Thursday – Turkeys Stuffing Oil With Turkey

Short post as I'm traveling today. I will be around until just after the gas numbers are reported and then intermittently available today and tomorrow.  

Cramer Watch 1: Scoop sent me an email telling me Cramer claimed an 11% gain after recommending (HAL); said it's one of the best calls he's ever had. What's that degree in? A major in Creative Journalism with a Minor in Historic Revisionism? I distinctly remember the "get out of HAL because it will never get out of its trading range" call, "not best of breed", and "sell, sell, sell" just 2 months ago. This guy should run for office. 

Cramer Watch 2 (and this one has multiple parts): Cramer did a segment on his show on dry bulk shipping. Essentially he said to:

  • Buy them because they are up a lot and stocks that go up a lot will go up a lot more.
  • Buy them before their next dividend because stocks run up before a dividend is paid. Ok, this is an illegal practice called dividend selling. You learn this is illegal when you take your Series 7 when you are 21 or 22. It's illegal for brokers to engage in this activity but not Cramer because he's a pumper, not a broker. Here's a good link on Understanding Dishonest Broker Tactics. If a broker ever tells you to "buy the dividend" hang up the phone. 
  • He then explained what the dry bulk shippers do by sucking what looked like sand from a bucket with a straw and then he blew it out on a foot long model of an aircraft carrier.
  • And finally, he said he's the only one out their talking about Dry Bulks as an investment because no one understands the business. I bet Jefferies and Cantor Fitzgerald might take issue with that along with the nine other houses that follow his best risky pick (DSX). Heck, after the sand from bucket to toy ship show, even I understand it now.

Scud Watch: While I'm bashing others I need to take a little time for some self-flagellation (got to get in the spirit of things for the Catholic wedding I'm in this weekend). My (ESV) $50 puts will go down as a complete loss. So to the "hate your money" trade on the (CAM) $110s unless there is a miracle which I really doubt. The (ESV) $55 puts will probably be a 75% loss as I'll be tapping the bid one way or the other before I have to catch a plane tomorrow morning.  The last put on the list is an (NBR) put which I may hold until Friday and which still might improve a bit but I'm not holding my breath. On the call side, my $115 October (RIG)s will get punted early this morning for a good sized loss.    

In Today's Post:

1) Commodity Watch

2) Stocks Of Interest

3) Oil Inventory Review

4) Natural Gas Preview

5) Holdings Watch

6) Odds & Ends


Commodity Watch

  • Crude Oil closed down yesterday after a volatile session in which it failed to breach $89. The bulls seem to be completely technically driven at this point meaning that they need to get high after high or their confidence is shaken. At this point the greater fool theory seems to be getting a little tired. Oil is trading up $0.50 in early, volatile trading.
  • Natural Gas traded up $0.07 to $7.44 before today's storage report. Gas is trading off a couple of cents this morning.
  • CHK commented that it is holding off on expanding drilling in the Fayetteville Shale. They commented that prices have been cut in half since the play's early explosive growth in 2005 and that the economics did not make the test for boosting their rig count from 11 to a previously planned 16 this year and may not in 2008 as well. Comment: a thinly veiled threat to Arkansas legislators not to be too hasty in raising severance taxes. More on this next week.

Stocks of Interest Today Watch:

  • Swift Energy may be one step closer to punting its Kiwi sub. 
  • (SFY) has wanted to sell it's New Zealand assets for some time now and last night New Zealand Oil & Gas (NZOG) said they plan to double production in New Zealand by 2012 through a combination of acquisitions and exploration. Perfect. They're already in many of the same fields and wells together as partners.
  • Oily little SFY (oil was 65% of 2Q07 production) is planning to focus its volume growth efforts on the U.S. and has already retained Scotia to advise on a sale of the NZ piece (12% and 13% of 2Q production and YE06 reserves respectively). Scotia should be able to get them $2 to $2.50 and Mcfe for those assets or $210 to $265 million. Who wants to worry about a troublesome asset on the far side of the planet which from day 1 was wrought with delays, lower than expected and declining production, weak prices, and higher than expected costs? I say good riddance to the Kiwi Albatross. 
  • Besides, SFY just did a producing property acquisition last week in South Texas and is flush with new inventory to drill. What's even more convenient, the high end of my sale price range above would pay for the S.Texas acquisition. Neat huh?
  • Hopefully a tumble in oil can pull this stock down a bit so we can take a position prior to earnings and the divestiture. 
  • Chinese Oils Reach Escape Velocity. Just calling the move to your attention for now. I'll have a piece out next week.


  • (NE) Reports Slightly Better Than Expected 3Q #'s. They reported $1.18 vs an expectation of $1.17. There is a 4 cent charge in the $1.18 making the comparison $1.22 vs $1.17. The beat was driven by better recent dayrates and  increased contract drilling. Top line beat by 4% as well. Their JU rigs, which comprised about 2/3rds of their fleet are all located in international markets. Their GOMex rigs are all deepwater units. Nice chart with the stock trading under 8x could be interesting. Will try to listen to the  2 pm est conference call this evening.

Your Tax Dollars At Work Watch: Probably a good thing for the ethanol companies if the current farm bill passes.  Of course it stinks if you pay taxes and I'm sure Bush will veto it but it will be interesting to see the fight over more sugar subsidies.

Oil Inventory Review In A Nutshell: The oil was bigger than expected but not shockingly so and by some estimates just before the report it was actually in line. Gasoline was the hardest to explain and seemingly bullish until you see that all of the gain in stocks came from blending components and that production and imports were down while demand rallied. Finally, the distillate estimate was a complete brick. Yesterday I offered a little anecdotal evidence about the pinch high HO prices have been putting on orders...and there you have the data.


  • The Crude Number Was Bearish. True, we are now down 4% from last year but the build in stocks brought inventories to 8% above the five year average for this week in history. Clearly the number in a vacuum would have to be perceived as bearish relative to expectations.
    • CNBC did their level best to put a bullish spin on the numbers...simply by stating that the number was bullish. When all else fails just say something enough times and people will believe you.
    • Here goes nothing: it was bearish, it was bearish, it was bearish. Ok, that's enough time wasted on what CNBC and their guests think about the number. I could really care less. Let me know when they get bearish and I'll start buying contracts. 



  • Gasoline: Blending components responsible for the entire build in inventories. At first blush the inventory report was a bit of a head scratcher: lower production and imports plus higher demand yielded a big build in stock?! Then you see the jump in blending components and things are not as bearish for gasoline cracks as you would otherwise think.

Production: On trend for this time of year.


Imports: down 230,000 bpd from the prior week but within the expected range for the season.

Demand: Increased again. Funny how the peak driving season is long past but we seem to be experiencing "Indian summer" demand despite prices that are a stunning 25% higher than year ago levels.


Stocks - Total Gasoline Stocks Edging Back Into The Historical Range... The following chart is the EIA's typical gasoline storage range and current year chart which shows inventories edging back into the low end of the range. The word Total is important because it includes blending components.


...But Finished Gasoline Stocks Were Unchanged This Week And Remain Near Record Lows. This is a chart I put together using EIA data and excluding blending stocks from the equation. Why would you do this you ask? Because blending stocks cloud the long term picture as they have changed over time and don't represent the same "road supply". This is what the Citigroup analyst was getting at last week when he upgraded (VLO) and (SUN) last week citing their strong positions in ethanol. You need ethanol to blend to make up for the low gasoline stocks.



  • Distillates: The 1 million barrel build was the big surprise to analysts although heating oil managed to close flat. This time of year we are generally starting to eat away at inventories but the anecdote about customers only taking half their usual loads is obviously not an isolated story. The increase came almost entirely from the dirtiest category (heating oil used to heat homes) which offset a small draw in over the road diesel. While total distillate inventories remain near the top of the range, fuel oil for home and other heating needs remain 19% below year ago levels in New England. High prices may result in continued builds until winter actual shows up. 

 Natural Gas Preview

  • My Number: 80 Bcf. Imports were off another 0.6 Bcfgpd but cooling demand dropped off substantially from the prior week while heating demand was up but still not near normal. My number should be perceived as somewhat bearish as it would substantial chew away the recently built but small deficit to year ago storage levels.
  • The Street's Number: ??? Bcf.

Holdings Watch:

CALLS No Action


  • (SU) - bought the December 95s for $2.95. Last bid $2.55. 


