Rising Oil Facts: Reasons Why Crude Oil Futures Prices Are Soaring:


OVER SPECULATION
Deep pocketed hedge funds who trade billions of dollars in commodities like
a video game is a main driver behind the markets. Yes, there are fundamental
reasons behind the current run in prices, but make no mistake that the hedge funds are a MAJOR
source behind the over-zealous move in crude oil at this time. Maybe because they know that the
US is about to enter a hard recession, so now is the time to run prices as high as possible to before the economy turns south.

DOLLAR WEAKNESS
The fall in the value of the dollar against other major
currencies has helped drive buying across commodities as
investors view dollar assets as relatively cheap.
It has also reduced the purchasing power of OPEC's revenues
and increased the purchasing power of some non-dollar consumers.
OPEC oil ministers have noted that although prices are
rising to record nominal levels, inflation and the dollar have
softened the impact.
The group's OPEC reference price in nominal terms was $74.18
in September, but was valued at $50.98 when adjusted for
inflation and the weak dollar.
Some analysts say investors have been using oil as a hedge
against the weaker dollar.

FED FUNDS
Since the Federal Reserve cut U.S. interest rates in
mid-August and central banks pumped billions of dollars into
financial markets to ease a credit crunch, oil prices have
surged 30 percent and gold has risen 20 percent.
Investment flows from pension and hedge funds into
commodities including oil have boomed, as has speculative
trading. At the same time, the credit crunch has brought some
other markets, notably the U.S. asset-backed commercial paper
market, to a virtual standstill.
In the United States, the size of the asset-backed
commercial paper market has fallen for 11 consecutive weeks, to
$883.7 billion this week from a peak of $1.17 trillion at the
end of July, according to data from the Federal Reserve.
In Europe, according to analysts at BNP Paribas, the market
shrunk to $192 billion at the end of September from $297 billion
at the end of July.
Some of that money has found its way into energy and
commodities.

DEMAND
While previous price spikes have been triggered by supply
disruptions, demand from top consumers the United States and
China is a driver of the current rally.
Global demand growth has slowed after a surge in 2004 but is
still rising and higher prices have so far had a very limited
effect on economic growth.
Analysts say the world is coping well with high nominal
prices because, adjusted for exchange rates and inflation, they
are lower than during previous price spikes and some economies
have become less energy intensive.

OPEC SUPPLY RESTRAINT
The Organization of the Petroleum Exporting Countries,
source of more than a third of the world's oil, started to
reduce oil output in late 2006 to stem a fall in prices.
Fewer OPEC barrels entering the market helped propel this
year's rally and consumer nations led by the International
Energy Agency for months urged OPEC to pump more oil.
At a meeting last month, OPEC agreed to increase oil output
by 500,000 barrels per day from Nov. 1.
OPEC's heads of state summit in Riyadh next month may turn
into a full-blown meeting to consider raising oil output, but
few in the group believe there is much they can do to tame a
market they say defies logic.

NIGERIA
Supply of crude from Nigeria, the world's eighth-largest oil
exporter, has been cut since February 2006 because of militant
attacks on the country's oil industry.
Oil companies have detailed about 547,000 bpd of shut
Nigerian production due to militant attacks and sabotage.

IRAN
Oil consumers are concerned about supply disruption from
Iran, the world's fourth-biggest exporter, which is locked in a
dispute with the West over its nuclear programme.
Western governments suspect Iran is using its civilian
nuclear programme as a cover to develop nuclear weapons. Iran
denies this, saying it wants nuclear power to make electricity.
On Oct 25, Washington designated Iran's Revolutionary Guard
Corps a proliferater of weapons of mass destruction and its
elite Qods force a supporter of terrorism.

IRAQ
Iraq is struggling to get its oil industry back on its feet
after decades of wars, sanctions and underinvestment.
Exports of Kirkuk crude from the country's north are
sporadic as sabotage and technical problems have mostly idled
the pipeline since the U.S.-led invasion of Iraq in March 2003,
preventing exports returning to the pre-invasion rate.

REFINERY BOTTLENECKS
Refiners in the United States, the world's top gas guzzler,
struggled with unexpected outages which drained inventories
ahead of the summer, when motor fuel demand peaks.
In the latest weekly figures from the U.S. government,
issued on Oct. 24, distillate stocks and heating oil inventories
fell and are below their levels of a year ago.