- The Washington Times - Thursday, March 12, 2009

NEW YORK (AP) - Oil prices soared 9 percent Thursday as investors stepped in to take advantage of a plunge in crude prices this week, just three days before OPEC meets in Europe.

Benchmark crude for April delivery increased $3.81 to $46.14 a barrel on the New York Mercantile Exchange. In London, Brent prices gained $3.13 to $44.53 on the ICE Futures exchange.

“We’re seeing some profit taking today,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. “A lot of people sold earlier in the week, betting prices would go down. Now they’re buying back into the market.”

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Oil traders and brokers have scrambled this week to predict which way the market will turn. A rise in crude prices last led many analysts to believe that oil had finally bottomed out after last year’s roller coaster ride from nearly $150 to $34 a barrel.

But prices plunged 7 percent Wednesday on signs that supply cuts have not caught up with the severe erosion in energy demand, which this year has left the world swimming in surplus oil.

“Every time the market starts to run higher, the rug gets pulled out from underneath,” Cameron Hanover analyst Peter Beutel said. “We see a wave of bargain hunting, or the dollar gets weak, or there’s problems in Nigeria” that could affect production.

Beutel said many investors have parked their money elsewhere this week in anticipation of the release Friday of demand expectations by OPEC and by the International Energy Agency in Paris.

OPEC meets in Vienna, Austria on Sunday where member states will decide if another production cut, on top of the 4.2 million barrels per day already announced, is needed to stabilize oil prices.

“There’s so many questions right now,” Beutel said.

The Organization of the Petroleum Exporting Countries has sent mixed messages about whether it will cut production again, or focus more on making sure member states are complying with reductions that have already been announced.

OPEC has long suffered a credibility problem, with some countries cheating on production limits when their budgets get squeezed.

After six months of cutting supplies, OPEC countries haven’t reached their targeted production levels, according to a survey by Platts released late Wednesday. The Platts survey found that OPEC drew 28.1 billion barrels a day in February, suggesting that it’s trimmed only 80 percent of its targeted cut.

Saudi Arabia said recently that it would focus on enforcing those production levels agreed to last year.

U.S. Energy Secretary Steven Chu will try to persuade OPEC ministers to avoid squeezing oil supplies more than they already have. Tighter supplies might boost revenues for oil producers, but it could also extend the global recession and the pain now being felt by countries that rely on oil for revenue.

New data shows that western consumers are cutting spending on energy and nearly everything else.

On Thursday, the government reported that retail sales fell in February for the seventh time in the past eight months.

The Labor Department reported that first-time requests for unemployment insurance rose to 654,000 from the previous week’s upwardly revised figure of 645,000, above analysts’ expectations.

The number of people receiving benefits for more than a week increased by 193,000 to 5.3 million, the most on records dating back to 1967. That’s the sixth time in the past seven weeks that the jobless claims rolls have set a record high.

The Energy Department’s Energy Information Administration said Thursday that U.S. stores of natural gas fell more than expected last week, however. The government reported that seasonal demand continued to rise, though it remains far below historical norms.

Natural gas inventories held in underground storage in the lower 48 states fell by 112 billion cubic feet to about 1.68 trillion cubic feet for the week ended March 6, EIA’s weekly report said. Analysts had expected a drop of between 100 billion and 105 billion cubic feet, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Elsewhere, Chinese oil imports have dropped 13 percent in the first two months of the year while the country’s exports plunged 25.7 percent year-on-year in February.

The lower crude oil imports are showing that China is building fewer stocks than a year ago as the capacity as been mostly filled,” said Olivier Jakob of Petromatrix in Switzerland. “But the lower crude imports should not be fully extrapolated as an indicator of the state of Chinese petroleum consumption.”

And Germany’s Institute for World Economy said it expects the global economy to shrink 0.8 percent this year, the worst rate since the Great Depression. The German economy shrink by 3.7 percent, a bigger contraction than it had forecast in December.

Gas prices dropped for the fourth straight day, sliding overnight to a national average of $1.931 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Pump prices are up 0.3 cents a gallon from a month ago, but they’re $1.315 a gallon cheaper than last year.

In other Nymex trading, gasoline for April delivery jumped 7.23 cents to $1.3235 a gallon, while heating oil gained 7 cents to $1.20 a gallon. Natural gas for April delivery rose 10.5 cents to $3.90 per 1,000 cubic feet.


Associated Press writers Ernest Scheyder in New York, Pablo Gorondi in Budapest and Alex Kennedy in Singapore contributed to this report.

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