Odds & Ends

Analyst Watch: (CRZO) downgraded to neutral at SunTrust, EGLE cut to neutral at UBS, Cantor raised price targets on many of the drybulk shippers.




69 Responses to “Thursday – Turkeys Stuffing Oil With Turkey”

  1. 1
    aaatest Says:


  2. 2
    Sambone Says:

    3:20 am EST

    Nymex Steady, Market Uneasy Over Winter Supply

    Dow Jones Newswires

    SINGAPORE — Crude oil futures inched higher Thursday in Asia on short-covering ahead of next week’s contract expirations, and as a “buy the dips’ mentality limited the market’s downside.

    Despite weekly U.S. oil data overnight coming in unfavorably for prices to stay at record levels, expectations for fundamentals to stay tight in the near term also kept sentiment firm.

    “With refinery runs now higher than last year, and demand relatively flat at the top of the output barrel, product availabilities continue to improve,” Paul Horsnell, head of energy research at Barclays Capital, said in a report.

    “In all, this is some softer data, but it is perhaps unlikely in itself to pause the move up for very long,” he said.

    On the New York Mercantile Exchange, light sweet crude for November delivery traded at $87.90 a barrel at 0700 GMT, up 50 cents in the Globex electronic session.

    The front-month contract expires at the close of trading next Monday.

    Heating oil futures for November rose 64 points to 232.53 cents a gallon, while November reformulated gasoline blendstock changed hands at 215.44 cents, up 78 points.

    Nymex crude on Wednesday settled lower for the first time in six sessions — the last three were in record territory — after the U.S. Energy Information Administration reported across-the-board builds in the country’s crude and products stockpiles.

    While the increases were modest, they took some shine off the bull run that saw prices spiking to $89 a barrel at one point, up more than 48% on year.

    In the week to Oct. 12, commercial crude inventories rose 1.8 million barrels while gasoline stock levels — still near all-time lows — were up 2.8 million barrels.

    Distillates, which include heating oil and diesel, gained 1 million barrels.

    Refinery crude run rates averaged 87.3% of capacity, down half a percentage point on week, the EIA said in its Weekly Petroleum Status Report.

    While concerns lingered about a possible supply squeeze during the Northern Hemisphere winter, the weak numbers presented traders an opportunity to cash out.

    “The market is still gripped by a variety of supply fears; some are real and many are perceived, but until some news item or data reading changes the market’s mindset here, players will be content to keep buying the dips,” Edward Meir, an analyst at MF Global, said in an overnight note to clients.

    He pointed to uncertainties over how the security situation between Turkey and Iraq would develop, as well as the reluctance of the Organization of Petroleum Exporting Countries to pump more oil.

    At 0700 GMT, oil prices on London’s ICE Futures exchange were mixed, with Brent crude for December up 28 cents to $83.41 a barrel.

    November gasoil traded at $723.25 a metric ton, down $4.75 from Wednesday’s settlement.

    —By Yee Kai Pin, Dow Jones Newswires

  3. 3
    zman Says:

    NE moving to the upside should be a positive for RIG and not ESV.

  4. 4
    Sambone Says:

    Cramer #1, yep he did the same thing with CHK, so that’s why I don’t like the guy. PT Barnum

  5. 5
    Sambone Says:

    US dollar getting spanked again.

  6. 6
    dooch Says:

    any thoughts on NOV getting whacked this week. Down almost $5 since Barron’s recommended it on Sat. They report earnings mon. Their trend is to underpromise and overdeliver. Any thoughts?

  7. 7
    Sambone Says:

    Weather – Nada

  8. 8
    Sambone Says:

    NOAA – “Above normal Northeast temps, November to January”

  9. 9
    Nicky Says:

    Morning all. What is the spin behind this mornings rally in crude?

  10. 10
    Sambone Says:

    9:57 am EST

    Nymex Crude Rises As Dollar Weakens


    NEW YORK — Crude oil futures rose Thursday, heading closer to their all time intraday record of $89 a barrel as traders focused on continued dollar weakness, which has been a major factor in crude’s rise over the past two months.

    While the dollar is slumping partly on signs of slowing U.S. growth, it is being seen as positive for oil prices because it makes the commodity cheaper for users of other currencies and blunts the effect of high oil prices on demand in other countries. Weak U.S. economic data also boosts the chance of a U.S. rate cut, which traders view as positive for oil demand.

