Oil slips amid growing global woes

Oil prices fell to near $103 a barrel Monday on concern that economic growth will slow across the globe despite a tentative agreement in Washington on a $700 billion bailout package to stabilize the U.S. financial system.

By midday in Europe, light, sweet crude for November delivery was down $3.50 to $103.39 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.13 Friday to settle at $106.89.

In London, November Brent crude fell $3.39 to $100.15 a barrel on the ICE Futures exchange.

Bailout plan goes to House
Congressional leaders and the White House agreed Sunday to a rescue of the ailing financial industry after lawmakers insisted on sharing spending controls with the Bush administration. The biggest U.S. bailout in history won the tentative support of both presidential candidates and goes to the House of Representatives for a vote Monday.

"The bailout package reduces the chance of a complete meltdown," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "But worries on the demand side will continue to weigh on oil prices."

The plan would give the administration broad power to use hundreds of billions of taxpayer dollars to purchase devalued mortgage-related assets held by cash-starved financial firms.

Congress insisted on a stronger hand in controlling the money than the White House had wanted. The government would take over huge amounts of devalued assets from beleaguered financial companies in hopes of unlocking frozen credit.

"It's still a crisis situation," Shum said. "The market is concerned about the depth and breadth of this global downturn."

JBC Energy in Vienna, Austria, also was cautious about the effects the rescue package could have on U.S. economic growth.

"The latest government reports show sales of new homes at a 17-year low in August and orders for durable goods falling stronger than expected," JBC said in a research note. "It is far from certain that (the bailout) will prevent an economic downturn."

Dollar stronger
Prices were also pushed down by a stronger dollar. Investors often buy crude futures as a hedge against a weakening dollar and inflation, and sell when the dollar strengthens.

While the dollar gained as details of the bailout package become known, analysts said the euro was weaker also because of growing economic problems in Europe.

"It is also a question of the euro losing ground due to a continued deterioration in the euro zone," said Olivier Jakob of Petromatrix in Switzerland. "With the rate of bank failures increasing in Europe and the economy slowing more rapidly than expected, pressure will continue to mount on the (European Central Bank) to lower (interest) rates."

The 15-nation euro fell Monday to $1.4361 from $1.4614 on Friday while the dollar rose to 106.23 yen from 106.01.

"The bailout should inject confidence in the markets in the short-term," Shum said. "Longer term, it increases money supply, inflation and likely weakens the dollar - all of which supports oil prices."

Gas prices fall for 10th straight day

Gas prices fell for their 10th straight day, dropping almost 19 cents during the period, according to a nationwide survey of credit card swipes at gas stations.

The average price of unleaded regular fell by 1.6 cents to $3.667 a gallon on Saturday, from $3.683 a gallon, according to survey results from the motorist group AAA.

Gone are the high prices that followed Hurricanes Ike and Gustav weeks ago. But prices are slightly higher than a month ago, when the national average for a gallon of unleaded was $3.660. They are 30% higher than a year ago, when the average was $2.805.

The record high was on July 17, when the nationwide average for gas prices was $4.114 a gallon.

For now, Hawaii and Alaska are the only two states where gas costs more than $4 a gallon. In Alaska on Friday, the statewide average for unleaded was $4.284 a gallon, according to AAA, and the average was $4.262 in Hawaii.

The cheapest gas was in New Jersey, where the average was $3.394 for a gallon, and in Oklahoma, at $3.370 a gallon.

Oil prices slip on fresh demand worries

Oil prices retreated Friday as the largest bank failure in the nation's history and uncertainty about the fate of the $700 billion bailout raised fresh concerns about the economy.

As Wall Street buckles, without clarity as to when relief should arrive from Washington, and the economy continues to sag, demand for oil will remain weak, sending oil prices lower.

Oil eased $2.46 to $105.56 a barrel. On Thursday, crude futures for November delivery settled up $2.29 to $108.02 a barrel on the New York Mercantile Exchange as the oil market focused on the way that the bailout plan would work to devalue the dollar.

Crude oil is traded in U.S. currency around the world, and so a devalued dollar means that crude oil becomes more expensive in dollar terms.

