Oil Rises Above $89 to a Record as Dollar Drops Against Euro

[sabra]

Source: Bloomberg

Oct. 18 (Bloomberg) -- Crude oil rose above $89 a barrel in New York for the first time after the U.S. dollar declined to a record low against the euro, enhancing the appeal of commodities as an investment.

Investors purchased oil on speculation the Federal Reserve will cut borrowing costs to bolster the U.S. economy. Oil reached records the past four days on concern Turkey will use military force against Kurdish rebels in northern Iraq, a step that the U.S. says may damage Iraqi security and disrupt oil supplies.

``Most commodities are priced in the U.S. dollar, so the drop on the dollar has an immediate effect,' said Peter Beutel, president of Cameron Hanover Inc., a New Canaan, Connecticut, energy consultant. ``The price in dollars needs to go higher to reflect the true value of the commodities.''

Crude oil for November delivery rose $2.06, or 2.4 percent, to $89.46 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures reached $89.56, the highest price since trading began in 1983. Prices are up 55 percent from a year ago.

Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=a0c7s0VQ._98&refer=home

[leftchick]

1. now would be a GREAT time to bomb Iran!

for the oil companies, and bush and all of the other idiots (sorry Hil) calling for a confrontation with Iran.

[Jim__]

2. Can someone explain to me how oil can have risen so much and we don't have ...

... rampant inflation? When oil rose like this in the 70's, inflation went through the roof, and that made sense to me. The price of oil rising rapidly and not causing high inflation confuses me.

[Lance_Boyle]

4. It'll trickle on in.

Right now there's a bit of a glut of the refined product, and refiners are looking at profits of $4/barrel instead of $40/barrel like they had this time last year. Don't think for even a second that those refiners have not noticed. Somehow, some way, refining capacity will be crippled in the coming days. No storms brewing, so my guess is an "accident" that will shut down operations for awhile.

[Jim__]

5. That makes sense - thanks.

[kestrel91316]

7. We HAVE rampant inflation in grocery stores. The media and the

government conveniently choose to ignore it.

[poverlay]

8. I'll second that. We make middle to upper middle class sort of money and in the past few years

we have been spending a lot of money but have less to show for it. What's the definition of inflation again??? :freak:

[kestrel91316]

10. Oh, and let's not forget inflation in energy prices.

Sheesh. No wonder they don't include either in their calculations...

[nealmhughes]

19. I never thought the day would come when cheese from Vermont, NYS or Wis.

would be a "luxury" or seeing sticker shock at staples, but live and learn, live and learn.

[Tempest]

12. There's a large supply of oil right now

Because of the slowing economy, the demand for oil has dropped significantly.

Once the supply dries up from an increase in use for heating during the winter, hang on to your short hairs.

That's why a majority of Americans believe the economy is currently in a recession.

There's a perfect storm brewing, a recession with inflation. It's not going to be pretty.

[NYC]

21. They don't include fuel and food in the inflation number.

They call it "core" inflation. They leave out fuel and food. Consumers don't have that option.

[gasperc]

3. we're trapped in a dangerous cycle

the Fed is pressured to lower rates to help the battered housing market. Lowering rates puts pressure on the dollar since it makes US treasuries less attractive. Now, investors are looking elsewhere and throwing money at the oil commodity market. This pushes up oil prices which puts pressure on the economy and the housing market, and were back into the vicious cycle.

[Divine Discontent]

6. so, $3+ a gallon soon right? n/t

[AndyTiedye]

9. We Paid $3.09/gal on Monday

[Tempest]

13. Diesel is up over $3 a gallon

And the increased cost of shipping is being passed on to the consumers, another cause of inflation.

[Divine Discontent]

15. oh... great. I'm so frustrated with our govt n/t

[partylessinOhio]

11. The rising cost of oil has trickled down and caused prices of food,

clothing, health care, gasoline, utilities, etc. to rise YET

the average increase in Social Security beginning in January 2008 will be only $24.

Something is very wrong with this.

:shrug:

[Divine Discontent]

14. yep..

we're heading towards, not saying they're weeks away, but towards riots... my sibling's food stamp stipend that is supposed to get him food for the month now lasts less than 14 days due to milk being over 4 dollars a gallon, for example. Everything is up...


and yes, I FULLY blame B*SH... I crack up when people say one man can't effect so much.... bullshit.

his f***ing waste of a war and the 2 billion it costs a week are destroying our country...

and to see SCHIP get vetoed, preventing 4 million kids from getting expensive health care just sums up how little they think of us Americans...
In referring to a family of SIX living in California, CA representative Herger said, ""$65000 a year. That's not low-income. That's a majority of households in America," said Rep. Wally Herger, R-Calif." I cannot imagine having 4 kids and getting by on about 10000 per person a year. I get by on about 12, barely. Damn republicans.