    The front-month November light, sweet crude contract on the New York Mercantile Exchange was recently up 87 cents, or 1%, at $88.27 a barrel. Brent crude on the ICE futures exchange rose 53 cents to $83.66 a barrel.

    Prices surged to a record intraday high Wednesday after Turkey’s parliament authorized the government to send troops into Iraq to root out Kurdish rebels who have been conducting raids into Turkey. While there are no imminent plans for an attack, many traders are concerned about the security of two major oil pipelines in the region.

    “The market keeps shifting focus, and today it is being influenced by a big move down in the dollar,” said Brad Samples, an analyst at Summit Energy in Kentucky. “While in recent days Turkey has been the focus, the dollar has been a big underlying factor” in crude’s recent move higher, which has seen prices rise more than 20% in the past two months.

    Combining with the dollar and concerns conflict in the Middle East could hit oil supply, prices are being supported by forecasts that global supply will fall well short of demand this quarter and next against a backdrop of strong demand.

    The confluence of price-positive factors has led many, including MF Global and Barclays Capital, to predict $100 a barrel isn’t far off.

    The major risks to those forecasts are reduced demand, either from a warmer-than-normal winter or a slowdown in economic growth. The National Oceanic and Atmospheric Administration Thursday repeated predictions that temperatures in the Northeast U.S., the world’s biggest heating oil market, will be above normal from November through January.

    The euro reached an all-time high above $1.43 against the dollar Thursday after the release of disappointing housing data Wednesday and the release of the Federal Reserve’s Beige Book, an anecdotal report on the state of the economy that sparked concerns of unstable market conditions flowing over into the fourth quarter.

    Front-month November reformulated gasoline blendstock, or RBOB, was 1.29 cents, or 0.6%, to $2.1595 a gallon Thursday morning. November heating oil rose 1.11 cents, or 0.5%, to $2.33 a gallon.

    —By Matt Chambers, Dow Jones Newswires

  11. 11
    zman Says:

    Dooch – re NOV …I’d be winging it either way as I don’t track them that closely. I thought they ‘d pull back after the split and their business should be pretty strong but the stock seems seems a little highend on the fwd PE side to me and it may need a good beat just to stay up here.

    Sam – I guess the $ plunge is good for tourism at least. USD going to equal peso soon. sad lol.

    Weather – and natural gas still could care less.

    Morning Nicky – its probably a combo of the dollar and your boy flynn.

    SLB weaker again going into earnings

  12. 12
    Nicky Says:

    56 bcf build expected for nat gas.

    Even that NOAA news is being ignored. Talk about a crazy market.

  13. 13
    RickWI Says:

    Market is expecting upper 40’s to low 50s for gas storage.

  14. 14
    zman Says:

    Man they want 90 bad.

    SU up another $2.

    Thanks Rick and Nick on the gas number. They’re banking everything right now on the steep decline in gas imports last week. I still think that’s a pretty low gas storage number given the lack or cooling and heating loads. Guess I was right when I said my number would be bearish.

  15. 15
    Nicky Says:

    WTI – either last night was a very short iv and we are now in v up or iv is an expanded flat which should top out below yesterdays highs.

  16. 16
    RickWI Says:

    Z – That would be a VERY bearish number. Super, super bearish. There has been a TON of load off the Henry Hub during the storage week. Lots of buyers. I have no idea what they are burning it for though. It’s either for A) storage or B) generation. I suspect option B.

    Me, I’d just like to see a small surprise of a +60 reported. I think that would be enough to temper the gas side of things.

  17. 17
    Nicky Says:

    Ricki – what number did Z give that would be very bearish?

  18. 18
    zman Says:

    Rick – agreed and I don’t think it’ll be that strong but generation was down week to week so I’m a little confused, maybe it was a mix thing as more nukes may have been down.

    RIG – interesting…guess it liked NE’s report

    BTU nice move

    VLO and TSO both up

  19. 19
    zman Says:

    Nicky – I said 80, it won’t make it there but the straight numbers say it could.

  20. 20
    zman Says:

    39 – ok I blew that one, big bullish number. SWN already popping, CHK will go over 38, KWK will be up $2 shortly. APC to rally hard

  21. 21
    RickWI Says:

    Well that 39 is certainly bullish for gas

  22. 22
    zman Says:

    Probably really nice number for HAL

  23. 23
    Nicky Says:

    Hmm well that is not going to help the whole complex come down. Wonder why it was so low.

