LightSweetOil.com

Light sweet crude oil is the source of petroleum gas, gasoline, kerosene, industrial fuel and diesel. It comprises of little sulphur in contrast to sour crude oil. The price of light sweet crude oil has a great impact on the economy and vice-versa. Present day price of crude oil is 76.60$ per barrel. There are 42 gallons in a barrel. It is being forecasted by experts that the prices of crude oil would go up to 87$ in the next year.

Goldman Sachs, an investment bank in the US, has forecasted the crude oil prices to reach around 90$ per barrel in the next year. It predicts that a consistently growing market would take the prices further high and up to 110$ in the year 2011. However, as per the report of the US Department of Energy, crude stocks have been consistently rising since the last year due to low demand for oil from the developed countries including the US. Crude reserves rose by 2.1 million barrels in the last week of November. Thus it can be assumed that a recession hit market has been the seed reason behind low demand for oil and rising crude stocks.

As per latest reports, crude oil prices came down by 2.26% to $76.60 per barrel on the New York mercantile exchange this week. However, it gained 31 cents the next day to go up to $76.91 per barrel. Actually, demand for crude oil is still growing but not at the pace at which it grew in the last decade. As a result, the US is getting close to an oversupply of oil and the refiners have no option but to hold down production due to lack of sales.

In the crude oil market, people purchase “futures” betting on the prices of crude oil at a latter date. This trading is done at the New York Mercantile Exchange, as well as at the International Petroleum Exchange. Crude oil trading is now more of a sensation in the market because it has been speculated to be safer than trading on the price of dollar or gold. However, global oil prices having dropped to 76$ a barrel, a report of the Energy Information administration showing US crude oil inventories to have risen to the highest level since August has put the market under severe pressure. Taking a closer look at the chart below, one can make out the huge drop in crude oil prices since December 2007.

This drop in prices is obviously a result of a struggling economy resulting in low demand from the developed countries. As one can find in the chart above, crude oil prices that had gone as high as $130 in the year 2007 have now gone down to as low as 76$ presently. While forecasters like Goldman Sachs continue to provide bright predictions in the coming years, the Department of Energy has sort of dropped a hammer with its reports on all the traders of crude. As per latest reports, crude oil prices on December 5, 2009 had dropped 99 cents to 75.47$ further fuelling the DOE reports.

All eyes are on oil majors since the fall of refining battle. though the industry is 20% increasing, the refineries are struggling to demand remains weak and the cost of input - oil - continues to rise.Most companies are betting on a rebound in oil prices to offset the results of refining dejuction. The results put the focus to the wells due to come on line in the up coming months.The earnings of this quarter from oil majors like Exxon Mobil Corp. and BP Plc, to be published this week, will focus on its integrated structure. BP reports results on Tuesday, followed on Wednesday by Conoco, Exxon and Shell on Thursday and Chevron on Friday.

Good news for oil producers U.S. oil prices is above$ 80 a barrel for the first time in a year.Just over half a year ago, it leveled at $68 per barrel,but 13% above the second quarter.Few hoping for a dramatic recovery in global demand for petroleum products next year,as oil majors also encountered by a difficult decisions about what to do with the excess refinery capacity and refiners.Olivier Jakob of Switzerland’s Petromatrix said high oil prices could encourage some producers to increase production.

Reflecting the fall in prices year after year, Exxon, the largest global private company in the petroleum sector is expected to report 63 percent decline in earnings of 4.94 billion U.S. dollars, according to the average Thomson Reuters.”We want to ensure that projects in the queue are going as planned and is expected to be growth of production in 2010,” said Neal Shah, an energy analyst with First American Funds in Milwaukee, Wisconsin.

It’s a similar story for BP, with a Reuters poll of six analysts give an average estimate of net profit of U.S. $ 3.2 million in the quarter, up 64 percent over the same period in 2008.While The Anglo-Dutch giant Royal Dutch Shell, based on the average among some analysts, is expected to show comparable net profit of U.S. $ 2.5 million, less than 69% from a year ago.”It will tell whether these “supermajors” are true supermajors” said Tina Vital from S&P Equity Research.

Oil Cazenove analyst Fred Lucas wrote in a research note that London-based BP management may suggest the possibility that lower capital spending in 2010.

CONOCOPHILLIPS : 51.97 (-0.96)
CHEVRON CORP : 76.68 (-0.61)
OCCIDENTAL PET : 82.15 (-1.85)
ROYAL DUTCH SHELL-A: 20.80 (-0.08)
ROYAL DUTCH SHELL-B: 1852.50 (+15.00)
SCHLUMBERGER LTD : 65.20 (-3.40)
EXXON MOBIL CP : 73.57 (-0.87)

A key test will come from their refining businesses, with benchmark margins off 54% on the US Gulf Coast and down 60 per cent in both Northwest Europe and Singapore

Most commodities have been reacting to the fear of deflation. The crude oil was no exception. The gold has not suffered much, however, given that is perceived as a form of money and during periods of deflation.Thus, crude oil decrease much more than gold and gold/ oil price combination moved away from any trend. Important note: prices tend to eventually revert to their means.

