Oil: What You Need to Know

As the price of oil trades around $70 a barrel, how much do you really know about investing in the oil business?

The following are key insights from TheStreet.com.

As a starting point, here are the oil industry's ten biggest earners (based on net income for the second quarter of 2008):

1. Exxon Mobil (XOM): $11.68 Billion
2. Royal Dutch Shell (RDS-A, RDS-B): $11.56 Billion
3. BP (BP): $9.47 Billion
4. Total (TOT): $7.46 Billion
5. Chevron (CVX): $5.98 Billion
6. Petrobras (PBR): $5.52 Billion
7. ConocoPhillips (COP): $5.44 Billion
8. Eni (E): $5.41 Billion
9. PetroChina (PTR): $4.12 Billion
10. StatoilHydro (STO): $3.68 Billion

(These companies will soon announce their third quarter earnings.)

From The No. 1 Oil Stock to Own (Video, Oct. 17)

Research Director Stephanie Link weighs in on the oil debate. Which is more important for investors: a stock's yield or the price of oil?

Link: "We think yield is very important... If you look at the last correction in the price of oil... the oil stocks that did not have a yield really got hit much harder than those that did have a yield... We actually started to building a position in Chevron ( CVX)... it's about a 4% yield, about $4 billion in cash and it's trading at the cheapest level on a normalized earnings basis than it has in quite some time."

To watch the video, click the player below:

Related video on TheStreet.com TV: Cramer: Gas Stocks and Yields (Oct. 14).

Plus, don't miss Dividend Stock-Picking: DuPont, Chevron.

From Cramer: Make Money as Oil Slips (Video, Oct. 1):

Jim Cramer: "I look at price-to-earnings multiples and you're now getting four or five times earnings for oils oil companies. That's traditionally been something that I'm only leery of if the balance sheets are bad, and these balance sheets are fabulous... There is a core value to energy... When I look at companies that I'm less concerned about their earnings -- which is oil and gas -- and I look at the cash flow of these companies and I look at the potential for dividends, I think that they've come down enough that you'd be foolish not to look at them."

Watch the video on TheStreet.com TV.

From Deepwater Drillers Offer Deep Value:

Transocean ( RIG) has the largest fleet of offshore drilling rigs, and the volatility in oil prices has not hurt the company's overall business. The total contracted backlog stands at $40 billion, and given the high demand for these rigs, these contracts are secure. Transocean produces eye-popping net margins approaching 45% and a return on equity (ROE) of nearly 40%, while changing hands at a P/E of 7.83 and a forward P/E of 7.46 (at publication time).

Diamond Offshore operates a fleet of 44 rigs all over the world, and the numbers are equally as impressive -- 35% profit margins, 37% ROE, and a forward P/E of about 9.12.

Read the full version of Deepwater Drillers Offer Deep Value.

From Four Drilling Stocks for Value Investors:

Across the board, both international and domestic oil companies are raising their oil-services budgets to meet expected worldwide demand growth. Budgets for exploration and development are expected to grow by 20% in 2008 and 10% in 2009, according to industry analysts. This bodes well for the companies in the oil service industries.

Many of the stocks are cheap. I wrote about Bronco Drilling ( BRNC)... It remains one of my favorite stocks in the group.

Read the full version of Four Drilling Stocks for Value Investors.

From One Horse You Shouldn't Change Midstream:

I Jonathan Moreland own several midstream energy master-limited partnerships (MLPs), which have gone from being seemingly safe income plays to being as hard hit as other more obviously risky plays due to the present market meltdown. But that doesn't mean that the companies themselves have become any riskier. What it does mean is that you may have to pay closer attention to their balance sheets than you might have previously. Having done that, I have one that I think presents an opportunity here.

Enterprise Products Partners LP ( EPD) is one of the larger players in the space that will survive this downturn, but even its quality shares have fallen... EPD now early October yields just over 8%, which is historically high for this security.

While the indicated yield could yet move higher before this financial catastrophe is over, any further decline in EPD should not be the result of fears of being rejected in the capital markets. Enterprise can wait until October 2009 to hit up the market for more funding. That's when a $500 million note comes due.

Read the full version of One Horse You Shouldn't Change Midstream.

From Crude Oil Tumbles Below $70 a Barrel (Oct. 16):

November-dated futures dropped $4.69 to $69.85 in New York and have now slid more than 50% since the all-time high that was reached in July. Oil hasn't been below $70 in more than a year.

Read the full version of Crude Oil Tumbles Below $70 a Barrel.

From Oil Soars 20% Ahead of Expiration (Sept. 22):

Crude oil futures pulled off their greatest one-day price climb at the New York Mercantile Exchange Monday Sept. 22.

By 2 p.m. EDT, the October WTI contract was up roughly $7 a barrel to about $113 a barrel. Then, prices suddenly launched above $130 in the most intense 15 minutes of buying that oil markets have ever experienced. At that point, the Nymex briefly halted trading of that particular contract.

Short-sellers, who were forced to cover their positions ahead of the looming expiration of the October WTI contract, served as the nitrous oxide that propelled already revving crude oil markets into overdrive.