  24. 24
    zman Says:

    wow, my worst brick ever.

    gas rallying hard.

  25. 25
    RickWI Says:

    Looking at the splits, lots of generation load. East injection WAY down and producing region low as well.

  26. 26
    Sambone Says:

    Z – I had you on a pedestal, the perfect guy. LOL

  27. 27
    zman Says:

    N – don’t ask me, I was off by a full multiple. I’ll dissect it before next weeks number. Perhaps it is a catchup in from the lower imports number. Last week I was low to the the number by 13, this week, high by 41. …I’m thing the low LNG sendout volumes of the last few weeks are being reflected in the data. East took the big hit on injections. Anyway, I’m embarrassed and about to hit the airport.

  28. 28
    zman Says:

    Sam – well that was your first mistake. Besides, didn’t you see the scud list?

    Setting stops on my October Rig Calls at 1.40 (current bid $1.65 and rallying nicely)

    muted response to gas number from the gas crowd. think they are still wary of buying and have oil fall on their heads.

  29. 29
    zman Says:

    If I do a trade today there will be a comment although not sure how timely but no blast. They’ll just be Oct exits anyway on the driller calls and puts.

    SU coming back in after it realized it was not one of the chicom oils

  30. 30
    Sambone Says:

    Will you post tommorow?

  31. 31
    zman Says:

    Sam – I’ll do my best. Keep the site warm for me either way though, lol.

  32. 32
    Sambone Says:

    Will do and have a safe trip!

  33. 33
    zman Says:

    Thanks, I probably crack berry in for the occasional quote and comment. Cheers.

  34. 34
    Sambone Says:

    10:58 am EST

    Nymex Crude Moves Closer To New Record Above $89

    Dow Jones Newswires
    From Market Talk:
    Nymex crude moved closer to its record intraday high of $89 a barrel. November crude was up $1.45 at $88.85. Prices touched the new record on concerns Turkish forces could attack Kurdish rebels in northern Iraq, but then fell back. A weakening US dollar was providing more support for crude and sending it back toward the highs.

  35. 35
    zman Says:

    Can I get oil ng and look at the stocks?

  36. 36
    aitrader Says:

    Nov CL 8836
    Nov NG 7521
    RIG 115.44
    SU 104.25
    CHK 37.82
    HK 18.56

    11:45 AM

  37. 37
    zman Says:


  38. 38
    zman Says:

    Ok, one last sound chk before ib hop the plane. Tia

  39. 39
    Sambone Says:

    Fair and balanced man


  40. 40
    zman Says:

    Ok, 600,000, I missed that, made it sound like it blew up completely which is non sense

    Now he’s sayinng 93 oil, flip, flop, flip

  41. 41
    Nicky Says:

    Energy looks to be building up for a break – 8820 is key on the downside and 8900 key on the upside.

  42. 42
    Nicky Says:

    Chart pattern favors an upside break in all honesty or else maybe they pop it and drop it.

  43. 43
    aitrader Says:

    Joe Bastardi, Chief Forecaster at Accuweather, on Bloomberg right now predicting a warm Winter with 2-4 degrees above average from Dec 21 – Feb 28.

    He says this Winter will be in the top 15% of warmest Winters on record.

  44. 44
    Nicky Says:

    Nat gas off a cliff – now at 7279

  45. 45
    Sambone Says:

    Uhmmm, the overall market has no direction.

  46. 46
    Nicky Says:

    Sam – if you mean the main indices then they are proving to be very resilient in the face of all this bad news.

  47. 47
    Sambone Says:

    N – Bad news, heck yea. But this market doesn’t know what bad news is.

  48. 48
    Sambone Says:

    Nicky – Leaving it to ya. Got to go and pick my kid up at college. Might (Hopefully) be back tommorow.

  49. 49
    zman Says:

    N can I trouble you for some quotes…mkts oil gas etc

  50. 50
    aitrader Says:

    CL 8945
    NG 7377
    RIG 116.07
    SU 105.90
    CHK 38.14
    HK 18.55
    TLM 20.69
    COP 87.77
    CAM 102.84
    ESV 55.55
    NBR 29.81

    2:31 PM

  51. 51
    Nicky Says:

    Z – they absolutely jammed it into the close. WTI up at 89.50.

