News

Oil jumps 4.4pc as tanker lists off Texas coast

OIL rose 4.4 per cent to $US45.52 a barrel, the highest level since January 26, as news of a tanker taking on water off Texas added spark to an already strong market.
Light sweet crude oil for April delivery settled $US1.91 a barrel higher after hitting a high of $US45.88 a barrel late in the session. Traders said news of the tanker's problem bumped crude through $US45.50 a barrel, a point at which gains throughout most of the session were being capped.
ICE Brent crude for April settled up $US1.21, or 2.77 per cent, at $US44.85 a barrel.
Nymex crude posted its first premium to Brent since December, said Tim Evans, an energy analyst at Citi Futures Perspective.
"I'd characterize this as a return to normalcy," he said, noting Nymex crude most often needs to trade at a premium in order for the US to attract the imports.

How per barrel cost of oil becomes price per gallon

While most of us don't pay attention to the fluctuating price of commodities, almost all of us know the daily price for a barrel of oil.
It's curious since the cost of wheat determines the price of bread and the cost of pork bellies affects the price of bacon, but we're more concerned about those 42 gallons of sweet light crude.
And while we all know the closing price for a barrel of oil, most don't understand how and when that will translate into price changes at the pump.
The price you pay for a gallon of gas at your local station is a combination of many costs occurring over many different time periods.
That's why when you hear on TV that the price of oil declined overnight, you may see the price at the pump going up the next morning when you drive to work.
Let's do a little drilling of our own and see how the cost per barrel ultimately becomes the price per gallon.
First, and this is important, the prices you hear quoted for a barrel of oil on TV are “futures” prices. That means they are the price that refineries are paying today for delivery of that barrel at some point in the future.
Generally the “media price” (what you hear on TV, the radio or read in the newspaper) is a 30- to 60-day future. If you hear of prices going down, that means you won't see that effect at the pump for many months.
Second, all oil trading in the world is settled in dollars. It doesn't matter if you are buying oil from Saudi Arabia, Nigeria or West Texas crude — you pay in dollars. That means the value of the dollar against other major world currencies like the Euro and the Yen has an effect on the price of gasoline at your local station.
Part of the decrease in gasoline prices we've seen over the past six months has been a consequence of the increased strength of the dollar in world markets.
Since last summer, the dollar has gained against the Euro roughly 20 percent — accounting for about 80 cents in the reduction of gas prices from $4 a gallon to their current levels.
There are also plenty of other folks involved in getting that barrel of oil from the wellhead in Kuwait to the pump down the street from you — and they all want money, too.
After the oil is pumped from the depths of the earth, it has to be shipped.