The price of unleaded 91 has fallen to 172.9c a litre, the price of 95 has fallen to 179.9c a litre and the price of diesel has fallen to 115.9c, a spokesman said.

US Light crude oil futures for July delivery was at $73.65 a barrel at midday Singapore time on the NYMEX.

Crude supplies fell more than expected last week, dropping by 1.4 million barrels, the American Petroleum Institute said late Wednesday. Analysts had expected an increase of 1.0 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

Meanwhile, the Dow Jones industrial average rose 2.2 percent Wednesday and all major Asian stock markets gained in early trading on Thursday.

“The driver for oil prices at the moment is economic recovery and there’s some evidence of it in the US and UK, but overall the concern is the eurozone debt crisis,” said CMC Markets analyst Michael Hewson.

“Jittery oil trading is here to stay for now as we continue to track the broader markets and swings in global risk sentiment,” said VTB Capital analyst Andrey Kryuchenkov.

Light crude oil futures for July delivery was at $74.67 midday Singapore time on Friday on the NYMEX.

Oil prices advanced 2.4 percent after the US Department of Energy said US crude oil supplies fell 1.9 million barrels to 363.2 million last week, while crude oil inventories were forecast to be unchanged, according to the Bloomberg News survey.

US stockpiles were forecast to drop by 500,000 barrels, according to analysts surveyed by Bloomberg News.

However, stockpiles of WTI crude oil at Cushing, Oklahoma, where New York traded WTI oil is delivered, rose to 37.9 million barrels, the second-highest level since the US Energy Department started keeping records at the storage hub in 2004.

US Light crude oil futures for July rose to $71.89 a barrel midday Singapore time on the NYMEX.

Investors mulled data from the US Commerce Department which showed new homes sales rose a bigger than expected 14.8% in April to a seasonally adjusted rate of 504,000, up from 439,000 the month before.

The July contract for WTI oil futures received an additional bounce when the US Energy Information Administration reported that oil inventories at Cushing, Okla. dropped by 300,000 barrels in the week ended May 21st 2010, the first drop at the storage hub since March.

Cushing is the delivery point for the physical barrels underpinning the NYMEX WTI oil contract, but inventories have begun to approach storage limits in recent weeks. As crude oil supplies hit record levels, traders became uncertain whether there would be space for more barrels, creating a strong incentive to sell futures contracts for next month delivery. Earlier this month, the now-expired June contracted traded at a $4.96 a barrel discount to July oil prices.

What’s in a name? Niger or Nigeria will be in a better position to answer this question. If not anything the confusion in the name pushed oil prices to $80 a barrel last week. How? There was a coup in Niger and traders hustled to buy oil, mistaking Niger for oil rich Nigeria.

Mistaken identity

On February 18, a coup took place in the West African country, Niger. Armed soldiers stormed the presidential palace in Niamey, the capital of the country and kidnapped the President of the country Mamadou Tandja. The coup was orchestrated by a soldier named Colonel Adamou Haroun. He was aided by another Colonel Djibril Hamidou. This is the third coup in the country since the 90′s.

In dramatic style, the soldiers declared on TV, the suspension of the constitution and all the institutes associated with it. Colonel Goukoye Abdul Karimou, read a statement on behalf of a group called Supreme Council for the Restoration of Democracy (CSRD). In the statement he appealed to everyone to have faith in the group’s ideas which “could turn Niger into an example of democracy and of good governance”.

The coup wasn’t entirely unexpected. President Tandja came to power after the election in 1999. He was supposed to step down on Dec 22. However, he chose instead to change the country’s constitution last year to stay on. The move enabled him to stand for a third time in office, and with more powers without election.

The fifteen nation West African regional bloc, ECOWAS (Economic Community of West African States) reacted by suspending Niger. The US terminated non-humanitarian aids and cut off trade benefits. The US state department spokesman Philip Crowley said “President Tandja has been trying to extend his mandate in office. And obviously, that may well have been, you know, an act on his behalf that precipitated this act today”. African Union chief Jean Ping condemned the military coup in Niger and said he was following developments “with concern”.

The reaction from Nigeria, coincidence or not, does take pains to differentiate between the countries. According to a statement by Senior Special Assistant to the Acting President on Media and Publicity, Mr Ima Niboro,the acting President of Nigeria Dr. Goodluck Ebele Jonathan has expressed deep concern over reports of shooting in Niger’s capital.