  52. 52
    Nicky Says:

    RBOB is at 21842 and distillates at 23550. It all went nuts.

  53. 53
    Nicky Says:

    Make that 23592 up another 95 on distillates since the close.

  54. 54
    j Says:


    FYI, your boys at CLR are up 6.5% today. Looks like they may hit 25 before earnings.

  55. 55
    Popeye Says:

    Those Nov chk 37.50 calls are now up 32%. I was happy as a clam to get out flat a few hours ago.

  56. 56
    irished Says:

    Popeye been there done that. only reason not on chk, took time out and went cycling. All that red was driving me nuts. Came back and I (zman) am/is a genius.

  57. 57
    Popeye Says:

    Damn, I went cycling after I sold.

  58. 58
    irished Says:

    There you go Now you have the secret. Dont spread it around. Also do not tell ZMAN I sold BTU. I was up 90 percent, then up 30 percent, and sold on the way up again. I do not yet have his ability to just wait and watch. Usually if I do nothing, I get killed.

  59. 59
    texana Says:

    z this art might explain some of large open interest on hk jan 15http://www.marketintelligencecenter.com/articles/451487

  60. 60
    TTupp Says:

    does any one know of an etf that tracks the USD against a basket of the mojor ones?

  61. 61
    Brian08 Says:

    hey T,

    I don’t know if this is what you are looking for, but the bullish US Dollar fund is UUP and the bearish US Dollar fund is UDN…

  62. 62
    Brian08 Says:

    Does anybody think there is any more MO’ to kick oil above $90 tomorrow? I was thinking about doing something really stoopid and going short USO tomorrow…

  63. 63
    scoop006 Says:

    Brian08 Remember the TREND IS YOUR FRIEND
    Why fight the tape

  64. 64
    Brian08 Says:

    Scoop couldn’t agree more!

    But this just seems like one of those trader manipulated rallies (self-fulfilling prophecy if you will)…I think Sam posted the article yesterday stating that the call-put ratio was like 4:1 for the $90 strike…I’m just feelin’ that they’re gonna get it to $90 tomorrow and then the fundies will start to take effect (shocking huh?)…

    Also it just doesn’t make sense to me…Oil at $90, COP and XOM really don’t move much today, the markets are flat on the day…Shouldn’t $90 oil be scaring the hell outta the market?? There’s hardly a blip on the screen…I’m new at this whole trading thing, but this is stuff that just isn’t sitting well with me…

  65. 65
    kaman Says:

    Brian, Nicky et al…agree, hope someone here will tell me when to go long on DUG.
    cheers- K

  66. 66
    scoop006 Says:

    Brian08-Your reasons are sound and you certainly make compelling points;However the market does not always move in a rational direction.

  67. 67
    Sambone Says:

    This is case Zman can’t post today.

    7:14 am EST

    Oil Back Above $90/Bbl On Weak Dollar

    By Nick Heath

    LONDON — Nymex WTI crude oil futures traded to new, record-highs in London Friday morning, boosted by continuing weakness in the U.S. dollar.

    The Nymex November WTI contract climbed back above the psychologically important $90-a-barrel to set a new record-traded high of $90.07 a barrel after the dollar fell to a new low against the euro earlier Friday.

    The currency move triggered another wave of buying as the market continued to seize on any developments of bullish note.

    “We see little on the near-term crude horizon that will alter the bias towards buying the dips and driving prices even higher,” Rob Laughlin of MF Global said.

    “Although fundamentals do not warrant such high valuations, the market seems to have a mind of its own at this stage, and only something “seismic” could force prices down.”

    At 1045 GMT, the front-month December Brent contract on London’s ICE futures exchange was down $0.10 at $84.50 a barrel.

    The front-month November contract on the New York Mercantile Exchange was trading $0.27 higher at $89.74 a barrel.

    The ICE’s gasoil contract for November delivery was up $5.00 at $763.50 a metric ton, while Nymex gasoline for November delivery was down 6 points at 218.45 cents a gallon.

