CRANBURY, N.J. (DTN) — New York Mercantile Exchange
nearby delivery oil futures rallied overnight, extending Wednesday’s late
afternoon burst higher following the announcement by the Federal Open Market
Committee that they would maintain ultra

-low interest rates through the end of
2014.

The Federal
Reserve said they would keep the federal funds rate between zero and 0.25%
through the end of 2014. Previously, the Fed announced it would keep the
ultra-low interest rate through the middle of 2013, with many market followers
anticipating the possibility of extending that policy through the middle of
2014. The longer duration was a surprise to many, immediately weakening the
U.S. dollar in spot index trading while rallying NYMEX crude and RBOB futures.
The S&P 500 surged to a fresh six-month high on the announcement.

The low interest
rate, which began in late 2008 to combat the credit crisis, is aimed at
spurring economic activity, with the latest move targeting high unemployment.
The Fed believes the jobless rate will remain high for an extended period of
time, with the central bank looking to promote higher job growth with low
borrowing rates.

However, the low
interest rate has an inflationary impact upon commodities such as oil, while
investors will also look to stave off dollar depreciation through investments
in commodities and equities, as recent history shows.

Also bullish for
equities and commodities were indications by the Fed that they might again buy
bonds to spur economic activity, which is referred to as quantitative easing.
Previous QE efforts have spurred commodities and equities higher, although the
policy has many critics.

The U.S. dollar
was lower in spot index trading this morning while the S&P 500 was moving
higher in futures trading. NYMEX oil and the dollar typically move in opposing
directions, while the crude contract has tracked closely with the S&P 500.

Overnight, March
crude futures posted a one-week spot high at $101.00 bbl, with the February
heating oil contract also registering a one-week high, reaching $3.0632 gallon.
February RBOB futures matched Wednesday’s

$2.8597 gallon better than three-month spot high in
overnight trading.

\

CRANBURY, N.J. (DTN) — New York Mercantile Exchange
nearby delivery oil futures are lower in overnight trading, pressured by a
sharp surge in crude supply for last week reported late Tuesday, with the crude
contract also down with a stronger U

.S. dollar and a decline in the S&P 500
index in futures trading.

The American
Petroleum Institute showed a huge build in crude stocks for the week-ended
Jan.20, up 7.331 million bbl, and an unexpected 573,000 bbl decline in gasoline
supply. Distillate inventory levels were drawn down by a larger-than-expected
2.464 million bbl last week. The refinery run rate eased 1.2% to 81.9%,
supporting product values while pressuring crude.

The Energy
Information Administration will release its data set for last week at 10:30 AM
ET.

Brent crude
futures were under pressure from news on Tuesday that Petroplus was insolvent
and would file for bankruptcy. The company is the largest independent refiner
and wholesaler in Europe, operating five refineries with a crude throughput
capacity of 667,000 bpd. The refiner had already shut three of those refineries
earlier this month due to a lack of operating capital, and will now shut the
other two.

While pressuring
crude futures, the news underpinned support for RBOB and heating oil futures on
the viewpoint that U.S. exports would be drawn to Europe to meet an expected
supply shortfall. Typically, the United States would ship distillates to Europe
while importing gasoline from across the Atlantic.

Market players
will be alert for signals of some form of monetary easing or other fiscal
stimulus from the Federal Reserve during its chairman’s news conference this
afternoon. This is the second day of the Federal Open Market Committee meeting,
with Ben Bernanke set to end the event with a news conference. No change is
expected in overnight bank lending interest rates, which are stuck near zero,
since the central bank has already indicated its intention to hold the rate
unchanged through 2013. Past stimulus efforts by the central bank have had the
effect of weakening the U.S. dollar while supporting higher crude prices.

The U.S. dollar
and crude have an inverse relationship. The greenback was holding near a
two-day high in spot index trading this morning.

CRANBURY, N.J. (DTN) — New York Mercantile Exchange oil
futures were mixed in overnight trading, with March crude futures holding to
inside trade so far, conflicted between potential heightening geopolitical risk
amid a European Union agreement

to ban Iranian oil imports and a stalemate in
negotiations over restructuring Greece’s debt.