[endarkenment]

18. 2 billion it costs a week?

This year we are looking at 4-5B/wk. 2B/wk is so pre-surge.

[Rageneau]

16. So BartCop's "unbelievably wild" prediction is about to come true.

Way back when no one else was thinking about it -- way back when oil was under $40 a barrel -- BartCop predicted that no matter what happened in whe world, or in world energy supplies, oil prices would continue to rise until they eventually reached $100/bbl.

NOBODY else was predicting anything like this at the time, and for a while -- when pump prices went down -- it looked like he was finally going to get one wrong, but here we are on the verge of seeing BartCop proven right yet again.

Although he's a guy from nowhere, with no connections, no helpers, no background in politics or journalism, and a self-confessed I.Q. of only 64, BartCop is still better able to see what is happening, what HAS BEEN happening, and what will soon BE happening better than any other voice in politics or punditry.

He says that the Democratic Party ought to let him run their spin-room, and I agree. Had Gore or Kerry listened to BartCop, they'd have become president. But neither did.

That's why BartCop says Hillary is going to be the next president -- because she's the only one who doesn't help to run a good campaign.

[Javaman]

17. whatever happened to Bartcop?nt

[catzies]

22. He's very much with us and still hammerin' at the BFEE

www.bartcop.com

[poverlay]

24. BartCop's perspicacity should embarass the hell out of every political operative out there...nt

[Skink]

20. It's the Christmas shopping season. Nobody mention inflation.

[amandabeech]

23. Part of the last few days' run-up may be a result of worsening political conditions

in the Middle East.

If Turkey invades northern Iraq, the Kirkuk oil will stop flowing, if it still is.

More importantly, increasingly strident and desperate shrub and darth comments toward Iran give traders the heebie jeebies. If Iran made an effort to close the Straits of Hormuz (that's right Greenspan, it's Iran, not Iraq, sitting on those straits), there would be little oil coming out of the Middle East. That would mean a SERIOUS shortage, and prices would explode.

I think that if we get through with shrub and darth, and replace them with reasonable types, the fear factor in the market might ease off.

However, with China, India and others increasing consumption while supplies remain level due to some major fields depleting (Mexico, North Sea) or not increasing much (Saudi, Russia) and turmoil elsewhere (Iran, Nigeria), I don't expect to see supplies increase anytime soon.

[legin]

25. I am not sure any oil is coming from Kirkuk

and hasn't been for some time.
-------------------------------------
(snip)

But the PKK's stepped up attacks on Turkey and Turkey's threat to unilaterally strike back at their bases across the border in Iraq could shut a key pipeline that runs from the giant landlocked Kirkuk oil field in Kurdish northern Iraq to the port of Ceyhan on Turkey's Mediterranean coast.

Given the extensive sabotage and vandalism unleashed on Iraq's oil industry following the U.S.-led invasion in 2003, the pipeline is one of the few corridors through which Iraq can access the world market to raise badly-needed cash to rebuild its economy. This makes it a frequent target in a region already rife with violence and warring factions.

The 600-mile pipeline's vulnerability is well known. Few barrels of crude have trickled through it over the past four years. Prior to that, it was idled by international trade embargoes aimed at cutting off the flow of petrodollars Saddam Hussein relied on to fund his regime.

Efforts to resume shipments through the line didn't bear much fruit until this past summer, when Iraq convinced the likes of Exxon Mobil Corp. that they could again accommodate routine tanker loadings.

So far, Iraq has lined up contracts to supply about 300,000 barrels of oil per day to tankers calling at Ceyhan, a move that would lift Iraqi oil exports by about 15% from its current 2 million barrels per day. Currently, most of that oil flows to market through the predominantly Shiite port of Basra in southern Iraq.

(snip)

http://www.marketwatch.com/News/Story/why-turkeys-feud-kurds-rattles/story.aspx?guid=%7BF48FC393%2D8C6F%2D46A3%2D8993%2D262914A1A1EE%7D

[legin]

26. OK there is some but not a great deal

Over 2006 averaged about 250,000 barrels a day but it dropping off this year.

Click on chart at the bottom of the page :
http://www.csmonitor.com/2007/0507/p01s02-wome.html?page=2

This oil price hike probably have more to do with threats to blow up the pipelines leading to Ceyhan.