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http://www.cleanmpg.com/photos/data/2/Canadian_Flag.jpg Stronger U.S. dollar puts brakes on three-month rally (http://www.theglobeandmail.com/globe-investor/oil-falls-to-near-71/article1182035/)

http://www.cleanmpg.com/photos/data/501/gas_prices_cartoon.jpgPABLO GORONDI - THEGLOBEANDMAIL (http://www.theglobeandmail.com) - June 15, 2009

And back down again ? --Ed.

Oil prices fell to near $71 (U.S.) a barrel Monday, halting a three-month rally, as the U.S. dollar, which typically trades inversely to crude, was boosted by comments by Russia's finance minister.

Benchmark crude for July delivery fell 94 cents to $71.10 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange. Earlier in the session, it traded as low as $70.71. On Friday, it fell 64 cents to settle at $72.04.

Oil prices have more than doubled since March in part on expectations that massive U.S. fiscal and monetary stimulus will hasten a decline of the dollar. Investors often buy crude and other commodities as a hedge against the risk of inflation posed by a weaker dollar.

The euro fell to $1.3871 on Monday from $1.4015 on Friday, while the British pound was down to $1.6334 from $1.6450, after Russian finance chief Alexei Kudrin said this weekend that the dollar's status as the world's main reserve currency was unlikely to change in the near term.

Traders are also wary that the recent price run-up isn't supported by improving supply and demand fundamentals.

“There's more talk in the market of expectations of a pullback in oil,” said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. “It's rallied too much in too short a period of time.”

“Oil is still very strong given the weak overall fundamentals,” he said.

On Friday, the Organization of Petroleum Exporting Countries dropped its daily demand forecast for 2009 by 230,000 barrels, estimating that global consumption would shrink to 83.8 million barrels a day.... http://www.theglobeandmail.com/globe-investor/oil-falls-to-near-71/article1182035/

I wouldn't count on it stopping its rise for long.

But it really underscores how important the value of the U.S. dollar is to commodity pricing.

I would like to see some smart person (assuming there is ONE) in our government start using the huge reserves we have accumulated as a buffer for this oil speculation scenario.

If you drive the price of oil up artifically by buying future supply with pennies on the dollar, you could get nailed by the govt.

Then they could restock the reserve when the prices drop in the winter. If they were judicious they could even make the government some money. Hey I know I am just a dreaming idiot, but I remember the last embargo very well.

My brother took over as manager of a motel that was armed robbed 4 times a year. He installed a closed circuit TV, a wire haired terrier, and a Browning A5. The dog would sleep in front of the TV. When a robber reached across the counter to open the register, he had 1200 pounds of jaw force clamped on his arm, and a few seconds later he was staring down the barrel of a 12 guage.

Two more attempeted robberies and then not a single one for 3 more years.

regards
gary

Gary, have you compared the size of our "huge reserves" to what is consumed daily in this country?

My brother took over as manager of a motel that was armed robbed 4 times a year. He installed a closed circuit TV, a wire haired terrier, and a Browning A5. The dog would sleep in front of the TV. When a robber reached across the counter to open the register, he had 1200 pounds of jaw force clamped on his arm, and a few seconds later he was staring down the barrel of a 12 guage.

Two more attempeted robberies and then not a single one for 3 more years.

Thank you I needed a laugh. :D

Isn't it funny how the answer can be so simple and so obvious.

I would like to see some smart person (assuming there is ONE) in our government start using the huge reserves we have accumulated as a buffer for this oil speculation scenario.

If you drive the price of oil up artifically by buying future supply with pennies on the dollar, you could get nailed by the govt.

Then they could restock the reserve when the prices drop in the winter. If they were judicious they could even make the government some money. Hey I know I am just a dreaming idiot, but I remember the last embargo very well.

My brother took over as manager of a motel that was armed robbed 4 times a year. He installed a closed circuit TV, a wire haired terrier, and a Browning A5. The dog would sleep in front of the TV. When a robber reached across the counter to open the register, he had 1200 pounds of jaw force clamped on his arm, and a few seconds later he was staring down the barrel of a 12 guage.

Two more attempeted robberies and then not a single one for 3 more years.

regards
gary

The reserve is supposed to be for a true national emergency, not for instances when we don't like the price of a barrel of oil. Your suggestion may slightly depress the price of oil in the summer, when people are driving around a lot, but then it would just increase it in winter, when people are burning oil for heat.

Markets run in cycles. The continued rise in commodity prices needed a rest. Eventually, as we progress out of this severe recession, commodity prices will rise again.

Harry

I would like to see some smart person (assuming there is ONE) in our government start using the huge reserves we have accumulated as a buffer for this oil speculation scenario.

What huge reserves would those be?

What huge reserves would those be?

I think the reserves he was referring to are the Strategic Petroleum Reserve. Personally, I've always considered the SPR to be more along the lines of emergency fuel for law enforcement and military, should an oil embargo take too long. Obviously, the PSR does not hold enough to sustain all of the engines in America for any length of time (30 days?). But at least things like the fire dept., ambulances, police, ect should remain mobile.

Gary, have you compared the size of our "huge reserves" to what is consumed daily in this country?

No I haven't, might be a good cause for some research. My thoughts about releasing some of the reserve was that if speculation was the real cause of last years outrageous peak in price, then the mere threat of a release of reserves would drive the speculators to some other less economically devastating way of pocketing quick profits at such a high overall cost.

The Sword of Damocles Effect.

The price follows a fairly predictable path. Thats why the speculators are using that predictability to their advantage.

They would (in my opinion) seriously reconsider the risk if they even thought a release could nail them in the pockets the way we all were nailed last year.

If memory serves me the reserve is in the neighborhood of a 100 day national supply.
That could certainly be off by a large margin and I would think that the real amount may actually be something that was not really public information.

regards
gary

33 days capacity: http://en.wikipedia.org/wiki/Strategic_Petroleum_Reserve

Some information from Wikipedia that is probably out of date by now, but it lists the current reserve at 727 million barrels, and a daily use of 21 million barrels. It's possible to pull 101 million barrels a day.

Or about 33 days worth, and 7 days at full draw capacity.

And Pale beat me to it.

I think the reserves he was referring to are the Strategic Petroleum Reserve. Personally, I've always considered the SPR to be more along the lines of emergency fuel for law enforcement and military, should an oil embargo take too long. Obviously, the PSR does not hold enough to sustain all of the engines in America for any length of time (30 days?). But at least things like the fire dept., ambulances, police, ect should remain mobile.

Sorry. I guess I should have put this emoticon :rolleyes: next to it.