Friday, June 15, 2012

What happens to crude oil prices after the OPEC meeting?

July WTI crude oil opened this morning at $83.91 a barrel with ICE Brent crude oil down 53 cents to $97.28 a barrel. The bearish mood for the prices of crude oil has not yet set in after the just concluded OPEC meeting held in Vienna on Thursday, June 14, 2012. In the official meeting members decided not to change export crude oil quotas from the current 30 million barrels per day. However, before the official meeting Iranian Oil Minister Rostam Ghazemi dropped a verbal bomb aimed at the Saudis warning them not to use oil as a weapon against it by pumping more oil to countries no longer buying Iranian crude due to the economic sanctions being imposed. Those sanctions will kick in on July 1, 2012 when the Western European nations will cut off any of their Iranian oil shipments. Minister Ghazemi went farther by warning the US and Europe their tactics will have a reverse effect. Saudi Arabia will not necessarily be able to ruling the OPEC crude oil pricing roost with Venezuela now exceeding their oil reserves per an internal BP report: However, Hugo Chavez is having severe health problems and may not be able to continue to control Venezuela with his social dictatorship very much longer. The new production being explored in US shale oil formations in Colorado, Montana, North Dakota and Montana will give it the US the ability to cut crude oil imports from OPEC countries thereby taking away any price control they have had in the past 50 years.

Monday, June 4, 2012

Should you lock-in home heating oil price for the 2012-2013 winter?

By: Bob van der Valk June 4, 2012 In July 2008 crude oil hit an all time high of $147 a barrel, which put the price of raw material cost before refining at $3.50 per gallon Crude oil and heating oil prices are priced in sync and reached a recent historical low 2009 of $31 a barrel in January 2009. You could have locked in on $5 per gallon on heating oil for the 2008-2009 winter. Big mistake but hindsight is always 20-20. There is no need to be pre-paying heating oil contracts when there is very little upside in price but plenty of room for the prices to go back down. Home heating oil is already 2% down from a year ago when the Arab Spring was in full force with the cut off from Libyan crude oil driving the price crude oil ever upward. Today there is more downside pressure on crude oil and in the coming months we may even see in an instant replay of what happened in the latter part of 2008. That year was also a Presidential election year but political forces were not involved in the price of heating oil going into a freefall. West Texas Intermediate (WTI) crude oil prices have already declined to a price range of $80-85 with the current price at about $82 a barrel. That puts the price of raw material at about $2 a barrel for crude delivered at the refinery gate. Our recent mild winter will keep oil price manipulators, who artificially inflated the prices of petroleum products, away from hedging this market thereby driving prices up. You could pre-buy heating oil today at a locked-in price of $3 per gallon or pay as you go with each delivery. One warning, crude oil prices tends to bottom out at the end of each year, and then increase in the beginning of the year. Oil companies are on the “Last In –First Out” accounting system, for they lower inventories by December 31st, then building them back up right after the first of the year. The variants in setting the price of home heating oil will depend on the price of crude oil. By keeping an eye on the price of crude oil and you can not go wrong. About the author: Bob van der Valk lives in Terry, Montana and is a Petroleum Industry Analyst. He reports on fuel-related trends and events. E-mail: and

Crude oil prices