Oil falls to three month low

[phk]

Oil falls to three month low

Crude prices sink after a call for renewed talks about Tehran's nuclear program overshadows conflict between Russia and Georgia that could threaten a critical oil pipeline.

Last Updated: August 11, 2008: 3:06 PM EDT

NEW YORK (CNNMoney.com) -- Oil prices fell Monday after Iran called for renewed nuclear talks and China reported a decline in crude imports, countering threats to supplies in Eastern Europe from the Georgia-Russia conflict.

U.S. crude for September delivery fell 75 cents to settle at $114.45 a barrel on the New York Mercantile Exchange, extending a multi-week slide that has knocked oil 22%, or about $34, from its peak.

Crude briefly dipped below $113 Monday before recovering some ground later in the session.

Nuke talks: Iran's chief nuclear negotiator agreed to a new round of negotiations with the European Union about its nuclear program, Iranian state-run media said.

The possibility of new talks eased worries that Iran could blockade the nearby Strait of Hormuz, a vital transport link for oil flowing out of the Middle East in the event of a conflict.

Concerns that a blockade could choke off oil supplies was one of the one of the forces behind oil's record rise to $147.27 on July 11.

China's falling demand: Concern about rising demand from emerging economies such as China and India also appeared to have abated.

China reported Monday that crude oil imports had fallen 7% to 13.79 million tons in July, down from 14.83 million tons 12 months earlier.

The Chinese report underscored concerns that the high price of crude oil and products made from it were taking a toll on consumption.

Dollar gains: The dollar rallied to five-month high against the euro Friday amid concerns about weakening European growth, and ticked up slightly on Monday as investors were becoming more cynical about oil.

"The fundamental case to justify $150 [a barrel] oil never made sense," said Stephen Schork, publisher of energy trading newsletter The Schork Report.

"I think it was a speculative bubble that people tried to massage the fundamentals around," said Schork.

The dollar, which took a big hit from the turmoil in the mortgage and credit markets, has made gains in recent weeks.

Crude is traded in dollars, so a stronger dollar makes oil futures more expensive to investors.

Georgian supply: Oil prices had risen overnight as the conflict intensified between Russia and the former Soviet republic of Georgia over control of the Georgian province of South Ossetia and its key pipeline - an important hub that transports crude oil between Europe and Asia.

Two pipelines run through Georgia, one from Baku to the Black Sea port of Sup'sa, and one from Baku to the Turkish city of Ceyan. The Ceyan pipeline is the bigger of the two, with a capacity of up to a million barrels of oil a day, according to Christopher Ruppel, energy analyst with Execution LLC.

The rally in early and late trading failed to gain steam because "nobody is going to damage the pipelines," said Ruppel. Both Georgia and Russia earn money from the vast oil and natural gas resources of Central Asia, he added.

However, Ruppel warned that the pipeline could come under the Russia's complete control, and that the country had used energy resources offensively by cutting off supply when diplomatically challenged.

Georgian president Mikheil Saakashvili signed an international-brokered proposal for a cease-fire Monday as fighting with Russia intensified.

Georgia, which has strong ties to the United States, has been developing closer relations with NATO. The country had been trying to assert control over South Ossetia and the province of Abkhazia, both of which have strong pro-Russian separatist movements.

Gas prices The price of gasoline in the United States, the world's largest crude consumer, has fallen for 25 straight days to a nationwide average of $3.81, according to motorist group AAA. The price is more than 30 cents below the record of $4.114 a gallon set July 16.

Still, gas prices were more than a dollar above where they were a year ago. To top of page

[War on Want]

So? Does this change the situation that we are past oil peak and demand is still rising with little remaining oil reserves left to tap?

[memphis]

Prices have been unsustainably high for a while now. Hopefully, the oil bubble will fully burst and we can be back to more reasonable prices.