The euro
softened and the U.S. dollar strengthened, with the greenback typically moving
in an opposing direction to NYMEX oil futures. The S&P 500 was marginally
higher in futures trading. NYMEX crude oil has tracked the direction of the
S&P 500, which is hovering at a six-month high.

Meanwhile,
markets are closed in China, the world’s second largest consumer of oil, for
the week amid the Chinese New Year—the Year of the Dragon.

Days of talks
between Greek officials and private creditors, which include European banks and
hedge funds, have reportedly reached an impasse.

Greece is looking to erase 100 billion euros of its 360
billion euros of debt through the negotiations, restructuring short-term debt
with longer-term coupons and lower interest rates.

The stalled
negotiations are cause for worry. Athens needs to satisfy officials with the
European Central Bank that they are making headway on their debt restructuring
efforts in order to receive the next bailout installment. This revenue is
needed for Greece to make its next debt payment of 14.4 billion euros or $18.5
billion, which is due on March 20.

Failure to reach
a “consensual restructuring” agreement and to make this payment, and
those due in the futures could trigger a chaotic default that is seen having a
domino effect throughout the EU and beyond. Such an event, analysts say, would
sink the EU into recession. Oil demand declines during recessions.

Tehran warned of
negative consequences should the EU move ahead with its agreement to ban
Iranian oil beginning July 1, with the EU measure meant to dissuade the Persian
nation from pursuing nuclear weapons. Iran, a member of the Organization of the
Petroleum Exporting Countries and third largest exporter of crude oil in 2010
according to the Energy Information Administration, again warned that it would
shut traffic in the Strait of Hormuz.

The strait is a
strategic shipping channel in which nearly 17 million bpd of oil passed through
in 2011, according to the EIA. The United States warned Iran that it would not
tolerate such a disruption of international trade, with a U.S. aircraft carrier
passing through the Hormuz Strait over the weekend.

Meanwhile, U.S.
oil fundamentals are weak, with the EIA expected to report Wednesday that
supply builds for crude oil and gasoline occurred last week. Gasoline demand
fell to its lowest rate since September 2001 earlier this month.

The American
Petroleum Institute will issue its weekly data set at 4:30 PM ET, with the
EIA’s report scheduled for release 10:30 AM ET Wednesday.

CRANBURY, N.J. (DTN) — New York Mercantile Exchange oil
futures were advancing in overnight trade, with the March crude contract
climbing from a one-month spot low after European Union members agreed to ban
oil from Iran starting July 1.

Tehr

an’s pursuit
of nuclear weapons have triggered action by western nations, with the
International Atomic Energy Agency late last year saying that Iran was
progressing in its efforts to make and deliver a nuclear weapon. Tehran denies
the allegations, saying they’re nuclear activities are for civilian purposes.

The EU agreement
was expected, with the July 1 timeline meant to give time to EU countries
currently importing Iranian oil to find alternative sources. Financially
troubled Greece was reportedly balking over the ban last week, fearing
increased costs. Reports indicate that some assistance might be provided to EU
countries detrimentally impacted by the Iranian oil ban.

The EU measures
also include a freeze on Iranian central bank assets, where payments for a
majority of Iran’s oil deals are processed. The United States, which already
bans Iranian oil imports, late last year targeted Iran’s central bank.

Tehran had
previously said it would retaliate to a ban on its oil by closing the Hormuz
Strait, a critical shipping lane for crude where an estimated 17.0 million bpd
of oil deliveries passed through in 2011. The U.S. promised to keep the strait
open. A U.S. aircraft carrier just passed through the strait.

The upside was
capped on concern that Greece will be able to reach an agreement with private
creditors over reducing its debt load, looking to wipe out about 100 billion
euros of its $360 billion euro debt load. The talks have dragged on for days
and throughout the weekend without striking a deal. Greece needs to satisfy
officials with the European rescue fund in order to receive its next bailout
installment ahead of a March 20 due date on its debt. The payment due is $14.4
billion euros or $18.5 billion.

Failure to reach accord with lenders and bailout
officials could trigger a chaotic default that is seen harming many other
European countries.