Meanwhile, Colonel Djibrilla Hima one of the leaders of the coup said that their group would hold election too. The plan, he said, is to hold elections once the situation has stabilized.

Oil in NigerNiger has in recent years attracted billions of dollars as investment in oil.Exploration in Niger began in the 1950s. Drilling was done in the 60′s by Petropar in Tamesna-Talak and Djado blocks. But the two main blocks that emerged were Djado Basin and the Agadem BasinIn the year 1992, the Djado permit was given to Hunt oil. In 1997 the Tenere permit was given to TG World Energy Inc. In 2004 the Niger government approved the joint venture arrangement between CNPC International Tenere Limited (CNPCIT) and TG World Petroleum Limited (subsidiary of TG World).In 2005, Petronas Carigali Niger Exploration & Production Ltd. (PCNEPL), announced that it had found hydrocarbons in the Agadem BlockEsso and Petronas had sole rights to the Agadem block. But in 2008, the rights were transferred to CNPC for USD$5 Billion investment. The oil reserves in the block are estimated at 325 million barrels. The company is also building a 20,000-barrel-per-day refinery in Zinder.Other oil companies in the region are Shell, ExxonMobil and Chevron

Thus, though Niger isn’t a major player in the oil business, the markets reached on hearing news of the coup. Tom Bentz, analyst at BNP Paribas Commodities said, “Markets took off at around the same time a Reuters story came out about gunfire erupting in the Niger capital in an apparent coup bid, mistaken by many as being Nigeria”.

To be fair, other factors too contributed for the increase in oil prices-tension of Iran’s nuclear program, weaker dollar and the report of EIA on heating oil supply falling by 1.4 million barrels. However, among the factors, the name confusion was the most important reason for the immediate oil price rise.

Yet, the fact remains that Niger is yet to produce oil for the world market.

Niger factsCapitalNiameyNeighboursNigeria, Benin, Burkino Faso,
Mali, Algeria, Libya and ChadPopulation15.3 millionCurrencyWest African CFA francOfficial languageFrench. The country
got independence from France in 1960Main religionIslamLeading producer of Uraniummore than 8 percent of world’s Uranium.

In the U.S. there is an over-supply of crude oil in the market, at present. Not that it definitely should but, obviously, the price of oil should slide, right? Well, last week the oil prices closed at $81.79 a barrel. There reason? There isn’t one but many. Before that let us look at some data:
First, the industry report from the American Petroleum Institute. API report showed:More than expected crude inventories due to more imports. An increase of 2.7 million barrels. Gasoline inventories increased by 909,000 barrelsDistillates dropped by 4.1 million barrels

Following is the data from Energy Information Administration (EIA):Increased crude oil stockpiles on the back of strong imports. The stockpiles increased to 341.6 million barrels, a climb by almost 4.1 million bbl (for week ended February 26). The expected rise was about 1.3 million barrels only. So, this is about three times the estimated increase-a surprise.Distillate fuel inventories fell 900,000 bbl to 151.8 million bbl due to high demand. Gasoline inventories rose by 700,000 bbl to 231.9 million bbl instead of the expected 300,000 bbl.

Clearly, there is more crude oil in the market. According to analyst from Raymond James & Associates Inc, total petroleum storage is now at 765.3 million bbl or 16 million bbl above the storage levels, same time last year. Oil supplies in the U.S. West Coast increased, with the stockpiles there jumping by 2.31 million barrels contributing to the overall increase in oil -341.6 million bbl. Still, oil managed to override this supply excess and touch the $80 a barrel mark.The reasons for the oil price rise:

While there are many reasons for the increase, some significant ones are:

