PRESIDENT BUSH AND OPEC TRADE BARBS AS OPEC MAKES NO CHANGE IN OUTPUT

Yesterday President Bush criticized OPEC by saying "Understand the consequences of high energy prices. I think it's a mistake to have your biggest customers' economies slowing down as a result of higher energy prices." His statement was likely more than a criticism, it was intended to encourage OPEC to commit to increasing production at its meeting today. It did not work, as OPEC voted to keep output at current levels.

After the OPEC meeting today, OPEC President Chakib Khelil said, "If the prices are high, definitely they are not due to a lack of crude. They are due to what's happening in the U.S. There is sufficient supply. There's plenty of oil there." He went on to say that the global oil market is being impacted by "the mismanagement of the U.S. economy." His mismanagement comment seems to be a reference to the policies that are causing the U.S. dollar to weaken to what some are finding to be uncomfortable levels.

As of 10:15 a.m. Central, light sweet crude it trading at $102.66 on the NYMEX, up $3.14.

From AP via Yahoo:

Khelil said crude stocks were well within their five-year average and the 13-nation group was not inclined to either boost or reduce its current output of about 32 million barrels a day. OPEC satisfies roughly 40 percent of the world's demand for crude.

"In truth, OPEC's decision not to pump more oil is a reflection that supply is relatively good," said Anthony Sabino, a professor of business at St. John's University in New York.

"What is driving oil prices up to the stratospheric level of over $100 per barrel is the U.S. economy, now undeniably in recession," he said. "It's not so much the price of oil is going up -- it's that the value of the U.S. dollar, sad to say, is slumping."

Oil shot up a dramatic 19 percent last month as the falling dollar prompted speculators and other investors to shift cash to crude and other commodities as a hedge.

Key cartel members said this week that prices in the $85 to $90 per barrel range would be optimal.

The 13 OPEC members are Algeria, Angola, Ecuador, Indonesia, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela.

CHAVEZ COMMENTS RATTLE OIL MARKET

Venezuelan President Hugo Chavez made threats on Sunday to cut off oil sales to the United States in retaliation for U.S.-based ExxonMobil seeking court assistance in settling a dispute with Chavez and Petroleos de Venezuela and a British court freezing as much as $12 billion in Petroleos de Venezuela's assets. The dispute centers around the nationalization of oil rights that ExxonMobil owned.

From USA Today:

If you end up freezing (Venezuelan assets) and it harms us, we're going to harm you," Chavez said. "Do you know how? We aren't going to send oil to the United States."

Mike Fitzpatrick, vice president of energy and risk management at MF Global, says is is hard to weigh the comment. "How much credence you want to give him is always a question mark," Fitzpatrick said.

But traders were clearly worried about the potential cutoff of Venezuelan oil. Light, sweet crude for March delivery jumped $1.82 to settle at $93.59 a barrel on the New York Mercantile Exchange after spiking to $94.72 earlier, a one-month high.

Word of power outages at a Valero Energy refinery in Delaware City, Del., and a Citgo Petroleum refinery in Lake Charles, La., also helped push prices higher. Both plants were being restarted Monday, Dow Jones Newswires reported.

Traders were unnerved by new violence in Nigeria, Africa's largest oil producer and a major supplier to the U.S. On Monday, gunmen attacked a naval vesselescorting petroleum industry boats, killing one sailor and injuring another. Militant attacks have cut Nigeria's oil output by nearly one quarter in the past two years, helping send oil prices to all-time highs.

Concerns about supply disruptions temporarily drew investors' focus from the weakening U.S. economy, which had been the market's dominant theme. Worries that the economy is slowing, and demand for energy is falling, pushed oil prices down from a record above $100 a barrel in early January to nearly $86 in recent weeks.

CME AND NYMEX IN TALKS

According to published reports, the Chicago Mercantile Exchange (CME) and the New York Mercantile Exchange (NYMEX) are in talks about an $11 billion merger that would create a giant energy trading marketplace.