The Commodity
Futures Trading Commission reported late Friday that noncommercial market
players increased their net-long position in NYMEX oil futures through the
week-ended Jan. 17. The funds moved to a better than two-month high net-long
position in crude futures, a two-month net-long high in heating oil futures and
a nearly one-year high net-long stance for RBOB futures.

The growing
net-long position increases the risk for long liquidation selling, with the
March crude futures contract sliding to a one-month spot low of $97.40 bbl
overnight. The news on the EU ban reversed the decline.
Forecasted heating degree days for the week through Saturday (1/28)
continue to trail both year ago and seasonal averages, according to data
released this morning by the National Oceanic and Atmospheric Administration,
with HDDs for the New England and Mid-Atlantic states this week projected at
more than 25% below normal. For the season through Saturday (1/21), HDD
accumulations have trailed seasonal averages by 17%, limiting heating demand

CRANBURY, N.J. (DTN) — New York Mercantile Exchange oil futures with nearest delivery slipped in overnight trade, with the expiring February crude contract registering a three-day low, as talks between Greece and its private creditors over restru

cturing its debt drag on.

Greek officials are negotiating for better terms with its creditors, and need to make progress in order to receive another round of aid in front of a fast approaching due date on some of its debt. Failure to strike a deal potentially reignites concern over the euro zone debt crisis that many now believe have been pushed deeper into the future.

Such an event would translate into lower oil demand, among other issues.

As a result too, the U.S. dollar strengthened in early spot index trading while the euro weakened.

The dollar steadied itself at a three-week low this morning after weakening each day this week. The dollar, in index trading, had surged to a one-year, four-month high prior Friday (1/13), coming alongside news Standard and Poor’s would downgrade the credit rating of nine European Union nations, including France, Spain and Italy, over their debt loads and insufficient policies to address that debt. Conversely, the euro has rallied this week from a better than one-year, four-month low plumbed Jan.

13.

Typically, NYMEX crude futures move in an opposing direction to the greenback, and have followed the path of the euro.

Major U.S. equities are poised to decline after a series of gains, with the S&P 500 surging in January to a six-month high Thursday on data signals implying the U.S. economy is on a growth trajectory, and fourth quarter

2011 earnings reports that have largely been better than anticipated so far. NYMEX crude futures have correlated relatively closely with the S&P 500.

February crude futures, which expire at today’s closing bell, fell to a three-day low at $99.44 bbl overnight, with support at $98.00 and the $97.70 current low for January.

The contango in the calendar spreads are narrowing in front of the expiry, although they have been tight for months, briefly flipping into backwardation in late October, early November 2011.

The February products contracts are holding to a tight inside trading range so far this session.

CRANBURY, N.J. (DTN) — New York Mercantile Exchange oil futures with nearest delivery were higher in range-bound overnight trading, with the crude contract holding near the upper end of Wednesday’s range, bolstered by an unexpected decline in com

mercial crude stocks reported by the American Petroleum Institute.

Oil futures were also supported by further weakening in the U.S. dollar in spot index trading, while the euro edged higher following successful bond auctions by France and Spain, with the two countries paying lower interest on their debt sales. European stocks moved higher, while U.S.

equity indices have rallied this week on growing optimism for the U.S.

economy, with stock index futures higher this morning.

Late Wednesday, the API said U.S. commercial crude inventories were drawn down by 4.089 million bbl for the week-ended Jan. 13 that missed market expectations calling for a build. The steep draw followed a larger-than-expected supply build during the previous week. API data showed total gasoline supply posted a 4.309 million bbl build for the week with distillate supply declining 900,000 bbl.

The Energy Information Administration will release its data set for last week at 11:00 AM ET, delayed by Monday’s federal holiday in observance of Martin Luther King Jr. Day.

CRANBURY, N.J. (DTN) — New York Mercantile Exchange oil futures with nearest delivery are surging in early trading, pushed up primarily as Iran leans on Saudi Arabia to not increase its production should western nations ban Iranian oil imports.

Oil markets were also pushed higher alongside equities as the International Monetary Fund proposed increasing its lending capacity, and as Greece reportedly made headway with private creditors over its attempts to restructure its debt. Additionally, China said it would allow the country’s five largest banks to increase new loans by 5% in the first quarter, as Beijing looks to offset a slowdown in exports.