But as oil prices resumed their slide Friday, inflationary concerns took a back seat to the continued collapse of the economy, which was initially weakened by the meltdown of the housing industry.

Federal regulators seized Washington Mutual (WM, Fortune 500) and announced Thursday night that JP Morgan Chase (JPM, Fortune 500) had acquired the bank's $307 billion in assets and $188 billion in deposits. The acquisition marks another sting in a biting chain of failures on Wall Street in the past couple weeks, pulling into focus just how weak the U.S. economy has become.

There were hopes that the $700 billion bailout plan that President Bush announced Saturday in an attempt to loosen credit on Wall Street would be passed quickly. However, a proposed settlement fell through Thursday when Congressional Republicans raised objections.

The heated disagreements across party lines and the inability of key lawmakers to reach an agreement was one more sign that the already beleaguered economy may have to weather through a prolonged period of distress. On Friday, President Bush made a brief televised statement promising a rescue plan will pass..

The longer the economy remains under high stress and credit markets stay frozen, the weaker demand for oil becomes.

Oil hit a record high of $147.27 a barrel on July 11, but has fallen more than $40 since as weak demand has overpowered otherwise significant supply concerns.

Hurricanes Gustav and Ike both smashed through the Gulf of Mexico, shutting down the production and refinery rich region for a period. Recovery in the region has been slow.

And violence in Nigeria has continued, threatening pipelines and limiting oil production from the region.

Oil prices slip on economic uncertainty

Oil prices slipped Thursday as investors weighed supply delays in the Gulf of Mexico against concerns that the U.S. credit crisis will slow global economic growth and hurt crude demand.

Light, sweet crude for November delivery was down 24 cents at $105.49 a barrel in electronic trading on the New York Mercantile Exchange by afternoon in Europe. The contract fell 88 cents to settle at $105.73 on Wednesday.

About 66% of oil production and 61% of natural gas output in the Gulf of Mexico remains shut-in after the passage of Hurricanes Gustav and Ike, according to the U.S. Minerals Management Service. The Gulf area is home to a quarter of U.S. oil production and 40% of refining capacity.

Mexico's state oil company said Tuesday it temporarily reduced oil production because U.S. refineries damaged by Ike have canceled shipment orders.

Petroleos Mexicanos, or Pemex, lowered its daily output by 250,000 barrels a day. The company said it expects production to be back to normal by the end of the week. Pemex produced an average of 2.75 million barrels a day in August, the latest available output figure.

OPEC's decision earlier this month to cut production by 520,000 barrels a day and militant threats to Nigerian oil operations have added to the supply shortage.

In addition, Royal Dutch Shell PLC was forced to close one of its gasoline-making units at Pernis, Europe's largest oil refinery, on Wednesday night after a mechanical fault. The closed unit has a daily processing capacity representing 10 % of the total 400,000 barrel daily capacity of the refinery, which is located in the Netherlands.

"We don't know when it will reopen," said spokesman Wim van de Wiel.

Crisis may impact crude demand
Traders are also concerned about the turmoil in the U.S. financial system will impact economic growth and crude demand from the world's biggest economy.

President Bush strongly urged Congress to act quickly to pass a $700 billion financial industry bailout, warning Americans in Wednesday speech that failing to act fast risked dire economic consequences such as disappearing retirement savings, rising foreclosures, lost jobs and closed businesses.

"Markets hate uncertainty, and this thing is hanging over everybody's head," said Gavin Wendt, head of mining and resources research at consultancy Fat Prophets in Sydney. "I don't think anyone is too keen to take a position in oil either way right now."

With the administration's original proposal facing significant changes in Congress, top House leaders issued an upbeat statement late Wednesday saying there was progress toward revised legislation that could pass. Bush summoned presidential candidates Barack Obama, John McCain and legislative leaders to an extraordinary White House summit in hopes of hashing out a deal.

Oil investors are also eyeing the impact the bailout plan may have on the value of the dollar. Investors often buy crude futures as a hedge against a weakening dollar and inflation.

The price of oil "depends on the dollar, it has nothing to do with oil demand and supply," Chakib Khelil, the president of the Organization of the Petroleum Exporting Countries, told journalists at a press conference in Algiers on Wednesday.

