OIL PRICE DROPS $3; GERMANS PAYING $8.00 PER GALLON FOR GAS

Crude oil prices dropped about $3.00 per barrel yesterday as the U.S. dollar strengthened a bit and traders waited to see what the Federal Reserve will do with interest rates at their meeting later today. Most analysts believe that a quarter-point rate cut is already factored into the oil price and that if the Federal Reserve makes no cut, oil could decline further as the U.S. dollar strengthens.

Think $3.79 per gallon for gasoline is high? Germans are paying the equivalent of roughly $8.60 per gallon for gas now.

From MSNBC:

It is an everyday lottery when it comes to fuel prices at German gas stations. Prices for regular unleaded and diesel gas bounces up and down, often changing twice on the same day. And drivers in this car-loving nation are unhappily dealing with increasing prices at the pump.

Record prices on the international oil markets have driven gas prices across Europe sky high, with a gallon of unleaded gas costing about $8.60 per gallon in Germany. (In Germany, gas is sold by the liter with one liter of unleaded fuel selling for an average of $2.29)

The high prices hit people where it counts – in the wallet.

GAS PRICES AT INFLATION-ADJUSTED HIGH

The price for a gallon of gasoline averaged $3.508, surpassing the inflation-adjusted high of $3.413 of 1981.

From USA Today:

The average price for regular gasoline across the USA was a record $3.508 a gallon Monday, eclipsing the inflation-adjusted peak of $3.413 set in March 1981, when the average was $1.417, according to the U.S. Energy Information Administration.

Separately, AAA and the Oil Price Information Service reported a U.S. average of $3.503 Monday, up 1.2 cents overnight and first time above $3.50.

The two surveys emphasize what Americans already know: However it's measured, gasoline is more expensive than it's ever been. That hurts.

OIL TOPS $115 AS U.S. DOLLAR NEARS $1.60 PER EURO

Oil traded at over $115 per barrel yesterday and early today as the U.S. dollar sank to nearly $1.60 per euro. Some are $3.80 per gallon retail for gasoline in the near future.

From AP via MSNBC:

Crude oil futures fluctuated Thursday after moving past $115 per barrel and hitting an all-time high in overnight electronic trading on a weaker dollar and supply concerns.

Overall, crude prices have jumped more than 4 percent this week, in part due to the falling dollar, as well as a host of supply and demand concerns in the U.S. and abroad.

The combination of all these factors will push oil prices even higher in coming weeks, said James Cordier, president of Tampa, Florida, trading firms Liberty Trading Group and OptionSellers.com.

"I think we're going at least to $125 (per barrel)," Cordier said. "That'll probably translate to about $3.80 (a gallon for gasoline) at the pump."

IRANIAN PRESIDENT AHMADINEJAD URGES OPEC TO QUIT PRICING OIL IN U.S. DOLLARS

Currently, oil sold by OPEC nations and traded globally is priced in U.S. dollars. President Ahmadinejad (along with Venezuela's Hugo Chavez) has urged OPEC to quit pricing oil in dollars. If another currency was used instead of the dollar, demand for dollars would decline, leading to further weakening of the already very weak U.S. dollar.

From AP via MSNBC:

According to the Iranian government's Web site, Ahmadinejad told OPEC Secretary General Abdalla Salem el-Badri the cartel "should establish a joint bank as well as having joint currency."

Oil is priced in U.S. dollars on the world market, and the currency's depreciation has concerned producers because it has contributed to rising crude prices and eroded the value of their dollar reserves.

Iran has repeatedly urged OPEC members to shift sales away from dollar. But Iran's proposal to trade oil in a basket of currencies is not supported by enough OPEC members, which include staunch U.S. allies such as leading producer Saudi Arabia.

FEBRUARY CONSUMER INFLATION IS FLAT

The Consumer Price Index came in flat this morning, showing no change in consumer prices from January through February. According to The New York Times, economists had expected an increase of 0.3%.

Core inflation, which excludes food and energy, also came in unchanged.

From AP via The New York Times:

Consumer inflation, which had been pushing relentlessly higher, posted its mildest reading in six months in February as the costs of energy and food moderated. The relief was expected to be short-lived, given that energy prices have resumed their upward climb.

The better-than-expected February inflation reading will likely be reversed in coming months, considering the big surge in energy prices in recent weeks. Crude oil hit a record high this week above $110 per barrel and gasoline pump prices jumped to a national record of $3.267.

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.

OIL SETS NEW RECORD HIGH

Oil is trading at over $103 per barrel this morning and has risen as high as $103.95.

