Heating Oil Price Trend for September 9: -3¢
For the past few weeks, Bernanke has reiterated the Fed is prepared to use its arsenal of tools to bolster the flailing economy, but has been vague about what those tools are and when he intends to use them. (image: thefinancialphysician.com)
Oil prices swung back and forth on Thursday before finally dipping as traders waited to hear President Obama’s jobs speech before planning their next moves. Heating oil prices lost three cents and crude slipped 29 cents to finish at &89.05 a barrel on the NYMEX.
Analysts believe Obama’s new jobs plan could include an economic stimulus package of up to $400 billion over the next year. As the United States remains the world’s largest oil consumer, such an announcement will likely push oil above and beyond the $90 a barrel mark – economic growth and oil consumption typically go hand in hand.
Meanwhile, Federal Reserve Chairman Ben Bernanke disappointed many investors by failing to divulge any details about the central bank’s next move toward boosting the economy. Bernanke said the Fed “will do all it can” to lower unemployment rates and encourage growth, but didn’t say exactly how. Economists expressed concern over the impact further stimulus measures could have on inflation. Bernanke dismissed these fears, saying any rise in prices from inflation this year will probably be transitory and not permanent.
The Energy Information Administration released its weekly supplies report, showing oil inventories dropped four million barrels. Supplies of distillates (heating oil and diesel) posted a build of 700,000 barrels, pretty close to what strategists had expected.
In the Gulf, Tropical Storm Nate threatens to disrupt production. The National Hurricane Center expects the storm to gather strength over the next two days, so rig operators must once again consider evacuating platforms.
The average retail heating oil price in the Northeast is three cents lower than Thursday’s average price.
Heating Oil Price Trend for September 6: -5¢
The U.S. economy added zero new jobs in August, once again sparking fears the country is headed for a double-dip recession. President Obama will address the issue in a speech on Thursday, possibly unveiling his new job creation recommendations. (image: theusnewsdot.com and Nicholas Whitaker for HeatingOil.com)
Oil prices plunged last Friday on the Labor Department’s disheartening employment report and fears that Tropical Storm Lee could disrupt oil production in the Gulf. Heating oil prices dropped five cents while crude lost $2.48 to finish at $86.45 a barrel on the NYMEX.
Economists had predicted the U.S. had added 80,000 jobs in August, but Friday’s report from the Labor Department showed no change since July – the worst performance in a year. The unemployment rate didn’t change either; it remains at 9.1%. Some traders believe the lackluster report will inspire the Federal Reserve to approve further economic stimulus measures, which officials have said they’re considering. A new stimulus package could bring stability and higher prices to oil markets, if it effectively boosts economic growth. The central bank’s next meeting is scheduled for September 20-21. Oil nearly breached the $90 a barrel mark last week, but analysts believe that until the Fed and the White House establish more direct economic policies, oil prices could dip back down to the low $80s – high $70s range.
Meanwhile, the “tropical wave” the National Hurricane Center said had only a 30% chance of becoming a hurricane may be doing just that. The wave was upgraded to Tropical Storm Lee and is heading towards the Gulf of Mexico. Oil companies have evacuated many of the Gulf’s production facilities and platforms and shut in around 12% of total U.S. output – around 666,321 barrels worth. Rough sea conditions prohibited tanker offloading from the Gulf, but oil is still being delivered to customers from onshore storage facilities.
The average retail heating oil price in the Northeast is five cents lower than Friday’s average price.
Heating Oil Price Trend for August 30: No Change
U.S. economic updates from July, including a better-than-expected rise in personal incomes, have traders feeling good about recovery efforts. (image: uphaa.com and Nicholas Whitaker for HeatingOil.com)
Oil prices saw moderate gains on Monday as strong stock market action overshadowed Hurricane Irene’s lingering impact. Heating oil prices didn’t move and crude climbed 52 cents to finish at $87.27 per barrel on the NYMEX.
Millions of Americans are still dealing with power loss and flooding in the aftermath of Hurricane Irene, but traders are already looking ahead to the latest U.S. economic indicators and influential news from the Commerce Department. While many suffered property damage and at least 40 people lost their lives, the general consensus remains that the storm could’ve been much worse. Only a small fraction of East Coast oil refineries reported shutdowns or reduced operations from the storm, and all are expected to be fully functional again within the next few days. However, with scientists confirming that continued global warming will likely bring a rise in natural disasters, analysts are reminded the peak month for hurricane activity is September and still lies ahead of us.