He said that oil prices would rise if the dollar weakens, as investors would use oil to hedge against the depreciating currency.

The dollar fell slightly in morning trading on Thursday against both the 15-nation euro and the Japanese yen. The euro bought $1.4708, up from $1.4658 late Wednesday in New York. The dollar slipped to 105.89 Japanese yen from 105.93.

In other Nymex trading, heating oil futures for October delivery fell 3.33 cents to $2.9800 a gallon, while gasoline prices rose 0.5 cents to $2.5997 a gallon. Natural gas declined 8.5 cents to $7.594 per 1,000 cubic feet.

In London, November Brent crude fell $1.71 to $100.74 a barrel on the ICE Futures exchange.

Oil rises as market waits

Oil prices rallied Wednesday as the market waits to hear from Congress about the proposed $700 bailout plan and for weekly supply data from the government.

Oil climbed $1.24 at $107.85 a barrel. On Tuesday, oil slipped $2.76 to settle at $106.61 a barrel as the market refocused on how the dour economic situation has crimped demand.

Bailout plan: The oil market has been waiting to hear from Congress about a $700 billion proposed bailout plan for beleaguered financial services companies. The debate over the rescue was very heated Tuesday.

The plan could pull oil prices higher, depending on the specific terms of the plan and depending on the economy's reaction to whatever plan is adopted.

If the bailout were passed and served to jumpstart the lethargic economy, the oil market hopes that demand for energy would recover to healthy levels. If the economy recovers and demand for oil recovers, then oil prices jump.

Dollar: At the same time, the plan involves a unprecedented shot of liquidity to the market and the sheer quantity of dollars being pumped into the market would devalue the greenback. Crude oil is traded in U.S. currency across the globe, and so when the dollar loses value, crude prices increase.

In the past couple sessions, oil prices have zig-zagged, and the dollar's volatility has contributed to the movement in the price of oil.

On Wednesday, "the dollar is down just a bit again and that is always positive" for oil prices, said Neal Dingmann, senior energy analyst for Dahlman Rose.

Demand: However, the fact that the economy is in desperate need of a lifeline highlights just how weak the economy is, and raises fresh concerns about demand. A limping economy does not have a healthy, growing appetite for oil.

The market continues to swing off the perceived level of demand for energy and the level of demand for energy swings off the strength of the economy. Therefore, the oil market watches the broader economy for clues on a daily basis.

Goldman Sachs Group (GS, Fortune 500) announced Tuesday that it will receive a $5 billion investment from Berkshire Hathaway. Goldman will sell $5 billion of preferred stock to Warren Buffett's company, which was a much-needed vote of confidence for the investment bank in a time of unprecedented uncertainty on Wall Street.

"When you have support either from Buffett or the Treasury Secretary," said Dingmann, "any support for the underlying financial markets boosts the overall market, or thus overall demand, which is positive for oil prices."

Supply report: The government's weekly supply oil data was due out later Wednesday from the Energy Information Administration. The market watches the report very closely in order to gauge demand for energy. The report should also give some indication of the stage of recovery of the Gulf region after Hurricanes Gustav and Ike.

"This will definitely give us another glimpse on the aftereffects of how the storm has played out," said Dingmann.

Crude oil stockpiles were expected to increase by 1.6 million barrels, according to a consensus estimate of industry analysts surveyed by Platts, a global energy information provider.

Gasoline stocks were expected to drop 5.1 million barrels and the Platts survey forecast that distillate stocks - used for heating oil and diesel fuel - would be 1.8 million barrels lower than the previous week. The Platts survey forecast that refinery utilization or run rate would fall 3.5 percentage points to 73.9%.

Gustav, Ike: Hurricane Gustav slammed the Gulf of Mexico on Labor Day and Hurricane Ike hit the Coast of Texas nearly a week later. The storms shook the production and refinery-rich region.

The Minerals Management Service reports that 23 manned oil platforms have been destroyed by Hurricane Ike. Of the 694 remaining platforms, 203 production platforms, equivalent to 29.3%, were still evacuated.

