Crude Oil Inventories Decline Slightly

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"Traders are still focused on Gustav's potential effects for now," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "If Gustav does become a serious problem, given that places like Russia and Venezuela are not pumping at peak capacity we could see prices head right back into the $130 to $140 area, especially since equities do not appear to be an appealing investment. Gustav is expected to regain hurricane status once it passes over Cuba."

"DOE (Department of Energy) Crude Oil Inventory, EIA (Energy Information Administration) Weekly Oil Inventory measures changes in crude oil production, refinery inputs and utilization, production by product, current inventory level of crude and related products as well as an estimate of how many days of supply is currently available. Increasing or decreasing inventory figures leads to an adjustment of price action that in time will spread throughout the economy.

Currently, it is estimated that for every one percent of GDP growth, oil consumption increases by one quarter to one third of a percent, so oil inventories must be able to increase along with the economy or another gasoline shortage may occur. It is also worth noting that at an average price of $75.00 a barrel, the U.S. spends one billion dollars a day on crude. Crude oil price is on the same level as interest rates when it comes to its impact on the economy. It affects every release. The product is responsible for much of the U.S. trade deficit; it is used throughout the product/service cycle, and also has a significant impact on consumer spending as well as inflation. The initial affect on the U.S. dollar tends to be the inverse of oil prices. For example, higher oil prices lead the greenback lower since it suggests higher trade deficits and a possible decrease on consumer spending. However, the real impact of oil prices (and inventory levels) is felt more over time as prices influence headline and core inflation.

..."Traders are still focused on Gustav's potential effects for now," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "If Gustav does become a serious problem, given that places like Russia and Venezuela are not pumping at peak capacity we could see prices head right back into the $130 to $140 area, especially since equities do not appear to be an appealing investment. Gustav is expected to regain hurricane status once it passes over Cuba."(8/27/08)

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