U.S. equities and commodities saw boosts in trading on the stock market, pushing oil prices slightly upwards. The Commerce Department reported Americans’ personal incomes climbed a more-than-expected 0.3% in July, with personal spending rising 0.8% in turn. Administrators noted the auto industry showed particularly strong sales reports. The new figures don’t account for back-to-school sales, so economists expect further gains in the near future. The Labor Department’s monthly employment report, due out on Friday, will almost surely affect oil markets as well.
The average retail heating oil price in the Northeast is unchanged from Monday’s average price.
Heating Oil Price Trend for August 15: No Change
U.S. equities and retail sales rose in July, despite recent studies showing American’s have curbed their personal spending. (image: zimbio.com and Nicholas Whitaker for HeatingOil.com)
After a week of rollercoaster trading, oil prices quieted on Friday as traders attempt to weigh contradicting cues from the U.S. economy. Heating oil prices didn’t move while crude dropped a modest 34 cents to finish at $85.38 a barrel on the New York Mercantile Exchange.
U.S. economic reports continue to overwhelm other market factors as traders cautiously await signs to tip the scale between weakness and recovery. The Commerce Department released a Friday report showing a promising rise in nationwide retail sales, good news after last week’s update showing Americans are cutting back on personal spending. However, the optimism didn’t last after Thomson Reuters/University of Michigan announced the early-August consumer sentiment index plummeted to the lowest level it’s been since 1980.
In other oil news, the Energy Information Administration estimates U.S. gasoline demand will drop 2.1% this summer to its lowest level in a decade. It may not seem relevant to heating oil prices, but when the world’s most voracious oil consumer is using less of its most widely used petroleum product, it makes oil investors question the security of making large buy-ins.
With U.S. demand in question, the EIA, OPEC, and the International Energy Agency have all scaled back their global oil demand estimates for 2011. OPEC has promised it won’t adjust production levels to protect prices – not yet, anyway.
The average retail heating oil price in the Northeast is unchanged from Friday’s average price.
Heating Oil Price Trend for August 12: +4¢
Surveyed economists expected new applications for unemployment benefits to hit 410,000 last week but instead they fell to 395,000. (image: teenvogue.com and Nicholas Whitaker for HeatingOil.com)
Oil prices hit their highest point this week on Thursday, along with the surging stock market, on an inspiring employment report from the U.S. Department of Labor. Heating oil prices gained four cents and crude jumped $2.83 to finish at $85.72 a barrel on the NYMEX.
According to labor market officials, jobless claims dropped by 7,000 last week instead of spiking as economists feared. U.S. equities markets finished high, and Cisco Systems delivered a better-than-expected national earnings report. Also, the Dow Jones Industrial Average made substantial gains in later afternoon trading, boosting oil markets. Industrial and manufacturing sectors are typically heavy oil consumers, so their growth or weakness often affects demand.
The International Energy Agency issued a warning on Wednesday that a double-dip recession in the U.S. could squelch demand enough to cause a global oil surplus next year. The economic distress in the U.S. and Europe are well known, but financial news from China shows the economy of the world’s second largest oil consumer may also be slowing down. However, the IEA also warned OPEC against taking pre-emptive measures to slash production to maintain prices and demand, saying a global oil surplus is just one possible scenario and it’s too early to say what to expect in upcoming months.
The average retail heating oil price in the Northeast is four cents higher than Thursday’s average price.
Heating Oil Price Trend for August 10: -4¢
Federal Reserve officials considered cutting short-term interest rates to boost the economy, but feared the risk of increasing inflation. Rates are already close to zero anyway, which the Fed promised to maintain for several more months. (image: infiniteunknown.net and Nicholas Whitaker for HeatingOil.com)
Oil prices took another hit on Tuesday as the U.S. Federal Reserve promised to keep interest rates low but made no mention of further economic stimulus plans. Heating oil prices slipped four cents as crude lost $2.01 to settle at $79.30 on the NYMEX. It’s the first time contracts have finished below the $80 a barrel mark in almost 10 months.
