Oil hits new record over $90

Crude surges more than $3 after report suggests OPEC isn't likely to boost production and Middle East violence flares.

By Steve Hargreaves, CNNMoney.com staff writer
October 25 2007: 4:21 PM EDT

NEW YORK (CNNMoney.com) -- Oil prices hit a record high Thursday of more than $90 a barrel after reports indicated that the Organization of Petroleum Exporting Countries has no plans to increase production.

U.S. crude for December delivery jumped $3.36 to settle at $90.46 a barrel on the New York Mercantile Exchange, surpassing the previous settlement high of $89.47 a barrel set Oct. 19. Oil also hit a new trading peak of $90.60, breaking the previous record of 90.07, also set Oct. 19.

Oil had been higher throughout the day, but spiked late afternoon after comments from an OPEC official.

"We have no price band or price target," OPEC Secretary-General Abdalla Salem El-Badri said Thursday on the sidelines of a meeting with Chinese energy officials, according to an online report from the Wall Street Journal. "If it persists for a longer period, then we start worrying. But at this time we don't know what's going to happen next month."

El-Badri also said the cartel isn't having any discussions about increasing production, the Journal reported.

Think oil can't go higher? Think again

OPEC, which supplies about 40 percent of the world's 84 million-barrel-a-day oil habit, agreed to boost production by 500,000 barrels in September, but the move did little to calm oil prices.

There had been speculation that the cartel would again boost production at its next meeting in December.

One trader downplayed the notion that OPEC would increase production.

"No one has any more to give us," said Nauman Barakat, a trader at Macquarie Futures, the trading arm of Macquarie investment bank.

While Saudi Arabia is generally believed to have the ability to pump about 2 million more barrels a day - the world's only significant remaining spare production capacity - Barakat said they are keeping that in reserve in case of a real supply disruption.

Turkish attacks on Kurdish separatists in northern Iraq and reports of Lebanon firing on Israeli warplanes also pushed prices higher, as traders feared conflicts could spread to the broader Middle East.

In addition, Barakat believes that today's news revealing signs of a weak economy - including a fall in durable goods and slow housing sales - makes it nearly certain the Federal Reserve will cut interest rates next week, pushing the dollar lower and commodity prices higher.

"I think $90 is a rest stop," said Barakat, who added that traders have placed more bets that oil will hit $100 than they had on $90.

The good news for drivers is that the record crude prices so far haven't appeared to influence gasoline prices.

While crude has surged nearly 30 percent in the last month, the retail cost of gasoline has barely moved, going from a national average of $2.81 a gallon in September to $2.82 this month, according to the motorist organization AAA.

Experts say weak demand is to blame, as the summer driving season is over and it appears Americans are beginning to drive less anyway with gasoline near $3 a gallon.

Crude oil prices have more than quadrupled since 2002. Analysts say surging global demand combined with limited new supply is the main underlying factor.

The surge in prices has also attracted lots of speculative investment money, further driving prices higher. And the tight supply and demand situation magnifies the effect that geopolitical tensions have on prices, as there is less spare supply available globally to cover a disruption from places like Iran, Nigeria or Venezuela.

The falling U.S. dollar has also played a role, as oil worldwide is priced in dollars.

Oil producing nations have less incentive to ramp up output if the buying power they receive per barrel is declining, and foreign consumers have less incentive to reduce demand if oil is, relatively, getting cheaper for them.

(http://money.cnn.com)

If you've ever wondered how Warren Buffett got to be such a smart investor

If you've ever wondered how Warren Buffett got to be such a smart investor, all you have to do is watch him for a five-hour plane ride. He reads. A lot. And he reads quickly. His morning started with the Wall Street Journal, followed by USA Today and Forbes.

The only reason he hasn't read more is because we don't have any more papers on the plane.

Buffett generally reads five newspapers a day -- the Journal, the Financial Times, the New York Times, USA Today and the Omaha World-Herald. Make that six -- he reads the American Banker every day too.

Needless to say, he's a fast reader.

Becky will continue to report on her experiences On the Road with Warren Buffett both on CNBC's Squawk Box (6a-9a ET weekdays) and here on Warren Buffett Watch.