Due to the many uses of light sweet crude oil, it is one of the most highly traded commodities. This commodity is used in the making of kerosene, jet fuel, diesel fuel and gasoline. Naturally this places light sweet crude oil in high demand the world over. Light sweet crude oil is traded in large volumes of 1,000 barrels per unit. The largest sweet crude oil markets are located in London, New York and Singapore.

When considering the price of this commodity it is important to note that there are three benchmarks used to determine this. The primary of the three would be Brent, as this is the world benchmark. The lessor of the three would include, West Texas Intermediate, (which is the U.S. benchmark), and OPEC which determines the basket price, or the average price of 15 different crude oil types available on the market.

Brent Crude is the largest of the significant classifications of oil, (Brent Crude, Brent Sweet Light Crude, Ecofisk, Oseberg and Forties). Brent Crude oil producer also goes under the titles of Brent Petroleum, London Brent and Brent Blend. Brent Crude is sourced from the North Sea and is used to price 2/3rds of the world’s internationally traded crude oil supplies. West Texas Intermediate (WTI) is the sweet crude oil type referenced in North American news concerning oil prices alongside Brent Crude. OPEC Basket consists of a weighted average price for the petroleum blends that are produced by OPEC countries. OPEC increases and decreases production in attempts to maintain the oil price between the higher and lower limits, which makes it significant for market analysts.

As with most commodities, the price of sweet crude oil tends to fluctuate due to increases and decreases in demand during different times of the year and various other factors. For example, the price of oil usually tends to be higher in the summer due to an increased demand for gasoline as a result of more driving time spent on the road by motorist driving to various vacation resorts. In 2008 economic growth in the U.S and China lead to the fear that oil supply would not be able to meet the demand and that this, in turn, would greatly increase the price. However, the increase in oil was actually caused by increased investments by hedge fund and future traders.

Sweet crude oil prices over the last 5 years:
(Average price per barrel 2005)
January
$42.21
July
$52.13
February
$42.91/$41.11
August
$58.07
March
$48.55/$47.80
September
$58.56
April
$46.63/$46.38
October
$55.12
May
$43.27/$43.02
November
$51.18
June
$49.56/$49.80
December
$52.31

(Average price per barrel 2006)
January
$58.30
July
$66.28
February
$54.65
August
$64.93
March
$55.42
September
$55.73
April
$62.50
October
$50.98
May
$62.94
November
$50.98
June
$62.85
December
$54.06

(Average price per barrel 2007)
January
$46.53
July
$65.96
February
$51.36
August
$64.23
March
$52.64
September
$70.94
April
$56.08
October
$77.56
May
$55.43
November
$86.92
June
$59.25
December
$83-46

(Average price per barrel 2008)
January
$84.70
July
$126.16
February
$86.64
August
$108.46
March
$96.87
September
$96.13
April
$104.31
October
$68.50
May
$117.40
November
$49.29
June
$126.33
December
$32.94

(Average price per barrel 2009)
January
$33.07
May
$51.27/$51.02
February
$31.04
June
$61.71/$61.46
March
$40.13/$39.88
July
$60.11
April
$42.45/$42.20

In recent news it was reported that oil prices stayed below $60/barrel. There are concerns that the global economy will not quickly improve and oil demand will continue to be low. Prices fell twenty cents, settling at $59.69 a barrel on the New York Mercantile Exchange for August delivery. Earlier in the season the price was as $59.30.

Since June 30th of this year, oil prices have dropped approximately $14/barrel, a decrease of 19%, following high unemployment rates in the U.S. and Europe. There is much doubt that the global economy will show strong recovery this year.

Gasoline sales in the U.S. were poor over the recent 4th of July holiday weekend. This is significant as this is usually when gasoline demand is at its highest for the summer in the U.S. Further more, the decline in oil prices came despite a decrease in the dollar and an attack on an oil facility in Nigeria. Often viewed as a hedge against inflation, the dollar tends to trade inversely with oil. However, recently the dollar was down against the euro and yen.

Militants in Nigeria announced that they had attacked an oil depot as well as loading tankers in Lagos. In the past years, attacks have been responsible for cutting Nigeria’s oil output by 20%. According to analyst Stephen Schork, due to oil prices falling despite a weaker dollar and the attacks on supply point, the trend toward higher oil prices might be over.