Oil commodities, including distillates like diesel and heating oil, fluctuated widely but finally ended in the red as America’s central bank issued a crummy outlook for economic recovery but vowed to keep short-term interest rates near zero for at least another two years. Strategists believe prices will likely fall even further, with negative financial momentum streaming from economic heavyweights like the U.S. and Europe, since seasoned commodity traders won’t be placing large buy-ins.
President Obama shared resolute encouragement after credit rating agencies issued the United States its first downgrade on Friday, probably because continued worry and fear about economic slumps won’t do much to improve the situation. Oil prices have dropped 17% already this month on sour financial news.
Traders await cues from Wednesday’s weekly stockpile report from the Department of Energy. They’re predicting a build of 1.1 million barrels, and are keeping a close eye on gasoline since unusually low summer demand is dragging down pricing and global demand levels.
The average retail heating oil price in the Northeast is four cents less than Tuesday’s average price.
Heating Oil Price Trend for August 9: -13¢
President Obama said the S&P’s downgrade should be taken as nothing more than a sign that federal lawmakers must show more “common sense and compromise” in fixing our tremendous national deficit. “Markets will rise and fall,” he said. “But no matter what some agency may say, we’ve always been and always will be a triple-A country.” (image: asksam.com and Nicholas Whitaker for HeatingOil.com)
Oil prices plunged to their lowest level in nearly nine months on Monday, as major credit rating agency Standard & Poor’s issued the United States its first-ever downgrade. Heating oil prices lost a whopping 13 cents cents while crude plummeted $5.57 to finish at $81.31 a barrel on the NYMEX.
Even though S&P gave fair warning some time ago and traders were anticipating the downgrade, many investors viewed the official decision as confirmation that U.S. recovery is slowing to a dead stop. Commodities and equities, including distillates like heating oil and diesel, endured major sell-offs across the board.
President Obama essentially dismissed the downgrade and attempted to reassure investors and the public as a whole, saying S&P’s decision would simply renew Congress’ motivation and sense of urgency in tacking the national deficit. Economists warned if the U.S. slips into a legitimate double-dip recession, oil prices could potentially hit $50 a barrel.
Economic indicators from Europe and the U.S. have overpowered all other influences for several weeks. Traders await developing news from Italy, where top lawmakers are working to balance the nation’s deficit by 2013. The Friday announcement from Italian prime minister Silvio Berlusconi briefly boosted oil markets, but economists are closely monitoring the financial health of other vulnerable eurozone members.
Despite all the depressing financial news, analysts believe heightened demand from China’s strengthening economy will prevent oil prices from slipping much lower. China is the world’s second largest oil consumer.
The average retail heating oil price in the Northeast is thirteen cents less than Monday’s average price.
Heating Oil Price Trend for August 5: -12¢
The Dow Jones dropped 4% and the Nasdaq lost 5% on Thursday in the worst stock-market selloff since 2009. (image: mwcnews.net and Nicholas Whitaker for HeatingOil.com)
Oil prices plummeted on Friday to their lowest level since February as intensifying fears that the U.S. and European economic recoveries have hit a wall caused an extensive market selloff. Heating oil prices plunged 12 cents while crude dropped a momentous $5.30 to finish at $86.63 a barrel on the NYMEX. That’s the lowest contract settlement since Libya’s civil war worsened and disrupted oil production several months ago.
A steady flow of negative U.S. economic reports from the Commerce Department, Labor Department, Institute for Supply Management and various other sectors, coupled with the recent unsettling debt ceiling struggle, culminated in a massive collapse on Thursday that affected not only oil, but spanned the entire equities market. Because the U.S. is the world’s most voracious oil consumer, traders trust its economic indicators to trend alongside global fuel demand levels.
Europe continues to wrestle with its own sovereign debt crisis; threats of a default have been looming there as well. Investors again believe the crisis could be spreading, especially since Italy’s equity market has been locked in a downward spiral, slipping almost 30% since February.
After being asked to increase oil output to offset Libyan losses, Saudi Arabia has raised production to levels not seen since the 1980s. Several million barrels of strategic reserves are also trickling into markets, pushing demand even lower.
However, prices could rebound on a better-than-expected Friday report from the Bureau of Labor Statistics showing U.S. unemployment fell from 9.2% to 9.1% in July, adding 117,000 new jobs.
The average retail heating oil price in the Northeast is twelve cents lower than Thursday’s average price.