Meanwhile, nearby delivery RBOB futures surged to a three-month high on news that Hess Corp. would shut the HOVENSA L.L.C. refinery in St. Croix, U.S. Virgin Islands, a joint venture between the company and Petroleos de Venezuela S.A., and convert the refinery to an oil terminal. Hess said today that it made the decision due to steep economic losses, with losses at the refinery totaling $1.3 billion in the past three years with no end in sight. Hess said the losses were due to weak demand for products and new refineries built in emerging economies.

In the Persian Gulf, Iran told Saudi Arabia to be wise, and not to make up for potential lost oil supply to world markets should western nations sanction Iranian oil. The comments follow similar rhetoric made over the Martin Luther King Jr. Day weekend triggered after the Saudis said they would increase their oil production in response to lower exports from Iran amid the possible sanctions.

France has proposed that countries in the European Union ban Iranian oil imports over Iran’s pursuit of nuclear weapons. Tehran denies the charge.

Nonetheless, the EU was set to make an announcement of such sanctions on Jan. 30, but late last week news surfaced that the proposed sanctions would likely be delayed by six months to allow countries such as Spain, Italy and Greece to find alternative supply sources. The United States which does not import Iranian oil, targeted companies doing business with Iran’s central bank, prompting some companies to reduce their oil imports since many of those transactions move through the bank.

Iran said earlier this month that it would shut the Strait of Hormuz, where roughly a third of the world’s oil traverses, should sanctions be imposed. The Energy Information Administration said that nearly 17.0 million bpd of oil moved through the strait in 2011.

This morning, the International Energy Agency revised lower projected global oil demand for 2012 by 200,000 bpd to 90.1 million bpd, which would set year-on-year growth at 1.1 million bpd. The revision follows a 200,000 bpd adjustment lower made in December by the IEA. The Paris-based agency said economic weakness was the reason for the lower projection, while also pointing to a 300,000 bpd decline in fourth quarter 2011 oil demand due to weakening economies and mild winter weather.

“Clear signs of economic weakness tipped global oil demand into a declining year-on-year trend at the end of 2011,” said IEA, saying the decline in fourth quarter global consumption was “its first such drop since the tail-end of the credit crunch.”

CRANBURY, N.J. (DTN) — New York Mercantile Exchange nearby delivery oil futures rallied in overnight trading following Monday’s federal holiday in observance of Martin Luther King Jr. Day on optimism for the U.S. economy in 2012 and growing ex

pectations that China’s central government will implement stimulus measures to spur economic growth.

The market view that emerged earlier this month gained currency after China reported annualized fourth quarter 2011 Gross Domestic Product growth at 8.9%, which was greater than anticipated. Estimates peg Chinese 2011 GDP growth at 9.0% while slipping to 8.5% this year.

In 2011, China took several steps to rein in inflation, including interest rate hikes and requirements that banks hold greater reserves, both aimed at reducing loans that fueled speculative growth in housing. Some analysts expected the Chinese economy to have a hard landing, sparked by an inflated real estate market and drop in exports amid the European Union’s debt problems and austerity measures. Others, including global political risk firm Eurasia Group President Ian Bremmer, expect China to engineer a soft landing, in which Beijing maintains economic growth, albeit at a slower pace.

The U.S. dollar weakened while the euro surged, climbing despite a series of credit downgrades for nine European Union countries issued by Standard and Poor’s on Friday (1/13) over high debt and government policy seen lacking the ability to successfully overcome structural issues in the EU. Following the country downgrades, which included France losing its AAA+ rating while Spain and Italy were each downgraded by two notches, S&P lowered the credit rating of Europe’s rescue fund from AAA+ to AA+.

The overnight rally came despite the end of strikes in Nigeria, a member of the Organization of the Petroleum Exporting Countries, with unions there late last week threatening to shut down the African nation’s oil production. The union called off strikes protesting the end of fuel subsidies after Nigerian President Goodluck Jonathan offered a compromise, subsidizing roughly 33% of fuel costs.

