guess nobody wants to cut the price of oil.

High Oil Prices Reflect Demand From Speculators: David Pauly

Commentary by David Pauly

Dec. 14 (Bloomberg) -- This is heresy: Sometimes markets lie.

The price of crude oil on the New York futures market reached a record $99.29 a barrel on
Nov. 21, having gained 50 percent in six months. Oil continues to trade for more than $90
a barrel.

That's supposed to mean that demand for crude to meet the world's energy needs has been
soaring. It hasn't. What's driving the market is demand from speculators.

``Supply and demand haven't changed that much in the last six months,'' says Fadel Gheit,
director of oil and gas research at Oppenheimer & Co. in New York. ``There's nothing to
justify a 50 percent price increase.''

Speculation accounts for as much as half of today's oil price, Gheit said Tuesday in a
meeting of the U.S. Senate's Energy and Natural Resources Committee and its Permanent
Subcommittee on Investigations.

While Gheit's estimate may be over the top, there's no doubt speculation in oil and other
commodities is rife. Prices of gold and silver and wheat and corn have jumped too.

Many investors bet on a long-term run for commodities as world economics grow. Others use
oil as a hedge against the falling U.S. dollar.

In the past, those who bought oil futures typically planned to take delivery, says Mary
Novak, managing director for energy services at Global Insight Inc., a Lexington,
Massachusetts, economics consultant.

Magic Number

Since oil hit the $50-to-$60 a barrel level, speculative investors -- those who get out of
their contracts before the delivery date -- jumped into the market, Novak says.

Based on supply and demand, crude oil should sell for $75 to $80 a barrel, meaning current
prices reflect $10 to $15 worth of speculation, she says.

Oppenheimer's Gheit insists there's nothing outlandish about his estimate that oil should
be only about $45 a barrel.

The oil industry's rule of thumb is that if you can find new oil at a third of the price
at which you sold your last barrel, it's a good investment. Currently, oil companies can
find new oil at $15 a barrel or less, Gheit says.

Estimates that the intrinsic value of oil is far less than its market value seems to
support members of the Organization of Petroleum Exporting Countries who blame higher
prices on speculation, not on their own refusal to pump more oil.

Makeup Money

This may be self-serving. Since crude oil is priced in dollars, $90-a-barrel oil
alleviates the effect of the dollar's fall for producing countries. Still OPEC is correct
about what's pushing up the oil market.

What will it take to break the speculators?

A slower-growing U.S. economy in 2008 that curbs demand for all commodities might send the
gamblers running the other way. Less rapid growth in China or India might be a trigger. If
the U.S. markets recover from the subprime mortgage scare, the dollar might rise, sending
currency traders who switched to oil back to their home market, Novak says.

The U.S. Department of Energy would help thwart the speculators if it stopped buying oil
for the country's reserve, both Gheit and Philip Verleger, an economist and president of
PKVerleger LLC in Aspen, Colorado, told the Senate hearing.

Government buying amounts to only a trickle in the marketplace but its persistence sends
the wrong message, suggesting that the U.S. fears a shortage when none is apparent, Gheit
says.

The concept of the strategic petroleum reserve is wrong to begin with, Gheit says. The
world has plenty of oil and enough inventory to absorb the shock of any short-term
disruption in supply, he says.

Decades from now, the oil may run out. Right now the only shortage in the market is common
sense.

(David Pauly is a columnist for Bloomberg News. The opinions expressed are his.)

To contact the writer

By Alex Lawler

DAVOS, Switzerland, Jan 26 (Reuters) - The U.S. economy could enter a mild recession if
financial markets remain in turmoil, the chief executive of Brazil's state-controlled oil
company, Petrobras, said on Saturday.

But Jose Sergio Gabrielli said oil prices, which hit a record $100 a barrel this year and
are now near $90, were unlikely to fall too far, and the future still seemed bright in
the
real economy -- in contrast to gloom in the financial world.

"If the financial crisis goes deeper and longer, then I think the U.S. economy is going
to
go through a mild recession," Gabrielli told Reuters on the sidelines of the World
Economic Forum in Davos.

"In this situation, I think that the real economy would survive without problems.
However,
if the recession goes deeper and longer, then probably we have to change our plans."

Asked how Petrobras (PETR4.SA: Quote, Profile, Research) (PBR.N: Quote, Profile,
Research)
would react to a longer U.S. recession, the CEO said: "Probably we would have to review
our cashflow and maybe delay some of our projects."

He did not refer to any specific projects that could be deferred should such a downturn
occur.

Petrobras has hit the headlines in recent months after making big petroleum discoveries,
such as Tupi and Jupiter, off Brazil's coast. It is not yet able to provide a more
precise
figure for Tupi's reserves. Continued...

By Tom Doggett

WASHINGTON (Reuters) - President George W. Bush will not tap the U.S. Strategic Petroleum
Reserve to ease oil prices that hit a record high of $100 a barrel on Wednesday, the White
House said.

"This president will not use the SPR to manipulate (oil prices)," White House spokeswoman
Dana Perino said. "Doing a temporary release of the SPR is not going to change prices very
much."

Perino said the Bush administration understood that high energy prices hurt family budgets
and small businesses, but it believes that using the emergency oil stockpile to lower
crude prices is not the solution.

"We have to figure out a way to increase supply here in the United States," she said. "The
SPR is supposed to be used for emergencies. We know that markets work."

The stockpile was created by Congress in 1975 in response to the Arab oil embargo. The
reserve now holds about 698 million barrels of crude at four underground storage sites in
Texas and Louisiana.