Heating Oil Price Trend for August 4: -7¢
With Japan slowly recovering from March’s earthquake and tsunami, factory orders in the U.S. are down. (image: cleveland.com and Nicholas Whitaker for HeatingOil.com)
Oil prices bottomed out on Wednesday, hitting their lowest levels in five weeks as indicators continue to suggest the U.S. economy and its demand for fuel are faltering. Heating oil plummeted seven cents while crude lost $1.86 to finish at $91.93 a barrel on the NYMEX.
Economists briefly held on to hopes that President Obama’s Tuesday signing of the new debt ceiling deal would boost markets, but any optimism was quickly dashed as the Commerce Department issued a report on Wednesday showing factory orders fell 0.8% in June. And after its disappointing manufacturing report earlier this week, the Institute for Supply Management dealt more crummy news – its service sector isn’t growing as expected, and slipped 0.6% in July.
With no real signs of economic relief on the horizon, most traders agree oil prices will soon slip into the $80 per barrel range. Credit rating agencies confirmed the U.S. is maintaining its AAA rating for now, but assigned the country a negative outlook. The news overshadowed the latest better-than-expected ADP employment report showing 114,000 jobs were added to the economy in July, the 18th month of job growth in a row.
The Energy Information Agency’s weekly oil inventory survey showed an increase of 1 million barrels, a bit less than analysts had forecast. Most disturbing to oil investors, however, was news that gasoline demand, which usually peaks during the summer, slipped 3.6% since one year ago. Gasoline demand registered at 9.06 million barrels a day, the lowest July numbers in nine years. While gasoline demand may not seem to have much bearing on heating oil, their pricing often loosely follows similar trends.
The average retail heating oil price in the Northeast is seven cents lower than Wednesday’s average price.
Heating Oil Price Trend for August 3: No Change
Despite slight declines in oil prices and higher incomes, American consumer spending unexpectedly fell in June for the first time in two years, helping to keep oil prices well below $100 a barrel. (image: iwanttogettoned.com and Nicholas Whitaker for HeatingOil.com)
Continually stagnant U.S. economic news kept oil prices quiet once again on Tuesday as heating oil prices barely moved and crude fell $1.10, its third decline in a row, to finish at $93.79 a barrel – the lowest it’s been in more than a month.
Weak economic indicators from the United States have plagued oil markets for weeks, and a new report from the Commerce Department showed nothing different. Despite data showing Americans’ incomes increased 0.1% in June, following a 0.2% rise in May, their personal spending has unexpectedly gone down 0.2%. The report followed a poor showing on Monday from the Institute for Supply Management, which revealed growth in the U.S. manufacturing sector had ground to a halt.
Inventories of distillates, mainly diesel and heating oil, climbed 1.7 million barrels last week. Unseasonably warm weather spanning the country should keep heating oil prices on a slow decline throughout the month.
However, markets could fluctuate later in the week, as traders await the Department of Energy’s weekly oil stockpile update due out Wednesday and an unemployment report on Friday. If figures continue showing a standstill in U.S. economic recovery, strategists believe we could see oil prices dip below $90 a barrel for the first time since June.
The average retail heating oil price in the Northeast is unchanged from Tuesday’s average price.
Heating Oil Price Trend for August 2: No Change
The Institute for Supply Management reported this week that fuel-intensive sectors like industrial manufacturing aren’t showing any growth, reminding oil traders the U.S.’s economic problems extend further than the recent debt ceiling debacle. (image: libn.com and Nicholas Whitaker for HeatingOil.com)
Traders were happy to put the U.S. debt ceiling ordeal behind them, at least for now, but the sour economic news continued with a weak manufacturing report, pushing oil prices just slightly down on Monday. Heating oil prices didn’t move as crude dropped 81 cents to finish at $94.89 a barrel on the NYMEX.
Economists originally suspected President Obama and Congressional leaders’ successful lifting of the federal debt limit would boost oil markets, but the event was overshadowed by new data from the Institute for Supply Management. The group’s manufacturing purchasing manager’s index slipped several points in July, showing virtually zero growth in the industrial sector. When the world’s largest oil consumer has a slouching economy, global oil demand slumps too.
With demand lagging, the International Energy Agency’s slow release of 60 million barrels of emergency reserves into the market isn’t doing much to keep prices low. Plus, Saudi Arabia is still keeping its promise to increase output to make up for losses from the Libyan uprising – the Saudis produced an average of 9.85 million barrels a day in July, the highest levels they’ve churned out since the early 1980s. With those two huge factors feeding supply, production levels from OPEC are the highest they’ve been in nearly three years.
