GAS/OIL

[nnuut]

What effect do you think the problem with Russian Oil will have on the market. How long can we stand the Oil prices at these levels? Im concerned it may stop or slow down any chance of a rally.:%

[Pete1]

The oil situation has not helped but there have been other considerations including concerns of a second half slowdown, interest rate increases,andfears of domesticterrorist attacks.

[Rolo]

Those have been my only stocks that have not gotten beaten up this whole time! Profits from my oil tanker stocks have kept my portfolio afloat.

VLCCF

NAT

TNP

SUN

Don't forget to look at the dividends; some are huge.

My thoughts:

When gasoline prices hit $1.60/gal., I figured we would see $2 and stay there. If you think about it, they have not risen that much since the Gulf War (they went up, then back down), so I see this as a "catching up" from an inflationary point-of-view.

Since demand for gasoline has increased steadily all this while, and spiking now that high-performance vehicles are more in demand (Can you say "HEMI"?) and the fact that we have, or will have, become desensitised to the price hike and have grown accostomed to paying $2/gal, I am not worried about oil prices. Russia itself...I do not know much about it, only that LETRX made a killing.

[Mike]

As long as the prices are stable, that is what matters most. The volatility is what spooks people.

The world is producing oil very close to its capacity. I've read there's about 1 million bpd to spare at this point, which really isn't much. In other words, if anything goes wrong in the oil production or refining sectors, prices will likely go higher.

And yes, oil has lagged way behind inflation over the past 60 years. If the price of oil and gasoline rose like everything else, we'd probably be paying $2-3 per gallon for regular unleaded anyway.

By the way, the Russian oil situation has already been accounted for by the oil traders, I think. That is why it is trading at such a high level for september delivery.

Upon further review, I'm not sure how much the oil traders are accounting for the Russian situation. Obviously, they're on edge and prices are spiking again, but if Yukos has to shut down its operations, I don't know how much higher prices would rise in response to that (perhaps $50 isn't out of the question). Below is the latest article I could find on the situation from the AP:

Oil prices hit new high
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Russia threatens to shut down big producer
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BY BRUCE STANLEY
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Associated Press
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LONDON — Crude oil shot to new highs Wednesday, hitting $43 a barrel in New York, as markets reacted to a threat by Russian authorities to shut down most of the production from that country's largest oil company.

Yukos, which produces 2 percent of the world's oil, has been battered by a gigantic overdue back taxes bill. The company said it does not have the cash to pay its tax debt. And, with its assets frozen by court order, Yukos roiled markets Wednesday by saying it might have to halt its main production units within a few days.

In Wednesday trading, September contracts of U.S. light crude spiked 3 percent to $43.05 a barrel on the New York Mercantile Exchange — the highest level since the exchange began offering the light, sweet crude contract in 1983. Prices eased a bit to settle at $42.90, up $1.06 — still a record close. The previous high was $42.33 on June 1.

In London, Brent crude for September delivery reached $39.68 a barrel on the International Petroleum Exchange, beating the previous high of $39.65 on Oct. 12, 1990, when Iraqi troops invaded Kuwait. Prices there eased as well, and settled up 99 cents at $39.53.

"The Yukos thing could dramatically affect global oil supplies," said Adam Sieminski, an oil price strategist at Deutsche Bank in London.

Crude supplies are already extremely tight, with Iraq's output hampered by saboteurs and most producers already pumping as much as they can. Saudi Arabia, the only producer that still has significant spare capacity, has recently boosted its production by about 1 million barrels a day, but much of this fresh oil has yet to reach customers and replenish their depleted inventories.

Yukos pumps an estimated 1.7 million barrels a day and exports about half of its output.

"The Saudis just spent the last three months putting an additional 1 million barrels on the market, and the action in Russia threatens to take 1 million off," Sieminski said. "Do we think this is really going to happen in Russia? No. But does anybody know for sure?"

Russian media reports cited a letter sent by Yukos lawyers to Justice Minister Yuri Chaika regarding a bailiffs' order telling three Yukos production subsidiaries to cease all sales of company property. Yukos officials repeatedly have warned that the company is being driven toward bankruptcy.

Yukos spokesman Alexander Shadrin said the letter asked the Justice Ministry and bailiffs to explain the order. If they confirm that Yukos can no longer put its crude into pipelines for shipment, "then in two to three days we will have to stop oil extraction," Shadrin told Associated Press Television News.

If Yukos can no longer export, there is "some prospect" that the United States and other major oil-consuming countries might decide to tap their emergency stockpiles of crude to try to dampen prices, argued Michael Rothman, chief energy strategist at Merrill Lynch in New York. These stockpiles contain about 1.4 billion barrels, half of them in the U.S. Strategic Petroleum Reserve.

Rothman said he foresees U.S. crude reaching as much as $43.50 a barrel within the next 30 days, but added that such prices aren't sustainable "given the obvious political discomfort among both exporters and consumers."

Other analysts weren't so sure.

"Yukos is just a psychological event," said Peter Gignoux, a London-based oil adviser for GDP Associates in New York. "There's a doomsday machine out there that could easily drive prices higher."

On the Nymex, August gasoline futures closed up 5.11 US cents at 1.2954; August heating oil rose 2.18 cents to settle at $1.14 per gallon; and August natural gas climbed 5.9 cents to close at $6.048 per 1,000 cubic feet.

[nnuut]

Good thing they came off that today. Looks like the trend is up to me. Nothing great for now, but mabye coming out of the HOLE?:ooUp, Up until Oct.:cool: