[R-G] Oil futures market hijacked by leveraged speculators while US gov't buys more oil

[CeJ]

Two oil-related articles follow. It looked rather blatant the past
week: every time the Dow dropped in a big way, oil futures rose. These
guys really are running out of things to leverage and speculate on!

Key excerpts from article 1:

>>This market has been hijacked by speculators," wrote Stephen Schork,
a trader and analyst in Villanova, Pa., in a research note.>>

>>Speculators have been lured to the crude market by the falling
dollar, which makes dollar-denominated oil futures a bargain to
overseas investors, and profits that can be made arbitraging various
oil contracts, experts said.>>


1. http://news.yahoo.com/s/ap/20071019/ap_on_bi_ge/oil_prices_145;_ylt=AqqeLlvykTt5xrGmO8oByhIE1vAI

Oil futures retreat from $90 record

By JOHN WILEN, AP Business Writer 1 hour, 21 minutes ago

NEW YORK - Oil futures fell Friday, retreating from an earlier foray
to a new record above $90, as investors sold to lock in profits.
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Still, many analysts expect the declines to be temporary and believe
oil futures will continue their assault on price records in the days
ahead. They say high prices are driven by a factors including a weak
dollar, speculative investing and low supplies at a key Midwest oil
terminal.

"This is just profit-taking today," said Tom Kloza, publisher and
chief oil analyst at the Oil Price Information Service.

Crude prices have jumped 28 percent since late August. The advance
appears to be trickling down to consumers in the form of higher gas
prices, and may result in higher heating prices this winter.

Prices at the pump have risen 5.3 cents over the past four days,
averaging $2.81 a gallon on Friday, according to AAA and the Oil Price
Information Service. Meanwhile, heating oil costs are expected to jump
more than 20 percent this winter.

Crude futures briefly passed $90 a barrel — rising as high as $90.07 —
twice in electronic trading overnight, despite a growing consensus
among analysts that the oil's underlying supply and demand
fundamentals do not support such high prices.

"This market has been hijacked by speculators," wrote Stephen Schork,
a trader and analyst in Villanova, Pa., in a research note.

Light, sweet crude for November delivery fell 87 cents to settle at
$88.60 on the New York Mercantile Exchange. Oil futures rose $4.91
this week, or 6 percent. The price of oil is still below
inflation-adjusted highs hit in early 1980. Depending on the
adjustment, a $38 barrel of oil in 1980 would be worth $96 to $101 or
more today.

Other Nymex energy futures also fell. November gasoline lost 1.64
cents to settle at $2.1687 a gallon, and November heating oil slid
1.87 cents to settle at $2.3306 a gallon.

Natural gas futures fell 33.3 cents to settle at $7.041 per 1,000
cubic feet on a new forecast from the National Oceanic and Atmospheric
Administration that this winter will be 3.4 percent warmer than the
30-year average.

In London, December Brent crude fell 81 cents to settle at $83.79 a
barrel on the ICE Futures exchange.

While organizations such as the International Energy Agency and the
Organization of Petroleum Exporting Countries warn that demand for oil
will increase in the fourth quarter, many observers think the demand
forecasts are overstated. Demand for gasoline is actually falling, the
Energy Department says. Domestic oil inventories are at high levels by
historic standards, and grew last week.

Speculators have been lured to the crude market by the falling dollar,
which makes dollar-denominated oil futures a bargain to overseas
investors, and profits that can be made arbitraging various oil
contracts, experts said.

Meanwhile, oil inventories at the Nymex delivery point of Cushing,
Okla., fell last week even as overall supplies grew. And falling
Cushing supplies feed a perception that, while overall oil supplies
might be sound, it is harder to secure oil in the short term.

For its part, the White House is worried about the cost of oil.

"The president certainly would like to see the price of oil lower,"
said deputy White House press secretary Tony Fratto.

But it will take more than hand-wringing to end the crude rally, analysts say.

"The market seems to have a mind of its own at this stage, and only
something 'seismic' could force prices down," wrote Edward Meir, an
analyst at MF Global UK Ltd., in a research note.


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Meanwhile, the Bush administration continues to buy up oil for the
ever-expanding 'strategic reserves' (so the US military can operate
globally, 24-7, no matter what). The expressed 'dismay' over high oil
(futures) prices is like them saying that poverty, war, political
oppression in Myanmar also dismay them, sigh, yawn:


2. http://news.yahoo.com/s/nm/20071019/pl_nm/usa_oil_bush_dc_2;_ylt=AqoC9VjGl.N2YV7wng95tZsE1vAI

 White House says crude oil price too high

By Chris Baltimore 2 hours, 17 minutes ago

WASHINGTON (Reuters) - The Bush administration on Friday voiced its
dismay at record-high crude oil prices over $90 a barrel, but said it
has no plans to suspend oil shipments to the nation's strategic
stockpile despite lawmakers' warnings that the action is cutting into
supplies.

"It's far too high," U.S. Energy Secretary Sam Bodman said when asked
about oil prices, which hit an all-time high of $90.07 a barrel.

U.S. oil has rallied more than 15 percent since October 8, driven by
fears about tight winter supply and a weakening U.S. dollar, which has
propped up prices for oil and other commodities like gold.

The Energy Department will continue its ongoing program to fill the
nation's emergency oil stockpile, Bodman said.

"We have no plans to make any changes," he told reporters after
speaking at a solar energy competition on the Smithsonian Mall.

Oil prices are marching ever closer to their inflation-adjusted high
of $101.70 a barrel hit in April 1980, a year after the Iranian
revolution.

Earlier on Friday, a White House spokesman said U.S. President George
W. Bush would like to see oil prices lower than their current levels.

"There's no magic to any particular number like $90 a barrel.
Obviously we prefer oil prices lower," White House spokesman Tony
Fratto told reporters.

The price rise has also worried OPEC, which may call for an early
formal meeting to discuss a further output increase. An OPEC supply
rise of 500,000 barrels per day (bpd), agreed last month, will take
effect on November 1, but some cartel officials have said there is
little it can do to cool down prices.

Bodman did not explicitly call for OPEC to boost its output, but said
global producers should weigh oil prices when deciding how much oil to
pump.

"I'm hopeful that the exporters, both OPEC and non-OPEC, will take a
hard look at it," he said.

The department is scheduled to add some 6 million barrels of crude
through January to the U.S. Strategic Petroleum Reserve. The
department last week also sought bids to deliver another 13 million
barrels of oil to the stockpile over six months, beginning in
February.

"The department should be taking prompt action to alleviate the
current crisis in energy prices, rather than reducing oil supplies
just when they are needed most," Democratic senators told Bodman in a
letter this week.

The department has said that the amount of oil in question -- about
50,000 barrels per day -- is modest when compared to the 20 million
barrels of oil consumed by U.S. consumers every day.

(Additional reporting by Matt Spetalnick and Tom Doggett)