Investors and heating oil dealers are awaiting cues from the Department of Energy’s weekly stockpile report due out on Wednesday.
The average retail heating oil price in the Northeast is unchanged from Monday’s average price.
Heating Oil Price Trend for August 1: +7¢
Various caucuses convened for emergency meetings on Monday, since neither Democrats nor Tea Partiers are happy with the compromising debt limit plan. (image: dailykos.com and Nicholas Whitaker for HeatingOil.com)
Oil markets parted ways on Friday as U.S. Congressional leaders struggled to amend a plan for raising the national debt limit, coming down to the wire on the August 2 deadline. Heating oil gained seven cents while crude plunged $1.74 to finish at $95.70 a barrel on the NYMEX.
President Obama and federal lawmakers worked through the weekend to reach an agreement on the $14.29 trillion debt ceiling, but traders and economists are viewing the drawn out, nerve-wracking ordeal as a sign of increasing weakness for both the economy and the outlook for U.S. oil demand. Congressional leaders presented a new plan Sunday night that none of them seem thrilled about but will effectively avert a default. The plan will raise the $14.29 trillion debt limit by $900 billion while cutting $917 billion over the next 10 years. Also, a “super Congress” of six Republicans and six Democrats will convene to present more cuts by Thanksgiving. Both parties need 217 representatives to sign off on the plan for it to pass.
Strategists’ original forecasts saw oil prices hitting the $100 a barrel mark, but changed their tune when crude hit its lowest price in two weeks. Some even stated we’ll see oil drop into the $80 a barrel range before it breaches $100 again.
In better news, Tropical Storm Don turned out to be less threatening than originally forecast. Though the storm may disrupt oil refinery operation around Corpus Christi, it should stay well clear of the larger cluster of refineries around Houston.
The average retail heating oil price in the Northeast is seven cents higher than Friday’s average price.
Heating Oil Price Trend for July 29: +2¢
Despite a lack of support from his own party, House Speaker John Boehner has failed to reach out to top Democrats Steny Hoyer (right) and Nancy Pelosi to discuss and revise his debt ceiling plan. (image: freakoutnation.com and Nicholas Whitaker for HeatingOil.com)
The U.S. debt ceiling stalemate took center stage once again on Thursday as oil prices saw very little change. Heating oil gained two cents and crude inched up four cents to settle at $97.44 on the New York Mercantile Exchange.
The latest attempt to resolve the debt ceiling gridlock, a Republican plan that would’ve raised the debt limit for only six months, failed in the House Thursday night. Congressional leaders have until Tuesday to raise the limit or risk inciting the country’s first-ever default and a credit rating downgrade from AAA to AA.
A default would mean the government won’t be able to meet all its financial obligations, including checks for veterans, the disabled, Social Security recipients and a variety of other residents who rely on federal assistance. Economists fully expect a credit rating downgrade will cost the government an additional $100 billion a year in borrowing fees.
Under the 14th amendment, President Obama has the legal power to raise the debt limit on his own, but has said that so far it doesn’t seem like the best option. In the past, raising the debt ceiling has been routine practice – it’s been done 106 times since 1940. Top leaders in Europe and other parts of the world have asked Congress to move quickly to solve the problem, since the outcome will heavily affect the global economy as well as oil prices.
In other market influences, optimistic employment news from the Labor Department failed to push prices down. The number of people applying to claim jobless benefits fell last week by 24,000 to its lowest level in four months. Economists believe the report is a strong sign the economy is adding more jobs than it’s losing.
And, Tropical Storm Don halted oil production throughout the Gulf of Mexico, causing strategists to initially predict a spike in oil prices on Thursday before markets leveled out. The National Hurricane Center advised area residents and business owners that storm winds will probably intensify over the next 36 hours before breaking. Refineries shut down even in mild storms to prevent damage and waste.
The average retail heating oil price in the Northeast is two cents higher than Thursday’s average price.