[War on Want]

Prices have been unsustainably high for a while now. Hopefully, the oil bubble will fully burst and we can be back to more reasonable prices.

There is no "bubble". Prices might go back down to 3$ but will ultimatley come right back up again.

[King]

A three month low is just the all-time high from three months ago.

[Jacobtm]

Part of the fall in recent weeks has been due to the dollar appreciating against other currencies. The dollar has recently been under-valued and oil over-valued, and since oil is traded in dollars, the two corrections serve to make the drop in oil prices seem more dramatic than it really is.

2 weeks ago, on July 28th, a barrel of oil was about $138 and 88 Euros

Today, a barrel of oil was about $114.5 and 77 Euros

It's a 17% drop in terms of the dollar, but only a 12.5% reduction in terms of the Euro. Not that the Euro is the only currency that matters, but doing this same thing with other currencies, many of which have dropped against the dollar in recent weeks, would provide similar results.

[2952-0-0]

...and this is still dizzyingly high when compared to August 2007.

[Small Business Owner of Any Repute]

So? Does this change the situation that we are past oil peak and demand is still rising with little remaining oil reserves left to tap?

Yes, because one of the main reasons for the price drop is decreased demand.

[dead0man]

You're trying to argue against Peak Oil with the Evil Mexican?  Good luck!

[opebo]

So? Does this change the situation that we are past oil peak and demand is still rising with little remaining oil reserves left to tap?

Yes, because one of the main reasons for the price drop is decreased demand.

It is extremely unlikely that demand can be decreased enough to reverse the peak-oil scenario over the long term.

[JSojourner]

God bless the oil industry.  They have lowered prices from scandalously obscene to just plain obscene.  And they have people thinking, "Wow!  We're so lucky!"

The masses are asses.

[Colin]

God bless the oil industry.  They have lowered prices from scandalously obscene to just plain obscene.  And they have people thinking, "Wow!  We're so lucky!"

The masses are asses.

Do you really know nothing about the laws of supply and demand or are you just blinded by political belief?

[MODU]

All I know is that gas has dropped 60 cents over the past month, and some people only have a short-term memory, so they'll view this as a big improvement.

[John Dibble]

All I know is that gas has dropped 60 cents over the past month, and some people only have a short-term memory, so they'll view this as a big improvement.

Well, it IS a big improvement in the short term, though in the long term we are still paying a lot more than we used to.

[MODU]

All I know is that gas has dropped 60 cents over the past month, and some people only have a short-term memory, so they'll view this as a big improvement.

Well, it IS a big improvement in the short term, though in the long term we are still paying a lot more than we used to.

Definitely.  However, emotional impact is relative.  I remember being able to rub a couple of quarters together per gallon of gas.  The $1-plus 8 years ago was high compared to what I use to pay, but I (we) got use to it.

[Sbane]

This is the inevitable drop before they jack up prices again. My guess is oil prices will be the lowest oh right about late october.(hmm...wonder why that is) Then its the "holiday driving season" haha. I'm eagerly looking forward to paying $5-6 a gallon. lol.

[Colin]

This is the inevitable drop before they jack up prices again. My guess is oil prices will be the lowest oh right about late october.(hmm...wonder why that is) Then its the "holiday driving season" haha. I'm eagerly looking forward to paying $5-6 a gallon. lol.

Who is they? Why do people constantly think that the entire oil industry is based off of collusion? Prices go up during the "holiday driving season" because demand increases. Demand increases because more people fly or drive during that time. Let's assume that there is a constant supply of oil, this is just hypothetical since there are always fluctuations in supply, if there are more people who want the same amount of oil, prices will go up as the resources becomes more scarce. When less people want the same amount of oil, prices will go down.

