356.16, and the Nasdaq composite fell 4.82, or 0.21 percent, to 2,345.09.

Government bond prices fell as stocks rose, indicating that investors feel less need for the safety of Treasurys. The 10-year Treasury note's yield, which moves opposite its price, was at 3.67 percent, up from 3.58 percent late Monday.

The dollar was mixed against most major currencies, and gold prices fell.

Oil prices moved higher as traders waited to see what the Fed's next move will be. A barrel of light sweet crude fell 23 cents to $90.76 a barrel on the New York Mercantile Exchange.
Wall Street has been extremely volatile in recent weeks amid fears of a U.S. recession and further write-downs in the financial sector. However, that has given way to a more quiet tone this week as investors looked for their second-straight day of gains before the Fed's decision.

Central bankers are widely expected to lower its key rate, now at 3.5 percent, by as much as one-half percentage point to 3 percent when policy-makers wrap up on Wednesday. This will be the last meeting for two months, but that doesn't rule out another emergency cut in the meantime.

Rate cuts are just one part of the central bank's plan to boost the economy. The Fed auctioned $30 billion in funds to commercial banks on Tuesday -- the fourth time since last month it has provided cash-strapped banks with extra reserves.

The auction is designed to keep banks lending and prevent a severe credit squeeze from pushing the country into a recession. Global banks have lost about $141 billion since the credit crisis began last year.

Investors were also hopeful after President Bush's State of the Union address Monday night. Bush urged Congress, as expected, to expedite its approval of a $150 billion tax relief and business incentive package.

As American Express Co.'s fourth-quarter results indicated Monday, companies are being forced to prepare for a climate throughout 2008 of deteriorating credit and slower spending. American Express said its fourth-quarter profit fell 10 percent after socking away more cash in reserve to use in case cardholders can't pay back their debt. AmEx rose 10 cents to $47.50.

In other earnings news, 3M Co., the maker of Post-it notes and Scotch tape, reported on Tuesday a decline in net income but the results beat analyst expectations. 3M rose 75 cents to $78.19.

The embattled mortgage lender Countrywide Financial Corp., which was recently bought by Bank of America Corp., posted a sharp loss, as expected, due to its missteps in subprime lending.

Countrywide rose 25 cents, or 4.2 percent, to $6.20; BofA added 46 cents to $41.66.

The Russell 2000 index of smaller companies dipped 1.13, or 0.16 percent, to 701.26.

Advancing issues led decliners by a 4-to-3 basis on the New York Stock Exchange, where volume came to 758.9 million.

In Asian trading, Tokyo's Nikkei stock average closed up 2.99 percent; Shanghai's key index added 0.87 percent; and Hong Kong's main index rose 0.99 percent. In European trading, London's FTSE rose 1.66 percent; Frankfurt's DAX rose 1.09 percent; and Paris' CAC rose 1.92 percent.