Heating Oil Price Trend for July 26: -2¢
House Speaker John Boehner and other GOP leaders have pushed for a temporary fix on the debt ceiling issue while Senate Majority Leader Harry Reid, House Democratic leader Nancy Pelosi and others have strongly advocated a more permanent solution. President Obama has demanded a balanced approach to leveling the national deficit and called the current standoff a dangerous game "we can't afford to play." (image: cleveland.com and Nicholas Whitaker for HeatingOil.com)
Oil prices fell on Monday as U.S. Congressional leaders failed to establish much progress on the debt ceiling gridlock, with House Republican Speaker John Boehner and Democratic Senate Majority Leader Harry Reid each presenting a different plan. Heating oil slipped two cents while crude lost 67 cents to settle at $99.20 a barrel on the NYMEX.
Investors focused almost exclusively on the debt ceiling standoff and U.S. economic factors, since President Obama and Congress have seven days to raise the $14.29 limit or risk defaulting on financial obligations. Both the Treasury Department and the International Monetary Fund have continually warned that such a default could have seriously damaging and far-reaching effects.
Because the U.S. is the world’s biggest oil consumer, any economic news is taken as an indicator of short-term fuel demand. Obviously, signs of crippling debt or economic fallout don’t inspire traders to invest in oil. Also, sour economic news often weakens the dollar. Because the dollar typically trades inversely to dollar-priced commodities like oil, a limp economy can push heating oil prices up.
The committee handling the debt ceiling issue first considered a temporary six-month increase in the government’s limits, but Democrats rejected the plan because of the uncertainty and turmoil the delay would cause financial markets. As investors keep a close eye on developments, the gridlock will remain a strong market influence until it’s resolved.
The average retail heating oil price in the Northeast is two cents lower than Monday’s average price.
Heating Oil Price Trend for July 18: +3¢
Federal Reserve Chairman Ben Bernanke (image: blog.cleveland.com and Nicholas Whitaker for HeatingOil.com)
Comments from Federal Reserve Chairman Ben Bernanke gave oil prices a boost on Friday to finish out a rollercoaster week. Heating oil hiked three cents as crude climbed $1.55 to finish at $97.24 a barrel on the NYMEX.
Oil markets teetered on news from the Fed all week, but Bernanke’s congressional testimony offered the possibility that both positive and negative economic indicators from the U.S. could be good news for oil. His logic is that while strong signs of recovery lift oil demand across the board, signs of weakened recovery could cause the Fed to push for further stimulus measures, which would keep the dollar weak. A weak dollar is consistently good for oil prices. Bernanke finished by reiterating that as right now, no plans for monetary stimulus are in the works.
The dollar remained weak on Bernanke’s remarks and a University of Michigan study showing the consumer-confidence index has fallen to its lowest level in more than two years. However, the euro also slipped on a report from the European Banking Authority that eight out of 90 banks, five of them based in Spain, failed the European Union stress test.
Also, the International Energy Agency is meeting this week to discuss the possibility of releasing even more emergency oil reserves, a development that will almost certainly affect market trends. Strategists responded to the news with mixed emotions, since tapping reserves would likely push prices lower and help more accurately gauge short-term demand, but could also set the stage for a major crisis if some major supply or production disruption occurred before the reserves could be restocked.
The average retail heating oil price in the Northeast is three cents higher than Friday’s average price.
Heating Oil Price Trend for July 15: -1¢
Obama with Speaker John Boehner and top House Democrat Nancy Pelosi, trying to outline an agreement on the debt limit. (image: tpmdc.talkingpointsmemo.com and Nicholas Whitaker for HeatingOil.com)
Oil prices barely moved once again on Thursday as investors weighed concerns over the U.S. debt situation, Greek debt “contagion,” and European bank security. Heating oil prices lost one cent while crude gained five cents to finish at $95.74 a barrel on the New York Mercantile Exchange.
Economic indicators from the U.S. maintained a stronghold over market trends, since Europe’s bailout package for Greece hasn’t yet caused any major fallout for banks handling the project. Earlier this week Italian lawmakers pushed through additional austerity measures that calmed some concerns, but economists are keeping an eye on the status of several major banks.
Buyers also hesitated because the August deadline for the U.S. government to reach an agreement on the debt ceiling is drawing near. The standoff between President Obama and GOP congressional leaders doesn’t appear to be making much headway, a problem that could negatively affect America’s credit rating. Despite Obama’s controversial offers to compromise with Republicans on measures such as increasing the Social Security eligibility age, GOP lawmakers failed to budge and reach a resolution. Obama has since stated he will not back down on this issue regardless of the toll it may take on his presidency.