Collusion, even within cartels like OPEC, usually doesn't work. Even OPEC found that, when oil prices were high, poorer OPEC nations, like Angola or Nigeria, would just produce more oil beyond their quota in order to get extra cash leading to a drop in world prices. If the rise in oil prices was just because of collusion between greedy oil executives wouldn't that lead one group of greedy oil executives, let's say ConocoPhillips, to sell cheaper oil below the prices set by their cartel in order to gain more profits for themselves and drive up their share price? This would lead the others to lower their prices to keep up and the collusion would collapse. There are very few true cartels and very little collusion in the world because of these problems, people are greedy and therefore will break with their partners if there is additional profit involved.

[Stranger in a strange land]

God bless the oil industry.  They have lowered prices from scandalously obscene to just plain obscene.  And they have people thinking, "Wow!  We're so lucky!"

The masses are asses.

The chocolate ration has been increased to fifteen grams!

[opebo]

Well, it IS a big improvement in the short term, though in the long term we are still paying a lot more than we used to.

Definitely.  However, emotional impact is relative.  I remember being able to rub a couple of quarters together per gallon of gas.  The $1-plus 8 years ago was high compared to what I use to pay, but I (we) got use to it.

Well actually, that dollar per gallon that prevailed during most of the late 1990s and into 2000/2001 was in fact, in real terms, cheaper than your fifty cent gas way back when a hamburger was a nickel or twenty five cents. 

Really, it is funny looking back how superlative the 1990s were - practically free gasoline, great old hulking used cars for $500, and I actually paid $85/month rent for a few years there.

[○∙◄☻¥tπ[╪AV┼cVê└]

It's still well over $4/gallon here, although I am aware that a lot of the country is under $4/gallon now. Anyways, we still have a problem of peak oil (and increased demand). But 62 million Americans decided to go with 2 Texas oil men instead of a massive alternative energy / energy independence plan.

[jeron]

This decrease in oil prices will only last for a while. In the long term prices will go up and up, as demand is rising. This would be true, even if the USA and other Western nations seriously cut back on their oil consumption, because China, India and other developing countries have fast-growing economies and as a result a growing energy consumption.

[dead0man]

The people making millions on it disagree.  link

[Sbane]

This is the inevitable drop before they jack up prices again. My guess is oil prices will be the lowest oh right about late october.(hmm...wonder why that is) Then its the "holiday driving season" haha. I'm eagerly looking forward to paying $5-6 a gallon. lol.

Who is they? Why do people constantly think that the entire oil industry is based off of collusion? Prices go up during the "holiday driving season" because demand increases. Demand increases because more people fly or drive during that time. Let's assume that there is a constant supply of oil, this is just hypothetical since there are always fluctuations in supply, if there are more people who want the same amount of oil, prices will go up as the resources becomes more scarce. When less people want the same amount of oil, prices will go down.

Collusion, even within cartels like OPEC, usually doesn't work. Even OPEC found that, when oil prices were high, poorer OPEC nations, like Angola or Nigeria, would just produce more oil beyond their quota in order to get extra cash leading to a drop in world prices. If the rise in oil prices was just because of collusion between greedy oil executives wouldn't that lead one group of greedy oil executives, let's say ConocoPhillips, to sell cheaper oil below the prices set by their cartel in order to gain more profits for themselves and drive up their share price? This would lead the others to lower their prices to keep up and the collusion would collapse. There are very few true cartels and very little collusion in the world because of these problems, people are greedy and therefore will break with their partners if there is additional profit involved.

Well Oil companies can affect oil prices by deciding when to keep refineries open and when to maintain them. They only affect the prices at the margins of course, but enough to fool us short-term thinking idiots. I will bet you anything oil prices, at least at the pump, will be lowest just before the election.

[War on Want]

The people making millions on it disagree.  link

These people can quite often be idiots, looking to make a buck in a short period of time. To assert that the market knows everything coming up in the future and can predict what will happen in 10 years time is idiotic.

[dead0man]

It's risky sure, but the guys that bought oil in 2008 ten years ago for $60/barrel (or whatever) are laughing all the way to the Porsche dealership.