According to the U.S. Energy department, refinery utilization in the U.S. rose to 81.9%, an increase by 0.7% for the week ending February 26. The refinery operating rates were the highest since October. For its part, the high refinery cost has compensated for any possible decrease in the price of oil. In addition, the US fuel demand was at 19.3 million barrels for the last four weeks an increase of 3% from last year-according to the department.Amid this, there were reports of rebel groups attacking oil installations in Nigeria. As Nigeria is Africa’s largest oil producer, investors feared for the oil exports from the region. The reports of the attacks are yet to be confirmed, but, still, helped increase the oil prices. U.S. jobs report showed lower than expected unemployment figures. The report from the Bureau of Labor Statistics department showed unemployment rate unchanged from the January rate of 9.7%. Investors took this as a sign of economic revival with the U.S. President Obama describing the jobs report as “better than expected”. As soon as the Labor department came up with the news, dollar fell increasing the oil prices. And how did that happen?Higher oil price increases the export bill leading to trade deficits and weak dollarDollar-denominated commodities become cheaper with a weak dollar, in turn increasing the price of oil.Moving on, there were optimistic signs on the manufacturing font in the U.S. The U.S. Commerce department announced that factory orders rose 1.7% in January mainly due to increased aircraft orders. There was 2.6% increase in durable goods orders. Confidence of the businesses showed as the Inventories continued to increase.
In addition, there emerged positive signs from the world’s second biggest oil consumer, China. Last Friday, the Chinese premier Wen Jiabao set an economic target of eight percent for this year. Fair enough since a good economy means better fuel demand.
Other reasonsHeating oil demand from the Northern hemisphereSigns from the Middle-East: Seizure of a Saudi Arabian oil tanker by pirates in the Gulf of Aden too worried the investors. As did the Iraqi parliamentary election due March 7.Greece’s austerity measures to rein in the debt problem

Oil prices in the coming weeks:

So, will oil manage to climb up, even further? Well, major groups like IEA and EIA have projected strong demand for oil in the near future. According to Barclays oil prices were likely to rise to $80-$90 range. Quoting data from Joint Oil Data Initiative (JODI), which said that the Asian demand for oil was increasing by more than 2 million barrels per day, Barclays analysts Paul Horsnell said, “If Asian demand can grow at such rapid rates when prices are in the $70 to $80 range, then prices cannot stay in that range for much longer”.

In China, for a change, the oil stocks are higher than the demand. So, China’s largest producer, supplier and refiner of oil, Sinopec is said to be introducing a subsidy of 130 yuan or $19 per ton, in an effort to increase the export of oil. The subsidy is expected to be in place till the demand and supply are balanced.

And, OPEC is meeting on March 17. Analysts predict that there would be no changes in the output quotas. Iraqi Oil Minister Hussain al-Shahristani said “Despite the fact the global economy is gradually recovering, demand has not increased significantly enough to make us reconsider our production ceiling”.

Correctly forecasting the price of oil is a science in itself. The situation in the Middle-East should be kept in mind. So, read the reasons, analyse the pointers and make your own judgment before investing.

When oil prices were dropping after the Dubai crisis, Iran took it upon itself to save the price of oil. After all, Iran has the third largest oil reserves in the world. But how did it go about doing it? By a small symbolic gesture of planting the Iranian flag on a low productive oil field in Iraq.

On December 17, Iranian soldiers seized an oil well in Al-Fakkah in the Maysan province, North of Basra. Al-Fakkah situated about 200 miles southeast of Baghdad is the seat of one of Iraq’s largest oil fields with reserves of about 1.5 billion barrels. This region is a shared border between Iran and Iraq, claimed by both countries as theirs. The dispute, in fact, has been going on for years since the 1980s- after the end of the eight year war.

Any conflict here-or just rumors of it-and the world jumps to the conclusion that oil supplies from the region would be affected. Already, Iraq was opening up its oil fields for foreign companies after thirty years. There were two bids for oil in Iraq this year; the first bid didn’t get through as investors weren’t keen on oil from disputed areas. The second bid took place just a week before the incursion, with many oil companies present in Baghdad bidding on oil contracts. And, contracts were awarded to seven of the 15 oil fields. Then Iran grabbed headline space with its actions in Iraq to raise the price of oil.

Among the issues that worked in favour of Iran are:Oil prices are extremely volatile. Unlike conventional demand and supply fluctuations, oil responds quickly to risk factors like war or war like situations even if the supply is steady.Iran’s position in the oil world- Iran is a large player in the oil business being the fourth largest producer of oil in the worldWhen Iran does something, the world takes noticeDetails emerging from the place would be at best sketchy as journalists are barred from the disputed territoryIn short, Iran didn’t have much work to do. The stage was set and it only had to make people believe of ‘some’ tension in the region.

Per se, it seems, Iran was able to pull it off too. Most of what was reported in the media hinged on the inference that Iran was asserting its supremacy in the region-the prevailing border dispute helped too. And it was precisely that fact to which the market and investors reacted to. As the news spilled across the globe, oil prices rose. Iran played the role it sought all along-innocence. Amir al-Rashadi, a spokesman at the Iranian Embassy in Baghdad, said, “We don’t have any information about this, but we suspect it is all lies”.