In other U.S. economic factors, reports on June activity showed that inflation fell for the first time in a year and industrial production increased less than strategists expected.
The dollar crashed earlier in the week after Federal Reserve committee members said they’d consider a third round of quantitative easing if U.S. economic recovery continues to lag. On Thursday, however, Chairman Ben Bernanke quelled fears of further stimulus measures, saying there are no plans for immediate action and the Fed is simply trying to keep options open and be prepared. The update strengthened the dollar, which typically pushes oil prices down.
The average retail heating oil price in the Northeast is one cent lower than Thursday’s average price.
Heating Oil Price Trend for July 13: No Change
Committee members at the Federal Reserve's last meeting had mixed viewpoints, but agreed further stimulus measures could be a possibility if the U.S. economy doesn't begin picking up on its own. (image: en.wikipedia.org and Nicholas Whitaker for HeatingOil.com)
The dollar reigned once again on Tuesday as the strongest market influence, but this time losing power against the euro and sending oil prices higher. For the second time this week, heating oil prices stayed put while crude saw significant change, climbing $2.28 to settle at $97.43 per barrel on the NYMEX.
A late-day announcement from the Federal Reserve detailing its latest policy meeting where officials decided the central bank may pursue another round of monetary stimulus initiatives if U.S. economic growth continues to drag. The news deflated the dollar and lifted commodities. Such stimulus measures, called quantitative easing, effectively boost any dollar-dominated commodity (including oil) because those commodities become cheaper for traders holding other currencies. The Fed has no plans for immediate stimulus action, but committee members said they’ll create a specific package if the economy doesn’t jumpstart itself soon.
Surprisingly high yields on an Italian debt auction once again sparked worries that Greece’s financial fallout is spreading and becoming Europe’s debt crisis. Italian leaders worked throughout the day to push through an austerity that improved strategists’ outlook, giving crude a boost.
Oil inventories fell 1.3 million barrels last week, a fairly average figure, but prices could fluctuate when two important weekly reports are released on Wednesday. The American Petroleum Institute, a strong industry mouthpiece, gives a survey report about U.S. oil and fuel inventory levels. Shortly after, the Department of Energy publishes a similar, more widely read follow-up.
Today’s average retail heating oil price in the Northeast is unchanged from Tuesday’s average price.
Heating Oil Price Trend for July 11: No Change
Heating oil prices haven't yet bounced back from last week's 14¢ jump on optimism about U.S. employment reports. (image: totallyexpat.com and Nicholas Whitaker for HeatingOil.com)
Oil futures reverted back to a wait-and-see pattern on Friday as heating oil prices stayed put, despite crude dropping $2.47 to settle at $96.20 a barrel on the New York Mercantile Exchange.
Unsurprisingly, Friday’s disappointing report from the Labor Department showing that only 18,000 nonfarm jobs had been added to the economy stoked fears that oil demand could be weakening. Optimistic strategists initially predicted that between 90,000 – 140,000 jobs would be added, but it turns out unemployment rates are actually rising.
The worrisome economic indicator affected markets across the board – the Dow Jones Industrial Average slipped 0.8%. However, OPEC members made good on their promise to increase production to offset lost oil from Libya’s turbulent political situation, exporting an additional 530,000 barrels a d day from Kuwait, the United Arab Emirates, and Saudi Arabia.
In other developments, Canada’s exploration and production of tar sands is making Alberta the latest major oil hub. Analysts expect the country to double production within the next decade. The United States is already the biggest consumer of Alberta petroleum, and one proposed pipeline would almost double exports from Canada into the U.S. While tapping this new resource would cut down on oil transport costs, U.S. officials expressed concerns over how the extraction and treatment of tar sand is impacting the environment. Because converting the tar-like material into usable oil creates a great deal of greenhouse gas, lawmakers are calling for more research before investing.
Today’s average retail heating oil price in the Northeast is unchanged from Friday’s average price.
Heating Oil Price Trend for July 8: +14¢
People waiting in line to apply for unemployment benefits in Indiana. (image: asiabizz.com and Nicholas Whitaker for HeatingOil.com)
Oil prices skyrocketed on Thursday as optimistic forecasts for U.S. employment rates overpowered the less-than-expected drop in oil inventories. Heating oil prices spiked fourteen cents as crude jumped $2.02 to finish at $98.67 a barrel on the New York Mercantile Exchange.