NEW YORK (DTN) — New York Mercantile Exchange oil futures turned higher early Thursday along with a relief rally for equities and the euro after Spain and Italy held successful bond auctions.

Spain sold twice the targeted debt planned whil

e Italy met its target, prompting yields on Italian, Spanish and French bonds to fall. The response to the auctions showed strong investor interest, which comes as a relief for the market that has become accustomed to bad news regarding the euro zone sovereign debt crisis.

The euro rose while the dollar fell, which is bullish for oil prices as investors use oil to bet against the greenback. The European Central Bank also held interest rates steady and investors are now focusing on bullish issues such as U.S. economic optimism and risks to foreign oil supply.

Meantime, a fourth day of nationwide strikes in Nigeria added to the tension between Iran and the West. News reports said tens of thousands of Nigerians stopped work and took to the streets across the nation, protesting a surge in gasoline prices after the government removed fuel subsidies.

The country’s largest oil workers union had threatened to shut down crude oil production as part of the strike but it’s not clear that has happened yet. Such a move would escalate the issue into a crisis for the global oil market since most of Nigeria’s 1.8 million bpd crude exports go to Europe and the U.S. East Coast.

On Iran, Japan pledged today to buy less Iranian oil, boosting a campaign by the U.S. to sanction Iran over its nuclear program. The news followed a meeting between U.S. Treasury Secretary Timothy Geithner and Japan’s Finance Minister Jun Azumi.

Geithner is on a tour of Asia to win support for expanded sanctions.

Asia gets most of Iran’s 2.2 million bpd oil exports, with roughly 425,000 bpd going to Europe.

The European Union is expected to ban imports of Iranian oil later this month despite a threat by Tehran to block the Strait of Hormuz, a key chokepoint that handled 17 million bpd or 19% of global supply in 2011, according to the U.S. Energy Information Administration.

On Wednesday, oil futures fell after data showed huge builds for U.S.

oil inventories while German growth rate fell 0.25% during the fourth-quarter.

NEW YORK (DTN) — New York Mercantile Exchange oil futures were lower early Wednesday as rising domestic oil stocks and worries about slowing economic growth in Germany trumped risks to supply from Iran and Nigeria.

Germany’s statistics o

ffice said initial estimates show the economy contracted about 0.25% during the fourth quarter of 2011 compared with the prior three months. During all of 2011, however, Germany’s gross domestic product expanded 3%, slowing from 3.7% for 2010 because of the euro zone debt crisis.

Analysts speculated the economy may also shrink during the current quarter, which would technically constitute a recession in Europe’s largest economy. However, the gloomy outlook was tempered by higher than expected investor interest in German bonds earlier today.

The euro plunged on the back of the German growth data while the dollar rose, adding pressure on oil and equities. On Wall Street, major stock futures are down, tracking falling European bourses. Oil and the dollar typically trade inverse to each other.

Oil prices were further pressured by data released late Tuesday by the American Petroleum Institute showing U.S. crude inventories climbed by 397,000 bbl during the week-ended Jan. 6. Gasoline stocks surged 1.9 million bbl while distillate fuels added 846,000 bbl.

The U.S. Energy Information Administration is scheduled to release its weekly supply data at 10:30 AM ET.

On Iran, a senior nuclear scientist was killed in Tehran today by a bomb fixed to his car and Iran is blaming its foreign enemies for the incident.

The circumstances of the death remain unclear, but analysts said Iran could retaliate.

Iran already has threatened to block oil shipments through the Strait of Hormuz if the European Union decides to impose sanctions on its oil exports later this month as widely expected.

EU foreign ministers will discuss the issue on Jan. 23, and an official decision could be announced by Jan. 30. U.S. Treasury Secretary Timothy Geithner is currently on a tour of Japan and China, trying to get them to join the ban on Iranian oil. Most of Iran’s 2.2 million bpd in oil exports went to Asia in 2011, according to the EIA.

In Nigeria, a nationwide strike entered its third-day today and tensions are escalating after the country’s biggest oil workers union said it will shut down oil production and export terminals.

Nigeria exported 1.8 million bpd of crude in 2010 mostly to the U.S. and Europe, according to EIA. Concerns over supply from Africa’s top producer could support oil prices.