Saudi cuts official crude oil prices in battle for market share

**** Oil prices are on decline. Shale Oil boom in North America, slow transition to fuel efficient/Electric cards and more and more production of renewable energy is reducing demand of oil as predicted earlier. The biggest beneficiaries are Airline stocks like Southwest LUV, American ALL, Delta Air DAl etc
***** 

By Rania El Gamal and Reem Shamseddine

DUBAI/KHOBAR, Oct 1 (Reuters) - Saudi Aramco sharply cut official oil prices for Asian customers in November, the state-run company said on Wednesday in the clearest sign yet the world's largest exporter is trying to compete for crude market share.

The move comes amid calls from some within the Organization of the Petroleum Exporting Countries (OPEC) for action to shore up prices, as international benchmark Brent crude oil has slumped to a two-year low.

But the price cuts on Wednesday indicate Saudi is likely to follow its long-stated policy of supplying enough oil to world markets, while at the same time quietly competing with countries like Iraq and Iran to be the top supplier to fast-growing economies likeChina.

International benchmark Brent crude oilfutures reversed course after the Saudi prices were released, turning negative in late trade. At 1835 GMT they were trading down 0.45 percent at $94.25 a barrel.

"Brent is going down hard," one trader said. "It's going to retrace most of the gains from today on this."

Another trader said the fourth-straight monthly reduction made it appear Saudi Arabia may be trying to start a "price war" with rival producers. Regional oil rival Iran may face a budget deficit due to lower prices and Western sanctions.

Saudi slashed its flagship Arab Light selling price by $1 a barrel versus October to a discount of $1.05 a barrel to the Oman/Dubai average. Traders had been expecting a cut no bigger than 70 cents.

Saudi also cut prices to Europe and the United States by 40 cents a barrel.

Read full article at : http://www.reuters.com/article/2014/10/01/saudi-oil-osp-idUSL6N0RW4TV20141001

Please sign this petition to control speculation in oil

An Open letter to All Airline Customers:

Our country is facing a possible sharp economic downturn because of skyrocketing oil and fuel prices, but by pulling together, we can all do something to help now.

For airlines, ultra-expensive fuel means thousands of lost jobs and severe reductions in air service to both large and small communities. To the broader economy, oil prices mean slower activity and widespread economic pain. This pain can be alleviated, and that is why we are taking the extraordinary step of writing this joint letter to our customers. Since high oil prices are partly a response to normal market forces, the nation needs to focus on increased energy supplies and conservation. However, there is another side to this story because normal market forces are being dangerously amplified by poorly regulated market speculation.

Twenty years ago, 21 percent of oil contracts were purchased by speculators who trade oil on paper with no intention of ever taking delivery. Today, oil speculators purchase 66 percent of all oil futures contracts, and that reflects just the transactions that are known. Speculators buy up large amounts of oil and then sell it to each other again and again. A barrel of oil may trade 20-plus times before it is delivered and used; the price goes up with each trade and consumers pick up the final tab. Some market experts estimate that current prices reflect as much as $30 to $60 per barrel in unnecessary speculative costs.

Over seventy years ago, Congress established regulations to control excessive, largely unchecked market speculation and manipulation. However, over the past two decades, these regulatory limits have been weakened or removed. We believe that restoring and enforcing these limits, along with several other modest measures, will provide more disclosure, transparency and sound market oversight. Together, these reforms will help cool the over-heated oil market and permit the economy to prosper.

The nation needs to pull together to reform the oil markets and solve this growing problem.

We need your help. Get more information and contact Congress by visiting www.StopOilSpeculationNow.com.

Amaranth 2: Likely to unfold in Oil Futures shortly

The disconnect between demand-supply and the price of Crude Oil future points to a possibility that we might see the history of Amaranth repeating. Amaranth bet too much on Natural gas futures which collapsed from a high of 15 plus dollars to a low of 4 dollars. IMO similar thing seems to be going on in Oil speculation. Would not be surprised to see some big bulls failing.

* Interestingly, the boom in Oil price is following Bush regime over the last 8, unfortunate years I guess, which is likely to come to an end within next 4/5 months. As the markets are forward looking, I believe Oil should peak ahead of November elections.

* It is weird that US is holding 150 plus days of crude oil, 700 million barrels, in Strategic Petroleum Reserve (SPR). This SRP was created in cold war days when USSR was a threat; there is no such threat right now but I guess until Bush is in office, there will be no draw down from there :(

* Oil is scarce as an energy source for transportation but otherwise nuclear, solar, coal, natural gas in abundent quantity in the world for power plants and other energy needs. For transportation/vehicle use also, the actual demand of Gas/Petrol is going down compared to its supply and that is why there is a tremendous marging pressure for Refiners like Tesoro and WNR, Western Refineries.

In my opinion, Oil is in speculative phase; let us watch how far it goes.

***********************************

By 2004-2005, the firm had shifted much of its capital to energy trading. Amaranth’s energy desk was run by a Canadian trader named Brian Hunter who placed "spread trades" in the natural gas market. Hunter had made enormous profits for the company by placing bullish bets on natural gas prices in 2005, the year Hurricane Katrina had severely impacted natural gas and oil production and refining capacity. Hoping for a repeat performance, Amaranth wagered with 8:1 leverage that the price of the March '07 and March '08 futures contracts would increase relative to the price of the April '07 and April '08 contracts (i.e., they were "long" the March contracts and "short" the April contracts).
Unfortunately for Amaranth, they did not. The spread between the March and April 2007 contracts, for example, went from US$2.49 at the end of August 2006 to US$0.58 by the end of September 2006. The price decline was catastrophic for Amaranth, resulting in a loss of US$6.5 billion.[1]. Historically, the spread in future prices for the March and April contracts have not been easily predictable. The spread is dependent on meteorological and sociopolitical events whose uncertainty makes the placing of such large bets a precarious matter.