From The New York Times:

Oil prices surged to a new record high Monday as the dollar weakened to another low against the euro.

Light, sweet crude for April delivery rose $1.93 to $103.77 on the New York Mercantile Exchange after earlier rising as high as $103.95. That's higher than the price of $103.76 that many analysts believe oil hit in 1980, when adjusted for inflation into 2008 dollars.

Oil's most recent run into record territory has been driven by the greenback's slump against other world currencies. Crude futures offer a hedge against a falling dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the dollar is falling.

WHERE WILL GAS PRICES GO?

There is quite a bit of debate over the direction of gas prices as we prepare to enter the high-demand spring season. Some analysts believe gas prices may go over $4.00 per gallon, but others cite huge inventories as a reason for their belief that gas prices will fall more in line with the Energy Department's prediction of $3.40.

From AP via BusinessWeek:

Gas prices jumped Friday to their highest level since June, a possible preview of what many analysts believe will be a record spike in pump prices this spring.

But the current price surge could be short-lived. While gasoline has risen sharply in recent days in response to oil's dramatic climb to a new record above $101 a barrel, gas supplies have quietly grown to their highest level in 14 years.

Many analysts believe gas prices will rise this spring to new records near $3.75 or $4 a gallon. But not everyone agrees.

[President of energy consultancy Ritterbusch and Associates, Jim] Ritterbusch, for example, thinks the high level of supplies, and an eventual decline in oil prices, will pull pump prices down. He doubts prices will rise as high as $3.75 without a major overseas supply disruption or domestic refinery outage.

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.

BIG THREE U.S. OIL COMPANIES COMBINED AVERAGED $233 MILLION PROFIT PER DAY IN Q4

Exxon Mobil announced this morning that it posted a quarterly profit of $11.66 billion for Q4, the largest operating profit ever posted by a U.S. company. That works out to roughly $130 million in profit per day for the quarter.

In related industry news, Chevron announced this morning that it posted a net income of $4.88 billion for Q4. Chevron is the second-largest oil company behind Exxon Mobil. On January 23rd, ConocoPhillips, the third-largest oil company, announced net income of $4.37 billion for Q4.

Combined, these three companies averaged profits of $233 million per day in the fourth quarter of 2007.

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 PRICES RISE AFTER PIPELINE EXPLOSION

From Bloomberg:

Oil surged more than $4 a barrel, the most in a month, after an explosion cut Canadian oil shipments through Enbridge Inc. pipelines that typically provide about 15 percent of U.S. crude imports.

Enbridge closed four pipelines that supply an average of 1.5 million barrels a day after a blast yesterday killed two workers. The company said today a fire is still burning at the Clearbrook terminal in Minnesota where the pipelines meet.

``It's an important pipeline and it's also where it's being hit, these pipeline junctions are a nightmare,'' said Rob Laughlin, a senior broker at MF Global Ltd. in London. Oil ``could go up further if it's shut for some time.''

Crude oil for January delivery gained as much as $4.55, or 5 percent, to $95.17 a barrel in electronic trading on the New York Mercantile Exchange. That's the biggest gain since Oct. 31. The contract, which gained for the first time this week, traded at $94.24 at 10:45 a.m. in London.

``All our lines are shut down until we can safely start up the system,'' Denise Hamsher, a spokeswoman for Calgary-based Enbridge, said today by telephone. ``At least one or two lines will be shut down for quite sometime.''

CITIGROUP SELLS 4.9% STAKE TO ABU DHABI FUND

From The New York Times:

Citigroup announced last night that it was selling a $7.5 billion stake to a Middle Eastern sovereign fund in the latest bid to shore up its balance sheet.

The fund, the Abu Dhabi Investment Authority, has agreed to buy a 4.9 percent equity stake in a complex transaction that has been approved by federal regulators. It will have no role in the management or governance of Citigroup, nor any presence on Citigroup’s board.

Abu Dhabi’s 4.9 percent stake will make it Citigroup’s single largest shareholder, overtaking Prince Walid bin Talal of Saudi Arabia. He has owned close to a 5 percent stake since the early 1990s, when he made a similar investment to bail out the company. Together, their holdings will mean that nearly 10 percent of the Citigroup will be owned by Middle Eastern investors.

“This investment reflects our confidence in Citi’s potential to build shareholder value,” said A.D.I.A.’s managing director, Sheikh Ahmed bin Zayed al-Nahyan.

The investment from Abu Dhabi underscores Citigroup’s precarious capital position, and also highlights the growing petrodollar wealth of Mideast countries, which are buying up assets and taking stakes in numerous American companies.

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.