Oil Prices Surge on US Financial Rescue Plan - Petroleum World

From Petroleum World website:

NEW YORK
Petroleumworld.com, Sept 22, 2008

Oil prices surged Friday after the US government said it was working on a comprehensive plan to rescue the banking system, prompting traders to reassess the outlook for the economy and energy use.

New York's main contract, light sweet crude for delivery in October, jumped 6.67 dollars to close at 104.55 dollars a barrel.

In London, Brent North Sea crude for November climbed 4.42 dollars to settle at 99.61 dollars a barrel.

"Prices continue to rise as market confidence returns, buoyed by a US government rescue plan alongside ongoing supply-side disruptions," Barclays Capital oil analyst Kevin Norrish said in London.

The US Treasury, the Federal Reserve and congressional leaders said late Thursday they were putting together a comprehensive plan to ring-fence the mountains of bad debt that have weighed down banks in the past year.

Treasury Secretary Henry Paulson said Friday a rescue plan for the troubled US financial sector will cost "hundreds of billions" of dollars.

"Of course the big question is will all of this work or will we have Black Monday revisited," said Phil Flynn, analyst at Alaron Trading.

"If the market holds up will oil demand rebound and save the beleaguered demand side of the equation?" he said.

Flynn said, "I think that the moves by the Fed will save the market and oil prices may benefit in the short term. But there will still be economic fallout from this global crisis that will reduce demand."

John Kilduff, analyst at MF Global, cautioned that it would take some time for the machinations in the financial markets to be felt on the demand for oil .

"The prints on the price screens are real and indicative of the power of perception to alter reason. Since late yesterday, global markets have cast a powerful vote of confidence," Kilduff said.

Amid the financial uncertainty, the dollar fell against the euro, with the single European currency fetching about 1.45 dollars.

A weakening dollar makes dollar-priced oil and other commodities a more attractive investment for buyers using stronger currencies.

Investors also focused on market fundamentals. Oil prices were supported by supply problems in the Gulf of Mexico and Nigeria.

Gulf of Mexico crude oil production has been almost entirely shut down since the hurricanes Gustav and Ike swept through the region, which normally pumps 1.3 billion barrels of crude daily.

According to the US Department of the Interior, less than 10 percent of production was on line, nearly a week after Hurricane Ike battered the Gulf.

In Nigeria, the second-largest oil producer in Africa, the main militant group in southern Nigeria -- the Movement for the Emancipation of the Niger Delta (MEND) -- said it had destroyed a major oil pipeline belonging to Royal Dutch Shell.

The attack is the fifth on a Shell facility in Rivers State, the center of Nigeria's oil industry, within a week.

Since it first emerged in early 2006 MEND, which says it is fighting for a larger share of southern Nigeria's oil revenue to go to local people, has cut Nigeria's oil production by more than one quarter.

Oil Hits Record High; Get Ready For $5 Per Gallon In Calfornia

Oil Prices hit another record today as the price for a barrel of crude oil hit $139.12 just one day after a record of $135.09 was reached. I can't even find a gas station with a price for gas less than $4 a gallon and generally the cost is between $4.30 and $4.50 per gallon. I drive around to find the cheapest price I can, but maybe it's better not to drive at all!