(http://www.cnbc.com)

India ‘committed’ to Iran pipeline

By Jo Johnson in New Delhi

Published: October 23 2007 19:11 | Last updated: October 23 2007 19:11

Senior Indian government ministers are showing fresh enthusiasm for building an oil and gas pipeline to Iran, in a move likely to add further tensions to US-India relations.

Growing support for the pipeline, which would pass through Pakistan, comes as hopes fade for a hasty conclusion to a historic nuclear power agreement with the US.

Palaniappan Chidambaram, India’s finance minister, said after meeting his Iranian counterpart in Washington on Monday that the pipeline was “completely doable” and “we should do it – Iran has the gas and we need the gas”.

He added: “He asked me about our commitment to the pipeline. I said we remain committed.”

The finance minister’s comments risk irritating the administration of George W. Bush, US president, and adding to its disappointment at India’s stalled efforts to push through a bilateral nuclear co-operation agreement. Manmohan Singh, the Indian premier, last week told Mr Bush that opposition from leftist members of India’s Congress-led coalition government meant it was having difficulties implementing the deal.

People close to Mr Singh, who has twice publicly shaken hands on the deal with Mr Bush, say he is “embarrassed” by the government’s inability to move ahead. There are also a growing number of reports that he is considering resigning.

Nicholas Burns, the US undersecretary of state for political affairs, has said Washington hopes “very much that India will not conclude any long-term oil and gas agreements with Iran”.

India has been blowing hot and cold on the pipeline during the nuclear talks with Washington but Pakistan and Iran recently announced their intention to sign a memorandum of understanding on the pipeline and a related sale and purchase agreement by the end of this month.

By increasing the potential size and profitability of the pipeline, India’s participation could overcome financing obstacles at a time when Pakistan’s turbulent domestic political situation has made it difficult to attract the required $5bn-7bn in private capital.

Under the 1996 Iran-Libya Sanctions Act, the US could in theory impose sanctions on countries that assist Iran in exploiting its petroleum resources.

But New Delhi insists that its decision on whether to participate in the pipeline will be based solely on an assessment of its own national interest.

“How India handles ever-tighter US-led sanctions against Iran will determine whether a degree of strain is injected into the Indo-US strategic relationship just as it is beginning to unfold,” said N.K. Singh, a political analyst. “There are 40m Shias in India and I don’t think the political parties will be unmindful of how all this plays out in terms of the Muslim vote in general and the Shia vote in particular.”

Copyright The Financial Times Limited 2007

(http://www.ft.com)

Research Request (Reg China and Sudan)

Heard at a progressive bar in Phoenix

"China imports most of its oil from Sudan"

Totally incorrect (to be polite)

Monday, Oct. 18, 2004 By MATTHEW FORNEY

China's stepped-up oil diplomacy and its increasingly competitive stance in world oil markets are already creating friction with countries such as India, which like China has a bustling economy and a growing oil habit to satisfy. Earlier this year, ONGC Videsh, the overseas investment arm of India's largest oil-and-gas producer, was on the verge of completing a deal that would have given it an 11% stake in a proven oil field in Sudan. While the company waited for the necessary approval from India's Cabinet, CNPC swooped in with an offer that was reportedly 17% higher, and snatched the oil deal for China. "The Chinese are definitely very aggressive in the price they are willing to pay," says R.S. Butola, managing director of ONGC Videsh. Similarly, Vietnam's leaders recently complained to visiting Chinese Premier Wen Jiabao about CNOOC's intent to conduct seismic testing near the Spratly Islands in partnership with the Philippine National Oil Co. The Spratlys, a mostly uninhabited archipelago in the South China Sea, are believed to harbor commercial deposits of oil and gas, but sovereignty over the islands has long been disputed by Vietnam, China, the Philippines, Malaysia and Taiwan.

Undaunted by such diplomatic sensitivities, Beijing has demonstrated its willingness to focus first on protecting its energy interests. Last month, the United Nations discussed imposing sanctions on Sudan as a punishment for sponsoring human-rights abuses in Darfur. China has invested a reported $15 billion in Sudanese oil projects, and Sudan nowadays supplies about 7% of China's oil imports. China, which sits on the U.N. Security Council, threatened to veto the sanctions. The U.N. instead passed a watered-down measure.

