A Refinery Fire & Reserve Worries Send Oil Prices Above $100 Mark
Tuesday, February 19, 2008SUZANNE PRATT: Oil prices closed above $100 a barrel today for the first time. At the New York Mercantile Exchange, March crude futures surged $4.51 or nearly 5 percent, to settle at record $100.01 a barrel. Fueling today's spike -- concern that OPEC will cut production at the cartel's meeting in two weeks. Oil ministers are reportedly worried about falling demand for crude as the global economy slows. But oil trader Ray Carbone doesn't believe OPEC will take any action with crude prices at $100 a barrel.
RAYMOND CARBONE, OIL TRADER, PARAMOUNT OPTIONS: It really depends on what happens between now and the OPEC meeting. If we are where we are today, I don't think OPEC will increase production or cut. But if we go back below $90 and we still have weak economic numbers, I think OPEC would be reluctant to add production into a weakening demand environment, so they're walking a fine line.
PRATT: Oil wasn't the only energy commodity that hit a record today. Gasoline and heating oil futures also closed at new highs on supply concerns following a weekend refinery fire in Texas.
PAUL KANGAS: Those high energy prices are seen as a wild card by the nation's biggest retailer. Wal-Mart posted better than expected fourth quarter results today, but sounded a cautious outlook on worries about the sputtering U.S. economy and soaring fuel costs. But as Jeff Yastine reports, the chain's price-cutting strategy continues to be its ace in the hole with consumers.
JEFF YASTINE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Shoppers were opening their wallets at Wal-Mart in the final quarter of 2007. From flat- panel televisions to toys, the retailer was doing what it does best, marking down prices and reaping the results. Excluding charges, Wal-Mart earned $1.04 a share in the fourth quarter, beating analyst estimates by $0.02. But the real question is whether the company can continue to hit its profit forecast in the face of a weakening U.S. economy. Wal-Mart president and CEO Lee Scott acknowledged the challenge in a statement, noting, we know that the economy remains a critical factor in this new fiscal year, adding that customers were more cautious in their spending in January.
The retailer sees earnings of $0.70 to $0.74 a share for the first quarter, while most on Wall Street were looking for $0.74 a share. Edward Jones retail analyst Stephanie Hoff took the retailer's cautious outlook in stride.
STEPHANIE HOFF, RETAIL ANALYST, EDWARD JONES: It was not unexpected that Wal-Mart would be a little cautious in its guidance and I think we'll see that from a number of retailers when they report next week. So we're looking at Wal-Mart and just thinking about the fact that the company still expects growth in '08. In our view, that's pretty strong relative to some other retailers that are likely to show declines.
YASTINE: One of the challenges faced by Wal-Mart and its future outlook is the rising cost of energy. Executives say the increasing price of fuel for the chain's vast distribution network of diesel trucks remains a quote potential headwind. With the price of oil topping $100 a barrel, that headwind shows no sign of abating.
HOFF: When you look at Wal-Mart's ability to control expenses and distribution, it's awfully hard -- it's awfully hard for any retailer. If the oil prices stay roughly at this level, I think Wal-Mart will figure out a way to manage this year. They're certainly doing things on the cost side of the equation with their fleet to update the technology and become more fuel efficient. So while, it's still a headwind, it might be less of a headwind than they actually faced last year.
YASTINE: Other analysts point out a bright spot for the chain -- overseas growth. Wal-Mart's sales growth in foreign markets rose 19 percent last quarter, nearly four times its U.S. stores. Analysts say that should help the retailer continue outperforming its rivals. Jeff Yastine, NIGHTLY BUSINESS REPORT, Miami.
