Oil fell more than $2 towards $34 a barrel on Monday after Russia and Ukraine signed a 10-year gas deal clearing the way for the resumption of supplies to a freezing Europe.

Implementation of a ceasefire between Israel and Hamas in Gaza also eased supply concerns as the market remained under pressure from expectations that the weakening global economy would erode oil demand.

“Right now the economy is dominating,” said Harry Tchilinguirian, analyst at BNP Paribas. “The market is very volatile and the signs are that demand is weakening.”

U.S. crude oil futures for February delivery dipped to a low of $33.89, down $2.62, before recovering to trade at $34.53 by 1800 GMT.

Traders said the February U.S. crude oil futures contract, which expires on Tuesday, also fell because of very high stocks at the delivery point for the U.S. futures contract.

Only just over 3,100 lots were traded on the February U.S. crude contract. The March contract was much more active as more than 31,000 lots changed hands.

London Brent crude for March fell to a low of $43.80, down $2.77, before edging back up to around $44.50.

GAS FLOWS

The agreement between Russia and Ukraine, which set a final price for 2009 supplies, is expected to lead to the restart of flows of Russian natural gas to Europe via Ukraine within the next 36 hours.

Also easing concern about energy supplies, Israeli forces began to pull out of the Gaza Strip following a tentative truce with Hamas after the three-week war, easing tension in a region which pumps about a third of the world’s oil.

Prices came under pressure on Friday after the International Energy Agency, an adviser to industrialised countries, predicted a fall in world oil demand in 2009.

OPEC, the oil exporters’ group, has cut production three times since September to try to stem falling prices. It might consider reducing output again, Algeria’s oil minister Chakib Khelil said on Saturday.

Oil has collapsed by more than $110 a barrel since reaching a record high of $147.27 a barrel in the summer as the global economic slowdown has eroded demand and consumer spending.

Still, some in the oil market think there is little room for prices to fall much further.

“It looks as if Brent will hold in the current $40-$50 range,” said Christopher Bellew, a broker at Bache Commodities. “I do not anticipate new lows.”

LONDON, Jan 19 (Reuters)

• More than $48 billion was withdrawn from emerging market funds in 2008, with the largest chucks of change pulled from funds tracking Asia, according to EPFR Global. An emerging markets bellwether, the MSCI Emerging Markets Index, dropped 54% last year, its worst performance since it was created in 1987, Bloomberg reported.

• Bank of America Corp. (BAC) sold 5.62 billion of its China Construction Bank Corp. shares, raising $2.83 billion. Based on the Construction Bank’s IPO price, Bank of America realized a profit of about $1.13 billion, Reuters reported.

• Bargain retailer Family Dollar Stores Inc. (FDO) closed its fiscal fourth quarter with a 14% rise in profit and raised its annual forecast, Reuters reported. The compact expects to earn $1.63 to $1.81 a share, up from $1.58 to $1.78, in its fiscal year ending August 29. It also expects sales, same-store sales and total sales to rise as well.

• Orbitz Worldwide, Inc. (OWW), an online travel agency, announced a new president and chief executive, and that it would institute more measures to save an additional $20 to $25 million annually. Barney Harford will replace Steve Barhart as CEO, The Wall Street Journal reported.

• Russia cut off all gas supplies to Europe through Ukraine yesterday (Wednesday) leaving more than a dozen countries struggling with dwindling energy supplies in the depths of winter, The Associated Press reported. “It is unacceptable that the EU gas supply security is taken hostage to negotiations between Russia and Ukraine,” said European Union spokeswoman Pia Ahrenkilde Hansen.

• Monsanto Co. (MON), the world’s largest producer of genetically modified seeds, closed up more than 17% yesterday (Wednesday) after the company reported that first-quarter profit more than doubled. Revenue jumped 29% to $2.65 billion from $2.05 billion.

• India’s Sun Pharmaceuticals Industries Ltd. said yesterday (Wednesday) that it’s secured U.S. Food & Drug Administration approval to sell a generic tablet version of the painkiller Vicodin. The U.S. market for branded and generic versions of that drug is worth $540 million. Sun has also received approval for generic versions of cholesterol-fighting Lopid, for Aredia, which is used to treat high blood calcium, and for the anti-allergent drug Phenargen, in multiple strengths, Reuters reported.