(http://http://www.time.com/time/magazine/article/0,9171,501041025-725174,00.html)

Ghost road to boost India-China trade

Published: October 19 2007 17:37 | Last updated: October 19 2007 17:37

Overgrown and disused for much of the last 60 years, a ghost road that connects India to China via Burma will soon reappear on maps of the region.

Dismissed by Winston Churchill as a “laborious task, unlikely to be finished until the need for it has passed”, the construction of the road claimed the lives of 1,100 US servicemen and many more local labourers during the second world war.

But when a convoy led by US General Joseph W. Stilwell in February 1945 completed the journey from Indian Assam to Kunming, capital of China’s Yunnan province, it helped bust a three-year Japanese land and sea blockade of China and hastened the end of the war.

Its military purpose served, the road rapidly deteriorated, disappearing altogether in parts of Burma.

Six decades later, the road is again the scene of a race against time. As India and China vie for influence in Burma while seeking to boost their own bilateral trade, Asia’s two emerging economic giants are restoring the historic highway.

This helps to explain why India and China have been reluctant to condemn Burma’s crackdown on pro-democracy protesters, while the international community has set about trying to punish the military junta.

Although India was critical of a previous Burmese crackdown in 1988, it began to reverse policy in the early 1990s, judging that its moralising had been counter-productive and was adversely affecting national security interests by pushing the junta into China’s arms.

China has already converted its own 680km stretch into a six-lane highway and is helping to rebuild much of the road inside Burma. India is further behind, expecting to complete the transformation of a single-lane track ridden with pot-holes into a two-lane highway by March.

New Delhi, keen to connect India’s insurgency-ridden north-east with the fast-growing markets of south-west China and south-east Asia, is also expected to help build part of the 1,000km-long Burmese section.

“There is hardly any traffic on the road, but this will change,” says Ganga Sharma, a businessman who owns two small trucks and is hoping for increased cross-border trade through the nearby Pangsau Pass, now limited to fortnightly fairs.

The $30m (£14.6m, €21m) Stilwell Road project is just one of the infrastructure projects that will soon span the 1,880km Indo-Burmese border. The most important is the Kaladan Multi-Modal Transit Transport Facility, which will allow goods to be sent from India’s landlocked north-east down the Kaladan river to Burma’s Sitwe port.

BSNL and TCIL, two state-owned Indian telecoms groups, are planning fibre optic cable links connecting India’s north-eastern state of Manipur with Burma, and beyond to Thailand, Malaysia and Singapore.

Efforts are also under way to create a rail link through Burma from Jiribham in Assam to Hanoi, the Vietnamese capital. A “trilateral” highway project proposes to connect the city of Morer in Manipur to Mae Sot in Thailand – again via Burma.

“By gradually integrating this region [with south-east and east Asia] through cross-border market access, the north-eastern states can become the bridge between the Indian economy and what is beyond doubt the fastest-growing and dynamic region in the world,” Pranab Mukherjee, India’s foreign minister, told a recent seminar.

India’s efforts to develop the north-east have been spurred by China’s rapid rise and an outstanding territorial dispute over part of an area cut off from mainland India by the creation of Bangladesh in 1947.

But after a humiliating defeat to China in border conflicts in 1962, India has belatedly realised that the best way of securing the north-east is through its development.

There is much to do. Per capita incomes in India’s north-eastern states are nearly 30 per cent lower than in the rest of the country and the 12 per cent unemployment rate is nearly twice the national rate. Poverty and unemployment have also driven the spread of separatist groups in the area.

Mani Shankar Aiyar, India’s minister for the north-east region, sees Beijing’s concerted development of its south-west, once the poorest region in China, and the history of the Stilwell road as an inspiration: “If the Japanese could be defeated because you are able to link Assam with south-west China, can’t we defeat the Japanese once again in the economic race by linking the north-east region with south-west China?”

Copyright The Financial Times Limited 2007

(http://www.ft.com)