The Energy Department said that, despite record high prices, it would not delay oil
deliveries to the reserve and will carry out its plan to add 12.3 million barrels of crude
to stockpile during the first half of this year.

The department said last autumn it would add the oil to the reserve beginning in late
January at an average rate of about 70,000 barrels per day over six months.

"The modest royalty-in-kind SPR fill (less than one-tenth of 1 percent of daily world
consumption) will continue as we announced," department spokeswoman Megan Barnett said.
Continued...

Thanx yo guys for your answers. I actually use your opinions in my buying.
I just made $800 buying CFCPRB. It was part of a recommendation I picked up here. Then
Kramer said the same thing oon Mad Money. BEERCAN

I do not know how to cut the price of oil but it looks like Peabody (BTU) may have a way
to cut gas prices by gasification of coal. It is a 100% US effort done entirely in this
country. It looks like the stock price is moving already. What is your opinion? BEERCAN

Chavez Says Colombia, U.S. Seek to Provoke a War (Udpate2)

By Matthew Walter and Brendan Walsh

Jan. 25 (Bloomberg) -- Venezuelan President Hugo Chavez said the U.S. and Colombia are
trying to provoke a war with Venezuela and planning ``aggression'' against him.

Chavez, speaking today on a state television, said Colombia's secret police plotted to
kill him and said any attack by the U.S. or Colombia would send oil prices to $300 a
barrel.

Chavez, who called Colombian President Alvaro Uribe a ``sad peon'' for maintaining ties
with the U.S., said relations with the neighboring country will probably further
deteriorate, hurting trade. Relations between Uribe and Chavez unraveled in November after
the Colombian leader withdrew his support for Chavez's involvement in negotiations to
secure a hostage release from Colombia's biggest guerrilla group.

``It's very difficult for us to normalize, within this framework, relations with
Colombia,'' Chavez said. ``This is going to keep getting worse. Last year, trade got to
almost $5 billion -- this year it should fall to $100 million.''

Tensions worsened last month when Chavez's attempt to rescue Farc hostages fizzled after
Uribe revealed the guerrillas didn't have a child they promised to set free as part of the
deal. Uribe revealed Emmanuel, a boy born in captivity, was released in 2005. Chavez's
second effort to free the hostages was successful.

Blunt Language

Chavez, who has said he's leading a socialist revolution in Venezuela, is known for his
blunt language. He called President George W. Bush ``the devil'' during a United Nations
speech. Chavez last year called former Spanish Prime Minister Jose Maria Aznar Lopez a
``fascist,'' sparking a rebuke from Spanish King Juan Carlos I. ``Why don't you shut up?''
the king said, pointing at Chavez.

Deteriorating relations will prompt Venezuela to find ways to reduce its dependence on
Colombian imports by increasing trade with Nicaragua, Argentina, Brazil and other Latin
American neighbors, Chavez said.

Venezuelan Energy Minister Rafael Ramirez said today that Venezuela ``is in support'' of
creating a cartel similar to the Organization of Petroleum Exporting Countries for
natural-gas producers. He said he has a team ready to meet later this year in Moscow to
discuss such a cartel.

To contact the reporter on this story: Matthew Walter in Caracas at mwalter4@bloomberg.net


Can we afford $300 doller a barrel oil!!!!????

By Alex Lawler

DAVOS, Switzerland (Reuters) - A meeting of major oil consumers including the United
States, Japan and Britain shared concern about high prices and the threat they pose to
economic growth, officials said on Friday.

The price of crude oil, which hit a record high of $100 a barrel earlier this year and is
now trading around $90, has alarmed consumer countries because of the risk it may slow
economic growth.

"It is a matter of concern," John Hutton, UK Secretary of State for Business Enterprise
and Regulatory Reform, told Reuters as he left a meeting of his counterparts from Japan
and the U.S. and other energy officials.

"But I think there is willingness to ensure we have the necessary conditions for
stability."

The talks on the sidelines of the World Economic Forum in the Swiss Alpine resort of Davos
took place ahead of OPEC's February 1 meeting to decide whether to raise oil output.

The U.S. has called on the Organization of the Petroleum Exporting

Oil May Fall as U.S. Supplies Rise, Economy Slows, Survey Shows

By Mark Shenk

Jan. 25 (Bloomberg) -- Crude oil may fall on concern that a U.S. stimulus package and
interest rate cuts will fail to prevent the country entering a recession.

Seventeen of 33 analysts surveyed, or 52 percent, said oil prices will decline through
Feb. 1. Six of the respondents, or 18 percent, said futures will increase and 10 predicted
there will be little change. Last week, 73 percent said oil would drop.

The Bush administration and House lawmakers announced yesterday that they had come to an
agreement on an economic stimulus package to avoid recession in the world's biggest energy
consuming country. Sales of existing homes in the U.S. fell more than forecast in
December, capping the biggest annual slump in 25 years. A slowing economy would lead to
reductions in fuel use.

``Given the downside risks to the economy we think the risks for oil remain skewed to the
downside,'' said Tobias Merath, a commodities analyst at Credit Suisse Group in Zurich.
``This is all the more true as U.S. crude-oil inventories have started to increase again
last week.''

Oil supplies rose 2.3 million barrels to 289.4 million in the week ended Jan. 18, the
Energy Department said in a report yesterday.

The crude oil contract for March delivery dropped 51 cents, or 0.6 percent, to $89.41 a
barrel so far this week on the New York Mercantile Exchange. Futures reached a record
$100.09 a barrel on Jan. 3.

The oil survey has correctly predicted the direction of prices 52 percent of the time
since its introduction in 2004.



Bloomberg's survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:

RISE NEUTRAL FALL
6 10 17