• Light, sweet crude for February delivery yesterday (Wednesday) tumbled 12%, or $5.95, to settle at $42.63 a barrel on the New York Mercantile Exchange. The drop was the mainly the result of a report from the Energy Information Administration said U.S. inventories of commercial crude inventories rose by 6.7 million barrels.

Source: Global Investing Roundups Thursday, January 8th, 2009

A special report jointly developed by U.K. affiliate MoneyWeek Magazine and the experts at Money Morning explores the automobile industry and how investors can benefit. For more information on MoneyWeek, please click here.

Every automobile on the roads of the world reflects a long and complex chain of industrial production and energy usage. Yet we live in a world where many of the highest quality resources and energy supplies have already been exploited and lower quality resources are more expensive to extract and exploit, if they are even available. So the world’s automobile industry is in the midst of a revolution in both resource availability and energy consumption.

Today the automobile business is vast. It is a global industry that has evolved by leaps and bounds in the 100 years since Henry Ford made his famous remark in 1908 about building “a car for the great multitude.” The worldwide customer base includes at least a billion people – spread over six continents – who have sufficient income to buy a car or small truck.

According to figures assembled at the MIT Sloan Automotive Laboratory, there are about 700 million automobiles and light trucks in the world. About 30% of those vehicles are in North America.

Every car requires steel, aluminum, copper and lead. Each car requires rubber, plastic, and myriad of other petroleum and natural gas by-products. And there is much else in the long industrial ladder of automobile production. Just think in terms of the energy that goes into processing materials, fabricating parts, building components, assembling a finished product – and all the transportation along the way.

In addition to the basic energy and material resources that go into manufacturing an automobile, the sheer number of vehicles reflects a lot of fuel tanks to fill with gasoline and diesel. And this does not even touch on the energy and resources that go into building road systems.

Oil Crises – 25 Years Ago and Today

The oil shocks of the 1970s – in both price and availability – spurred improvements in auto energy efficiency within the United States as well as worldwide. In the United States, the increase in fuel efficiency was related to rising costs for gasoline, as well as government mandates for higher fuel efficiency dating from the late 1970s.

On average over the past 25 years, the typical power train of gasoline-fueled automobiles in the United States has improved in efficiency by about 1% per year according to data gathered by MIT. While discrete, 1% improvements may not appear to be much, the compound improvement in the typical U.S. automotive engine over 25 years has been about 30%.

There has been even more progress in the fuel efficiency of diesel engines over the past 25 years. Diesel power trains are no longer the sooty “knock-knock” devices that they were back in the days of disco. Most cars sold today in the European Union (EU), for example, are powered with clean-burning, fuel efficient, smoothly running diesel engines.

In fact, the demand for diesel fuel in Europe is such that EU refineries routinely ship surplus gasoline to sell in the North American market. And in North America the relatively low prices for gasoline throughout the 1980s and 1990s discouraged the use of diesel engines.

So there have been significant improvements in automobile power train efficiencies over the past couple of decades. But have these improvements translated into any overall reduction in demand for fuel? No.

In 2007, motor fuel consumption in the United States was as high as it has ever been (Although according to the American Petroleum Institute, demand for motor fuel may be at a plateau due to price increases at the pump in 2006 and 2007.). In the past 25 years, we’ve seen more people driving more cars for more miles. But compounding the fuel issue, the cars that people are buying and driving tend to weigh more and offer higher performance.

Is a Car-dependent Culture Sustainable?

We live in a world of peaking oil output, and of energy and resource scarcity. So the trend lines for fuel usage by automobiles simply cannot continue for much longer. The most obvious sign is the rising price for oil and by extension for fuel at the pump. Something has got to give, and the energy markets are sending signals of long-term high prices for motor fuel. Where do we go from here?

Well first, people and policy makers have to realize that there is an energy problem. Everyone has to realize that this is something permanent, going forward. “Peak Oil” will not pass if we ignore it long enough. And no one can solve the problem just by bellyaching about the rising price for gasoline.

