Oil Rises U.S. data shows crude inventories drop, but gasoline stocks up

Oil prices rise TheStar.com - Business - Oil prices rise

U.S. data shows crude inventories drop, but gasoline stocks up

January 09, 2008

THE ASSOCIATED PRESS

NEW YORK – Oil prices rose today after a U.S. government report showed crude oil stockpiles fell for the eighth consecutive week but gasoline supplies swelled.

Fears of further violence in Nigeria, the world's eighth-largest oil producer, also supported prices.

Crude inventories fell by 6.8 million barrels, or 2.3 per cent, to 282.8 million barrels during the week ended Jan. 4, the Energy Department's Energy Information Administration said in its weekly report.

The drop was more than eight times the 800,000 barrels analysts predicted, according to a survey by Dow Jones Newswires. However, gasoline inventories beat expectations, rising sharply by 5.3 million barrels, or 2.6 per cent, to 213.1 million barrels. Analysts forecast stockpiles would climb by only 1.6 million barrels last week.

"This was really a mixed report, not a bullish report," said Tim Evans, an analyst at Citigroup Inc. in New York.

Contributing to the drop in crude oil stocks were efforts by Gulf Coast refineries to minimize their inventories, which are subject to year-end taxes, he said. Crude supplies also tend to rebound early in the year, he said.

"When we have weak gasoline demand, as we do now, and when we have swelling gasoline inventories, as we do now, it's hard to make the case that the overall petroleum market is critically tight," Evans said.

Light, sweet crude for February delivery added $1.36 to US$97.69 a barrel on the New York Mercantile Exchange.

Gasoline prices in the United States climbed 0.66 cent to $2.4805 a gallon.

At the pump, gas prices dipped 0.1 cent overnight to a national average of about $3.10 a gallon today, but remain well above the year-ago average of $2.30 a gallon, according to AAA and the Oil Price Information Service. The Energy Information Administration on Tuesday said gas prices are expected to average more than $3 a gallon through 2009 and peak near $3.50 this spring.

In London, February Brent crude rose $1.04 to $96.58 a barrel on the ICE Futures exchange.

The weekly report also showed that inventories of distillate fuel, which includes diesel and heating oil, rose by 1.5 million barrels to 128.7 million barrels. Analysts had expected a drop of 300,000 barrels.

Heating oil futures rose by 3.06 cents to $2.6669 a gallon. Natural gas prices jumped 11.5 cents, selling at $8.082 per 1,000 cubic feet.

U.S. refineries ran at an average 91.3 per cent of total capacity, an increase of 1.9 percentage points, beating the expected 0.1 percentage point gain, the report said.

Reports that Nigerian militants are planning attacks on the nation's oil facilities also sent prices higher. In a research note, Vienna's PVM Oil Associates noted that the country had "already lost some 15 per cent of crude output capacity" due to violence. Still it forecast increased production of around 2.35 million barrels a day for this year, up from last month's 2.22-million barrel daily output.

Oil was also being supported by a surge in the price of gold, analysts said. Gold futures surged above $880 an ounce Tuesday to their highest level ever, not accounting for inflation.

A monthly EIA report Tuesday predicted oil supplies will be tight this year but ease in 2009. The EIA predicted oil prices will average $87 a barrel this year, up from a previous estimate of $85. The average price will then fall to $82 a barrel in 2009, it said.

A barrel of light, sweet crude surpassed $100 a barrel on the New York Mercantile Exchange for the first time last week.

Canada A slowdown, but no recession?

Slowdown, but no recession?

TheStar.com - Business - Slowdown, but no recession?

AP FILE PHOTO

Bottles of Cott ginger ale move down the bottling line at the company's plant in Mississauga, Ont., in 2001.

But U.S. slowdown 'will feel like a recession' says BMO's Sherry Cooper

January 09, 2008

THE CANADIAN PRESS
OTTAWA — Canada and the U.S. are heading for the worst economic performance in five years and may already be in the midst of a mild recession, says a report from an economic forecasting group.

Global Insight Canada has increased the chances of Canada experiencing a recession during the first half of 2008 — two consecutive quarters of negative growth — to 25 per cent.

The chances of the U.S. being in a slump during the same period are even greater, at 40 per cent, the economic forecasting firm said today.

While the report still forecasts both economies to stay above water — if barely — Global Insight’s managing director Dale Orr said last week’s “quite discouraging” employment numbers in the U.S. and weaker industrial production make “us more concerned than we were a month ago.”

On Friday, the U.S. reported that hiring practically stalled in December, driving the country’s unemployment rate up to a two-year high of five per cent. Canada’s next jobs report will be released Friday.

Global Insight says the most likely scenario is that Canada’s economy will grow 2.2 per cent this year, a little better than the U.S.’s 1.9 per cent. Both would be the worst economic performances since 2003.

In that forecast at least, the Toronto-based firm is in line with views presented by Canada’s five big banks at the annual outlook breakfast at the Economic Club of Toronto today.

Economists from the banks agreed that while Canada’s economy will slow from last year’s anticipated 2.8 per cent advance, the retreat won’t be all the way to the negative side.

But Global Insight also argues that the chances of what it calls the “pessimistic scenario” becoming reality are increasing. That would happen if the U.S. housing and financial sectors, already hit hard by the subprime mortgage crisis, weaken further, business productivity and investment slows, and oil prices remain at record levels.

“In this scenario, the U.S. economy declines by 1.7 per cent in the first quarter, 0.5 per cent in the second quarter and moves up to no growth in the third quarter of 2008,” the report says.

Canada will be sideswiped by such a development south of the border, the report says, because of lower demand for exports of softwood lumber, autos and auto parts, resulting in higher unemployment to 6.2 per cent from the current 5.9 per cent.

Even in the pessimistic scenario, however, Canada does not fall into recession, although growth will be microscopic in the first half of 2008 and only reach 1.4 per cent for the year as a whole. The 25 per cent risk of a Canadian recession is based on the U.S. economy performing worse than in the pessimistic scenario.

“If a person wants to be an optimist and think there will be no recession, they can be,” said Orr. “But if you want to be a pessimistic, there is evidence there to support that view as well.”

Orr notes that the odds of Ontario, Canada’s manufacturing heartland, falling into a recession this year are the same as the U.S. at 40 per cent because of the province’s disproportionate dependence on exports.

But even Alberta would suffer under the pessimistic scenario, due to reduced demand in the U.S. for its energy exports.