History Crude Oil Futures

A recent low point was reached in January 1999 of $16 (all prices are in US$ per barrel), after increased oil production from Iraq coincided with the Asian financial crisis, which reduced demand. Prices then increased rapidly, more than doubling by September 2000 to $35, then fell until the end of 2001 before steadily increasing, reaching $40-50 by September 2004. [2] In October 2004 light crude futures contracts on the NYMEX for November delivery exceeded $53 and for December delivery exceeded $55. Crude oil prices surged to a record high above $60 in June 2005, sustaining a rally built on strong demand for gasoline and diesel and on concerns about refiners' ability to keep up. This trend continued into early August 2005, as NYMEX crude oil futures contracts surged past $65 as consumers kept up the demand for gasoline despite its high price. Crude oil futures peaked at a close of over $77 in July 2006, and in December 2006 at about $63. That is just about where they began the year 2006.[3] In September 2007, US crude (WTI) crossed $80. Multiple factors caused this high price. OPEC announced an output increase lesser than expected.[4] US stocks fall lower than experts predicted[5] and six pipelines were attacked by a leftist group in Mexico. [6]

In October 2007 US light crude rose above $90 for the first time, due to a combination of tensions in eastern Turkey and the reducing strength of the US dollar.[7]

On January 2, 2008, a single trade was made at $100[8], but the price did not stay above $100 until late February.

Oil broke through $110 on March 12, 2008[9], $125 on May 9, 2008[10], $130 on May 21, 2008 [11] and $140 on June 26, 2008.

Prices on June 27, 2008 touched $142.26 for August in the New York Mercantile Exchange, the highest price ever, amid Libya's threat to cut output, and OPEC's president predicted prices may reach $170 by the summer.[12][13] Oil prices on June 28 hit a record of $142.99 at 1:58 p.m., the highest since 1983, and to $142.97, the highest intraday price since 1988, owing to a weak dollar, geopolitical unrest and global equities slump.[14][15][16] Oil rose on July 1 to a NYME record $143.67 and a London ICE Futures Europe exchange record $143.91.[17][18] On July 3 prices hit $145 for the first time.[19] London Brent crude reached a record of $145.75 a barrel, and Brent crude for August delivery peaked to a record $145.11 a barrel on London's ICE Futures Europe exchange, and to $145.85 a barrel on the NYMExchange.[20][21] By midday in Europe, light, sweet crude for August rose to a record $ 145.85 a barrel on the NYME while Brent crude futures rose to a trading record of $ 146.69 a barrel on the ICE Futures exchange.[22][23]



The Future

Fatih Birol, chief economist of the International Energy Agency said in October 2007 that oil prices will remain high for the foreseeable future due to rapid increases in demand from the rapidly growing economies of India and China.[24] The ministers of OPEC, meeting in early December 2007, appeared to reach a consensus for high, but stable prices. This price point would deliver consistently high income to the oil producing states, but avoid prices so high that they would depress the economies of the oil consuming nations. A range of $70-80 was suggested by some analysts to be OPEC's goal.[25] This would be in step with the price of shale oil, which, though more expensive to drill, will not likely go above $100. [26] The ministers of OPEC Major oil-exporting countries are rapidly developing and are using more oil domestically. Particularly significant are Indonesia, which no longer exports oil, Mexico and Iran, where projected demand will exceed production in about five years, and Russia, which is growing rapidly.[27]

Due to rapidly changing valuations of the United States dollar, it is unclear when these price points will break. While it is not expected to reach as high as $200 anytime soon, backsliding but still leveling at the previously unheard of $70 could become the norm.

Russian energy giant Gazprom meanwhile forecast that soaring oil prices would "very soon" hit 250 dollars a barrel.

A difficult factor to isolate is the total volume of the futures markets themselves. As there are many indirect owners of futures (401k plans, mutual funds, and even simple savings accounts are routinely invested in such things without the account holder being explicitly aware,) the knock-on effect of a downwardly spiraling economy could itself further devalue oil. Similar factors corrected the run away that gold and silver experienced in the early 1980s, for example.

As with any speculation market, it is well within investors' ability to drive up the price of futures well out of proportion with the supplies and demands involved. But there are two dangers that can quickly effect such transient spikes. Demand can drop off, and supply can increase. This was the case in 1998/1999 when the Asian market collapsed, reducing demand, and Iraq increased production by over 12%, increasing supply. This caused the all-time low of $8. As it pertains to recent events, the demand side is slowing, though not appreciably enough. The US Congress opened to panels to investigate the potential speculation fraud on Tuesday June 17. On the same day, Saudi Arabian oil production increased by 200,000 barrels a day, the largest in its history was announced as a potential option. This and other factors caused oil to drop for fourth day in a row, closing at $133.53.[28]