It helps to view the age of the automobile – and its future – as a systemic whole. And some social critics are out in front of the broad discussion, with a sharp focus on the automobile and what it has brought us as a society. James Kunstler, for example, author of highly regarded books such as The Geography of Nowhere and The Long Emergency, believes that the car-dependent suburban build-out in the United States may be “the greatest misallocation of resources in all of human history.”

The Automotive Energy Revolution

EVERY AUTOMOBILE ON THE ROADS of the world reflects a long and complex chain of industrial production and energy usage. Yet we live in a world where many of the highest quality resources and energy supplies have already been exploited. And lower quality resources are more expensive to extract and exploit, if they are even available. So the world’s automobile industry is in the midst of a revolution in both resource availability and energy consumption.

Thinking about Basic Materials and Energy

Today the automobile business is vast. It is a global industry that has evolved by leaps and bounds in the 100 years since Henry Ford made his famous remark in 1908 about building “a car for the great multitude.” The worldwide customer base includes at least a billion people — spread over six continents — who have income sufficient to buy a car or small truck. According to figures assembled at the MIT Sloan Automotive Laboratory, there are about 700 million automobiles and light trucks in the world. About 30 percent of those vehicles are in North America.

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~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Every car requires steel, aluminum, copper and lead. Each car requires rubber, plastic, and myriad of other petroleum and natural gas by-products. And there is much else in the long industrial ladder of automobile production. Just think in terms of the energy that goes into processing materials, fabricating parts, building components, assembling a finished product, and all the transportation along the way. In addition to the basic energy and material resources that go into manufacturing an automobile, the sheer number of vehicles reflects a lot of fuel tanks to fill with gasoline and diesel. And this does not even touch on the energy and resources that go into building road systems.

Automobiles and Energy

The oil shocks of the 1970s — in both price and availability — spurred improvements in auto energy efficiency within the U.S. as well as worldwide. In the U.S., the increase in fuel efficiency was related to rising costs for gasoline, as well as government mandates for higher fuel efficiency dating from the late 1970s. On average over the past 25 years, the typical power train of gasoline-fueled automobiles in the U.S. has improved in efficiency by about one percent per year according to data gathered by MIT. While discrete, one percent improvements may not appear to be much, the compound improvement in the typical U.S. automotive engine over 25 years has been about 30 percent.

There has been even more progress in the fuel efficiency of diesel engines over the past 25 years. Diesel power trains are no longer the sooty, “knock-knock” devices that they were back in the days of disco. Most cars sold today in the European Union (EU), for example, are powered with clean-burning, fuel efficient, smoothly running diesel engines. In fact, the demand for diesel fuel in Europe is such that EU refineries routinely ship surplus gasoline to sell into the North American market. And in North America the relatively low prices for gasoline throughout the 1980s and 1990s discouraged the use of diesel engines.

So there have been significant improvements in automobile power train efficiencies over the past couple of decades. But have these improvements translated into any overall reduction in demand for fuel? No. In 2007 motor fuel consumption in the U.S. was high as it has ever been. (Although according to the American Petroleum Institute, demand for motor fuel may be at a plateau due to price increases at the pump in 2006 and 2007.) In the past 25 years we’ve seen more people driving more cars for more miles. But compounding the fuel issue, the cars that people are buying and driving tend to weigh more and offer higher performance.

The Future of the Automobile

As I’ve said over and over again in Whiskey and Gunpowder, we live in a world of peaking oil output, and of energy and resource scarcity. So the trend lines for fuel usage by automobiles simply cannot continue for much longer. The first, most obvious sign is the rising price for oil and by extension for fuel at the pump. Something has got to give, and the energy markets are sending signals of long-term high prices for motor fuel. Where do we go from here?

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And You Thought $3 Gas Was Expensive

Get ready for an oil war, the likes of which we may have never seen. Not since the energy crisis of the 1970s have we seen such a rise in the price of fuel. Through summer and into the end of the year, we can expect oil to go higher still.

How will this effect you and how your investments? Click here to find out…

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