From The New York Times:

In what the two said was a 30-day exclusive negotiating period, the firms said they are discussing a takeover of Nymex by CME. The Chicago exchange would pay $36 in cash and .1323 in CME stock per Nymex share, or about $119.22 based on Friday’s closing price. That represents an 11 percent premium over Nymex’s closing share price Friday of $107.16.

CME will keep Nymex’s trading floors in lower Manhattan and would buy back the exchange’s 816 memberships for a maximum of $500 million.

Both exchanges said that the discussions are early and that any final deal may differ from those terms.

OIL CLOSES OVER $90

From The New York Times:

Oil prices shot past $90 a barrel today on what one analyst described as a “perfect storm” of economic news, ranging from tensions in the Middle East to growing anticipation of a Fed rate cut.

Crude oil futures jumped $3.36 to close at $90.46 a barrel, exceeding the highs reached last week, though still shy of the inflation-adjusted record price of $101.70 set in 1980.

Concerns over supply levels spurred the price increase after the Energy Department reported yesterday that crude oil stockpiles fell last week and investors learned that OPEC shipments from the Middle East were expected to slow. Fewer oil supplies and steady demand mean that oil prices will go up.

Military tensions between Turkey and Iraqi Kurds also contributed to the sudden spike, along with a decision by the United States to impose sanctions against oil-rich Iran. Prices were also pushed up by a weak dollar and expectations that the Federal Reserve will cut its benchmark interest rate next week, analysts said.

“It’s almost like a perfect storm,” said Fadel Gheit, managing director of oil and gas research at OppenheimerFunds.

CRUDE OIL SURGES AS TURKEY VOTES TO USE MILITARY FORCE AGAINST KURDS

From Bloomberg:

Crude oil rose to a record $89 a barrel in New York after Turkish lawmakers voted to allow the use of military force against Kurdish rebels in northern Iraq.

The assembly in Turkey's capital of Ankara backed the motion by 507 votes to 19, Parliament Speaker Koksal Toptan told lawmakers. An Energy Department report today showed that U.S. oil, gasoline and heating-oil supplies rose last week.

``The Turkish vote has scared traders,'' said Rick Mueller, an analyst with Energy Security Analysis Inc. in Wakefield, Massachusetts. ``The doomsday scenario is that things will spiral out of control and lead neighboring countries like Iran and Saudi Arabia to become involved. This isn't likely but it encourages people to be long oil.'' Longs are bets prices will rise.

Crude oil for November delivery rose 31 cents, or 0.4 percent, to $87.92 a barrel at 1:20 p.m. on the New York Mercantile Exchange. Futures reached $89, the highest since the contract was introduced in 1983. Prices are up 49 percent from a year ago. This is the seventh straight daily gain.

On Oct. 15, prices passed the previous all-time inflation- adjusted record reached in 1981, when Iran cut oil exports. The cost of oil used by U.S. refiners averaged $37.48 a barrel in March 1981, according to the Energy Department, or $84.73 in today's dollars.

OIL TOPS $82 PER BARREL

You can check the current price by clicking here.

From USA Today:

Oil futures rose to records Tuesday after the Federal Reserve cut interest rates by a larger-than-expected half percentage point, raising market hopes that economic growth will accelerate and lift demand even as crude oil and gasoline inventories are tight.

A barrel of crude surged to a new trading high of $81.90 on the New York Mercantile Exchange in the moments immediately after the Fed's decision.

Investors had already priced a quarter-point cut in the benchmark federal funds rate into the market, said Brad Samples, a commodities analyst at Summit Energy Services in Louisville The half-point cut spurred even more buying.

Moreover, many analysts see a weaker dollar as a natural side effect of lower rates, and that could promote buying of oil contracts by foreign investors.

"Lower interest rates have the unintended consequence of raising oil prices if the dollar declines relative to other currencies," said Larry Chorn, chief economist at Platts, the energy research arm of McGraw-Hill, in a statement.

"Seen through a euro or yen prism, nominal (New York Mercantile Exchange crude) prices have yet to reach their 2006 highs," said Antoine Halff, head of energy research at Fimat USA, in a research note.