Transcripts

Oil Prices Suddenly Slip

SUSIE GHARIB: Oil prices slipped below $80 today after the government reported an unexpected increase in crude supplies, up 1.2 million barrels over the last week. November light sweet crude settled at $79.94 a barrel, down $0.11, the fourth straight decline. But some analysts worry that Mother Nature and human nature could push prices much higher. Scott Gurvey reports.

SCOTT GURVEY, NIGHTLY BUSINESS REPORT CORRESPONDENT: Crude futures have basically been rising all year and are currently trading near $80 a barrel, as markets worry about refinery break-downs, possible damage from hurricanes and the potential for war in the Mideast. Ray Carbone of Paramount Options says he expects to see record high prices posted in the next few weeks.

RAY CARBONE, OIL TRADER, PARAMOUNT OPTIONS: The same kind of fear that gripped the market in late spring and early summer was, will there be enough gasoline for the summer driving season? The same thing is going to plague the market in my opinion, this winter. Will there be enough heating oil for a cold winter if indeed we do get a cold winter?

GURVEY: Citing increasing demand from developing countries in the face of declining production, the chief economist at CIBC is now predicting $100 a barrel oil as early as next year. Traders also say the trend away from the floor to electronic trading is adding to speculative action. Some online brokers are even encouraging off-floor trading in commodities by advertising for new accounts. Fadel Gheit, oil and gas analyst at Oppenheimer, blames speculators for high energy prices. He says trading volume in the last five years has increased almost 10 times.

FADEL GHEIT, OIL & GAS ANALYST, OPPENHEIMER & CO.: A few things people have to keep in mind. Number one, it became like a global gambling hall -- no government is paying any attention to what is going on. Speculators, basically, are in control of the market. It's not the oil company. It's not the Exxons of the world or the BP or the Shell. Basically, its speculators, financial players, who do not buy or sell crude oil for any use, but they play the commodity. There's plenty of money to be made.

GURVEY: Gheit also blames talk of a military attack on Iran's nuclear facilities for the high price of oil. He says prices would fall by $20 a barrel if the uncertainty were removed, either by a settlement with Iran or by the start of military action. Scott Gurvey, NIGHTLY BUSINESS REPORT, New York.