Crude Oil Futures Surge, U.S. Stocks Lower

123jump.com Staff
21 May, 2008
New York City

Crude oil futures, near and long term rocketed past $140 a barrel as speculators expect prices to reach $190 a barrel. Rising consumption of crude oil in the U.S., China and India is expected to lift the demand above 85 million barrels a day by 2012. However, world crude oil supply has been relatively stable near that level. Lack of new crude supply in the market and the occupation of Iraq are contributing to the sustained rise in oil prices.

[R]9:10AM New York – Long term crude oil futures contract surge on the continued geopolitical concerns and rising crude oil consumption in the U.S., China, and India.[/R]

Crude oil futures rose above $130 a barrel as several brokerage firms, prominent investors and expectations of weak dollar put additional pressure on the oil prices. Crude oil traded above $130. The futures of oil for the delivery in 2016 surged $9 or 4% to $139.90 and futures of 2012 added over $2. Goldman Sachs, Societe Generale and Credit Suisse are just few of the brokerage firms who have revised their price targets.

Geopolitical concerns are weighing on crude oil delivery and prices as well. Global demand from the current level of near 83 million barrels a day is expected to rise to 85 million barrels a day and most energy traders do not see new supply of crude oil n the horizon.

The U.S. led occupation of Iraq has added between 30% and 40% premium to the crude oil prices and economic growth in China and India has sustained the demand for oil. However the leading energy user and crude oil user in the world is the U.S. The largest economy in the world has seen its manufacturing base shrink to nearly 16% of its GDP from 30% in the last twenty years but the crude oil consumption and imports have steadily risen during that period.

At least till now, despite a surge in crude oil prices, world has not experienced crude oil shortage but that can change very quickly after year 2012 when the world demand is expected to reach 85 million barrels a day. Since January, crude oil prices have jumped 35% and are expected to increase another 20% in the near future.

If the world oil demand growth, primarily driven by consumption increase in the U.S, China and India does not slow down than speculators may drive crude oil prices above $190 a barrel. Just only three years ago most energy executives, media pundits and market analysts were predicting crude oil prices of below $50 a barrel.

Earnings review

Hewlett-Packard Company, a tech equipment makers and services provider said second quarter revenues rose 11% to $28.3 billion from $25.5 billion a year ago. Net income in the quarter jumped 16% to $2.1 billion or 80 cents per diluted share compared to net income of $1.8 billion or 65 cents per share, a year ago. Third quarter revenue is estimated to be between $27.3 billion and 27.4 billion and earnings per share between 76 cents and 77 cents.

Hewlett-Packard Company stock ((HPQ)) dropped 46 cents or 1% to $46.

Intuit Inc, financial software company said third quarter revenues rose 15% to $1.3 billion from $1.1 billion a year ago. Net income in the quarter jumped 21% to $444.2 million or $1.33 per diluted share compared to net income of $367.2 million or $1.04 per share, a year ago.

Intuit Inc stock ((INTU)) rose 94 cents or 3.5% to $27.21 in the pre-market trading.