A strong economy typically translates to more oil consumption, so traders gained confidence when the Automatic Data Processing issued a report stating the private sector added 157,000 new jobs last month, far exceeding economists’ predictions. Plus, an update from the Labor Department showed that for the first time in three weeks, new unemployment claims had fallen.
However, we now know strategists may have celebrated too early – the actual report released Friday morning showed that only 18,000 jobs were added to the U.S. economy, obviously a staggeringly different figure than the 90,000-140,000 expected. According to labor experts, 125,000 new jobs must be added each month to keep pace with the country’s exponential population growth. Additionally, instead of dropping, unemployment rates climbed to 9.2%. Such negative economic indicators will likely affect oil prices in the immediate future.
Meanwhile, the Department of Energy reported that oil inventories dropped 900,000 barrels, less than the 2.4 million barrels analysts had predicted. This marks the fifth week a in a row inventories have declined, a strong sign that consistent demand will persist. Also, despite mild skepticism, OPEC reaffirmed its vow to increase oil output from Saudi Arabia, capable of producing around 12 million barrels a day, which should work towards keeping prices in check.
Today’s average retail heating oil price in the Northeast is fourteen cents higher than Thursday’s average price.
NEFI Examines Heating Oil Implications of 2011 Federal Budget
President Obama shook hands at the Lincoln Memorial on April 9 in celebration of the agreement on the 2011 budget reached the previous night. (image: UPI/Jim Lo Scalzo via upi.com)
Earlier this month, the political battle over the 2011 federal budget was all over the news as the threat of a government shutdown loomed. A last-minute compromise between Democrats and Republicans in Washington averted a shutdown and produced a budget that will fund the Federal Government through September of this year.
So what was in that eleventh-hour compromise budget? Analysis began to trickle out shortly after the deal was announced on the night of April 8, and contained some surprises. Most surprisingly, it turned out that the 2011 budget that supposedly included more than $30 billion in spending cuts in reality cut just $352 million from this year’s expenditures.
For the heating oil retailers and consumers, however, the 2011 federal budget’s surprises were mostly positive ones. That’s the gist of a recent report from the New England Fuel Institute (NEFI), an industry group comprised of fuel sellers and marketers (disclosure: HeatingOil.com is a member of NEFI). NEFI’s latest “Legislative Alert,” released on Friday, gave brief explanations of funding changes to three federal programs and agencies that have direct connections to the heating oil industry.
First, NEFI reported, the vicious cuts proposed by the Obama administration to the Low-Income Home Energy Assistance Program (LIHEAP) were softened considerably in the final 2011 budget. Instead of the proposed $2.5-billion cut, the 2011 budget reduced the program’s funding by just $390 million to $4.7 billion in total. This much smaller reduction in LIHEAP funding will go a long way toward providing as many needy Americans as possible with heating assistance and keeping intact a steady revenue stream for heating oil dealers who supply LIHEAP recipients. Unfortunately, the final budget also cut all funding for the Weatherization Assistance Program (WAP), the federal program that partially funded Americans’ improvements to their homes to boost energy efficiency and lower heating and cooling costs. The loss of that government funding and the economic incentive it offered will mean fewer heating oil users investing in efficiency improvements and using more heating oil next season.
Second, NEFI noted that the passed budget included a funding increase for the Commodity Futures Trading Commission (CFTC). The CFTC, which is currently working on new regulations of commodity exchanges and derivative markets, had been targeted by deficit-slashing House Republicans for major cutbacks, despite the clear mandates for broader market oversight conferred on the agency by the Dodd-Frank financial reform law. In the end, the CFTC will get most of the additional funding it had requested to fulfill its duties, receiving a $34-million increase. That funding increase will hopefully expedite the rule making process and help bring about calmer and more predictable prices for heating oil more quickly.
Finally, the budget includes a substantial reduction in funding for the Environmental Protection Agency (EPA), another target of Republican deficit slashing. The $1.6-billion cut, 16 percent of the EPA’s previous budget, could slow the agency’s progress toward regulating carbon emissions from industrial installations like oil refineries. That could be good news for heating oil dealers and consumers, as the oil industry has argued that tighter emissions standards would raise production costs, which would be passed on to wholesalers, retailers and consumers. The real effects of new emissions regulations on heating oil and other product prices, however, have yet to be determined.