According to officials in Iraq, an emergency meeting of the National Security Council was convened with the Iranian Ambassador called in to lodge an official protest. Security forces and police reinforcements were deployed in the area by Iraq. Iraq behaved as if it knew the plan of Iran. Iraqi Government spokesperson al-Dabbagh told Al-Arabiyah TV “Again, we ask Iran to be committed to the good relations that they announced with Iraq and its nation, and to withdraw its forces immediately”.

But soon, Iranian military claimed that it had not violated Iraq’s sovereignty as the area was Iran’s territory with the statement to Al-Alam satellite television “Our forces are on our own soil and, based on the known international borders, this well belongs to Iran.”

Iran has better political, cultural, religious and economic relations with the current Shiite government in Iraq. Of course, indeed, there was political tension in the region after the recent election and over the country’s nuclear program. If Iran wanted to divert attention from the crisis at home, it would have done something more dramatic, not a meek incursion like this. Anybody’s guess then that this was a well planned ‘news’ to hike the price of oil.

Meanwhile, the US was laidback in its response. The US government in the past had accused the Iran regime of funding and sending across Iran fighters into Iraqi soil. Adm. Mike Mullen, America’s top military official said the oil well incident must be resolved between Iran and Iraq, and there were no plans by the United States to intervene. U.S. Ambassador to Iraq Christopher Hill’s words on Iraqi response to Iran incursion “It does speak to the overall view here that they are not going to be pushed around by Iran”.

Of course there were doubts raised too. Edward Morse, head of economic research at LCM Commodities LLC said, the border “is not clearly delineated, is in desert and is in dispute anyway.” He added, “The possession of an unproductive well seems a strange thing on which to hang a national crisis”.

As of December 20th, Iranian forces are said to have withdrawn from the region. According to Reuters, a spokesman of Iraqi government is said to have confirmed it saying, “The Iranian flag has been lowered, and Iranian troops have pulled back 50 meters, but they have not gone back to where they were before. The Iraqi government asked for the troops to go back to where they were”.

A symbolic gesture on a low productive oil field but has given huge financial relief for the Middle-East. If you believe this is all some silly hypothesis, check out the price of crude today-$81.74 a barrel. The extent countries go for increasing the price of oil…

Crude oil prices have surged to year high recently, as the economy is showing its first signs of recovery.Mark my words: the economy is not booming, far from that. There are however some signs that the worst part is behind us.But a surge in oil prices like we are witnessing seems out of proportion with today’s growth, stagnant at best. This is dueto the lack of elasticity in crude oil pricing. Let me explain the principle of “elasticity”:

Up until recent years when the world’s need for oil would vary with cycles in the economy it was merely a matter of turning a faucet, thus pulling moreor less oil out of the ground from existing wells to satisfy demand, with little effect on the price. This is why we talk about elasticity.

Imagine the demand for oil is tied to the price of oil with a rubberband.If the demand goes up, the rubberband stretches and has some give before the price follows suit.The rubberband stretches and contracts in reaction to sudden motion and dampens changes. This is elasticity.

But right now the rubber band is short, tense and overstretched already.In fact it looks more like a tight rope than a rubberband. You see, in months past when oil was cheap, oil companiescould not justify costly deep water exploration projects so these were canceled.Because of current lack of new oil and because the old oil fields are declining, it is not possible to increase production as fast as demand climbs, even though the current change is mild.There is no elasticity, oil demand and oil price are tied together with a tense overstretched rubberband acting like a rope.

Of course as petroleum prices go up, oil exploration ventures will resume but these are long-term projects. Much like it takes nine months to make a baby no matter what, it sometimes takes several years for a new oil field to start producing.Short term this bodes well for oil exploration companies such as Transocean. Expect their business to grow for the next few years as oil companies scramble to meet demand.

Light crude oil futures open trading on Wednesday and dipped under $76 as the oil fell for a second day on continued concerns that the European bailout is insufficient to end the region’s sovereign debt crisis.

US Light crude oil for June delivery dropped as much as 73 cents, or 1 percent, to $75.64 a barrel on the NYMEX.

Crude oil traders have been eyeing how the euro reacts after European policymakers unveiled a $1 trillion debt bailout package earlier this week.

Commodities priced in dollars, such as oil, become more expensive for investors holding euros as the US dollar strengthens.

Meanwhile, BofA Merrill Lynch Global Research analysts said in a note to investors that the currency effect on oil prices may be limited and that crude will top $100 at some point next year.