    —By Nick Heath, Dow Jones Newswires

  68. 68
    bill Says:


  69. 69
    Sambone Says:

    8:24 am EST

    Nymex WTI Back Above $90/Bbl

    By Nick Heath

    LONDON — Nymex WTI crude oil futures traded to new record highs in London Friday morning, boosted by continuing weakness in the U.S. dollar.

    The benchmark November light, sweet contract climbed back above the psychologically important $90 a barrel mark to set a new record traded high of $90.07 a barrel after the dollar fell to a new low against the euro earlier Friday.

    The currency move triggered another wave of buying as the market continued to seize on any developments of bullish note.

    “We see little on the near-term crude horizon that will alter the bias towards buying the dips and driving prices even higher,” Rob Laughlin of MF Global said.

    “Although fundamentals do not warrant such high valuations, the market seems to have a mind of its own at this stage, and only something “seismic” could force prices down.”

    At 1159 GMT, the front-month December Brent contract on London’s ICE futures exchange was up $0.03 at $84.63 a barrel.

    The front-month November contract on the New York Mercantile Exchange was trading $0.34 higher at $89.81 a barrel.

    The ICE’s gasoil contract for November delivery was up $4.75 at $736.50 a metric ton, while Nymex gasoline for November delivery was down 1 point at 218.50 cents a gallon.

    Crude prices set new all-time closing highs Thursday, as the slide in the dollar boosted prices in New York trade. December Brent closed at $84.60 a barrel while November light, sweet crude settled at $89.47 a barrel.

    And a brief spike to $90.02 a barrel in electronic trading after the Nymex close set up the light, sweet contract for further heights Friday.

    “I think there is just a concerted will to take the market higher,” said Jim Rintoul of TheOilTrader.com.

    “We saw that last night — the market was in a slow drift after the earlier move higher, then climbed in the last hour to get a record close again.”

    The expiry of the November light, sweet contract Monday threatened a volatile end to the week Friday, with position adjustment likely to muddy the direction of crude, analsyts said.

    “The front month could go anywhere,” said Olivier Jakob of Petromatrix. “The expiry is on Monday, so I would expect a lot to get done today. It should be quite volatile later this afternoon.”

    The futures market was keeping a close eye on the options market Friday, meanwhile, with hedging of December call options raising the potential for further climbs in futures, particularly as the November light, sweet contract trades around the $90 a barrel mark.

    “I think the current rally has lot to do with hedging dynamics on options,” Jakob said, adding that a large layer of open interest on the $90 call on the December contract posed upside risk to the futures contract.

    “The level to watch is really $90, basis December, because if we go through that level, it’s likely we will see further upside coming from hedging of call options.”

    While many in the crude market continue to question the validity of crude’s record highs in relation to prevailing fundamentals, the expected tight fourth-quarter supply/demand balance not only justified current levels, analysts at Barclays Capital said, but would likely result in further gains.

    “Over the past three weeks U.S. crude oil inventories have fallen by 4.5 million barrels relative to the five-year average whereas the stock position has also deteriorated considerably in Europe,” they said.

    “With the market currently running a hefty deficit — and with the size of that deficit likely to increase moving into Q4, we see the recent move up in prices as fundamentally justified and we think that, for the moment at least, the door for higher highs remain open.”

    With prices moving further into virgin territory, speculation over whether a supply side response may be forthcoming from the Organisation of Petroleum Exporting countries mounts.

    An announcement from OPEC on production quotas is viewed as one of only a handful of potential developments that could plausibly challenge crude’s current uptrend.

    Nigeria’s Minister for Petroleum, Odein Ajumogobia, said Friday that global oil markets have plenty of oil, but markets shouldn’t rule out OPEC increasing crude production beyond what they recently agreed to provide from November to dampen record-high oil prices.

    “I’m not ruling out we won’t do something more. We’ll all see each other in Riyadh and we’ll discuss where things are with the market,” Ajumogobia told Dow Jones Newswires.

    The top leaders of the Organization of Petroleum Exporting Countries and their oil ministers will meet in the Saudi capital Riyadh for a summit in mid-November.

    Having spurred the latest leg of the current uptrend, no fresh news over Turkey’s parliamentary vote allowing its troops to pursue Kurdish rebels based in northern Iraq emerged Friday. But with the decision valid for one year, it ensures that an associated risk premium will remain priced into oil values in the absence of further developments.

    —By Nick Heath, Dow Jones Newswires

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