According to the most recent situation report from the Department of Energy, 76.6% of production in the region remained shut in and 65.5% of natural gas production was still shuttered. With 6 refineries in Texas still shut down, nearly 1.7 million barrels per day less oil have been processed in the region, according to the DOE.

Gas prices: Down 10 cents in 4 days

Gas prices fell another 2 cents, marking the fourth straight decline after rising more than 18 cents in 8 days following Hurricane Ike, according to a nationwide survey of credit card swipes at gasoline stations.
The average price of unleaded regular dropped 2 cents to $3.757 a gallon, from $3.777 a gallon, according to the survey released by motorist group AAA.
While prices have remained under $4 for some time, they are still much higher from a year ago, when gas was selling for less than $3 a gallon.
Current prices are about 34% higher from a year earlier at this time. Still, prices are 54 cents, or 13%, down from the record high price of $4.114 a gallon set on July 17
Gas prices had been moving higher following the devastation left behind by hurricanes Ike and Gustav.
More than 30 refineries, which convert crude oil into usable gasoline, had shut down or were operating with reduced capacity in the Gulf region after the storms hit. The number has since fallen by more than half, restoring gasoline supply to retailers and easing consumer prices.
Many crude pipelines in Texas and Louisiana had also shuttered ahead of the hurricanes. Those are slowly coming back on line.
Lower oil prices have also helped lower the cost of retail gas. Crude has been moving lower since mid-July amid weakening demand, losing more than a third of its value since it reached a record of near $150 just two months ago.
But oil prices rallied back above $104 a barrel Friday amid growing optimism that the government's various rescue plans will help ease the credit crisis currently stifling the U.S. economy.
Meanwhile, only three states now continue to report gas prices above $4 a gallon: Alaska, Hawaii and Illinois. Alaska continues to be the state with the most expensive gas prices, at $4.339 a gallon. The cheapest gas can be found in New Jersey, where gas cost $3.468 a gallon, according to AAA's Web site.

Countrywide e-mail snafu angers borrowers

The chairman of beleaguered Countrywide Financial Corp. raised eyebrows and tempers with his snippy reply to an e-mail plea from a man who said he was in danger of losing his home.

"Disgusting," Angelo Mozilo wrote in his inadvertent reply to an e-mail from Daniel Bailey Jr. who had asked the company to modify terms of his adjustable-rate mortgage.

Bailey said he didn't fully understand the terms, was wrongly told he could refinance after a year and was on the verge of losing his home of 16 years because of unaffordable payments.

Bailey's e-mail went to 20 Countrywide addresses. He used language from a form letter on the Web site LoanSafe.org, which offers advice to borrowers in trouble.

Countrywide said mass e-mails have flooded its inboxes and disrupted operations.

"This is unbelievable," Mozilo wrote Tuesday. "Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the Internet. Disgusting."

Mozilo apparently clicked "reply" instead of "forward," sending his comments back to Bailey.

Flame war: Bailey posted the response on a LoanSafe forum, touching off a furor on housing Web sites.

A comment posted on loanworkout.org said Mozilo's e-mail was "a perfect example of the 'help' they can expect to receive when contacting their lenders."

Another comment on the Web site read: "If borrowers want the freedom to take out credit for hundreds of thousands of dollars, they are equally responsible to not sign something they don't understand."

Late Tuesday, Countrywide issued a statement saying the company and Mozilo "regret any misunderstanding caused by his inadvertent response to an e-mail by Mr. Bailey. Countrywide is actively working to help borrowers like Mr. Bailey keep their homes."

Last week, a federal judge ruled that a shareholder lawsuit against Mozilo and other Countrywide (CFC, Fortune 500) executives and directors should go to trial. The plaintiffs claim the top officials failed to provide enough oversight of the lender and misled shareholders about the company's true financial state.

According to congressional figures, Countrywide lost $1.2 billion in the third quarter of 2007 and another $422 million in the fourth quarter as the subprime mortgage crisis hit. The company's stock fell 80% between February and the end of the year.

During the same period, Mozilo received a $1.9 million salary. He also received $20 million in performance-based stock awards and sold $121 million in stock.