October WTI crude oil ultimately closed up $16.37, or more than 15%, at $120.92, while the November WTI contract rose $6.62 to $109.37 a barrel. Brent crude oil rose $6.43 to $106.09 on the ICE exchange.

Unlike most futures markets for other assets, energy markets at the Nymex are physical markets in which raw energy commodities are delivered to those who are in possession of futures contracts when they expire. This attribute nearly always creates a situation in which energy futures spike in value and then quickly slide down again immediately before they are set to expire.

Read the full version of Oil Soars 20% Ahead of Expiration.

TheStreet.com Reload: Looking Back at Oil

From Oil Sinks to $100:

Light, sweet crude for October delivery slid $1.71 to settle at $100.87 on the New York Mercantile Exchange. That's the lowest close in about five months. The decline came as the dollar rose against both the euro and pound Thursday Sept. 11.

As Hurricane Ike heads toward Texas and the state's crude oil and refining operations, Exxon Mobil ( XOM) shut down its suburban Houston plant in Baytown, the nation's largest refinery, according to a Reuters report that quoted an Exxon spokesperson. The stock slipped 0.5% to $75.64.

Trading in the opposite direction, Brazil-based Petrobras ( PBR) shares climbed more than 6% after the company reported that one of its fields contains between 3 billion and 4 billion barrels of oil.

Read the full version of Oil Sinks to $100. (Note: Sept. 12, crude oil closed at $101.18 a barrel.)

From Crude Oil Futures Drop Below $105:

Crude for October delivery was recently midday Sept. 9 down $2.16 at $104.18 a barrel at the New York Mercantile Exchange. Brent crude was losing $2.25 to $101.19 a barrel.

Contributing to the decline in oil futures were remarks from the oil ministers of Saudi Arabia and Venezuela, both members of OPEC, that the group wasn't likely to lower production in the near future.

Also bearish for crude were forecasts showing that Hurricane Ike has lost some of its strength and is now believed to be on a track that will keep it south of much of the petroleum infrastructure operating in and along the Gulf.

Read the full version of Crude Oil Futures Drop Below $105. (Note: Sept. 9, crude oil closed at $103.26 a barrel.)

From Cramer: China's Gone, So Oil's Headed Lower:

It ain't a hurricane that controls oil. It is China. It isn't terrorism that controls oil. It is China. It isn't the lack of new finds that controls oil. It is China.

I urge people to recognize that the speculators certainly accentuated and exacerbated any moves in oil that might have been bullish, but the underlying bullish tendency was because of China, not any of the extraneous issues.

Read the full version of Cramer: China's Gone, So Oil's Headed Lower.

Cramer: How to Trade Oil Now (Video, Sept. 12)

Jim Cramer gives his put strategy on some oil stocks.

To watch the video, click the player below:

Plus, don't miss Oil Prices Sink as Gustav Fears Diminish (Update) (Sept. 2), Cramer: The Gulf Can't Make or Break Oil (Video, Sept. 2), Crude Futures Fall After Gustav Weakens (Sept. 1), Tropical Storm Gustav Rocks Oil Prices (Aug. 29), Oil Rises as Gustav Storm Intensifies (Aug. 27) and Jim Cramer's 'Stop Trading!' Don't Trade on Gustav (Aug. 27).

China Watch: Peer Into CNOOC (Video, Sept. 8)

In China Watch: What's So Special About CNOOC? (Video, Sept. 5), energy reporter Chuck Marvin gives you the lowdown on why things are looking up for China's third-largest oil company. Here, he fills you in on the risk of investing in CNOOC, why CNOOC outdoes its competition, and if you should really get it on this oil stock now.

To watch the video, click the player below:

Plus, don't miss this video take on another China-based oil play: China Watch: A Little Gem Under $10 (Aug. 25:Frank Curzio of the Stocks Under $10 portfolio touts WSP Holdings ( WH), an oil equipment and services company, as a little-known gem.)

From Drill, Baby, Drill ... Just Not Anytime Soon:

Republicans spent the first week of September at their national convention in the Twin Cities chanting: "Drill, baby, drill." The pressure and poll numbers showing public support for drilling may be paying off for them.

Democrats have resisted efforts to support offshore drilling most of the summer. However, a bipartisan group of senators has pushed for an energy compromise that would include drilling. Senate Majority Leader Harry Reid (D., Nev.) announced Monday a legislative slate to address comprehensive energy plans and offshore drilling to facilitate a compromise.

Will an energy bill pass or will 2008 mirror 2004 when Congress passed the buck on energy? Back in 2004 an important presidential election was also dominating the news. However, in contrast to the present, Democrats were in the minority back in 2004. Democrats had managed to block the passage of an energy bill crafted by VP Dick Cheney's energy commission for three years in a row by bottling it up in the Senate. It finally passed in 2005 after the election.

History could very well repeat itself.

Read the full version of Drill, Baby, Drill ... Just Not Anytime Soon.

Plus, don't miss Cramer: A Drilling Compromise Would Be Hugely Bullish (Aug. 15).

From Oil Prices Slip on New EIA Data (Sept. 4):

The EIA Energy Information Administration said that falling petroleum imports were largely responsible for the 3.6-million-barrel decline in commercial petroleum inventories during the week ending Aug. 29.

Motor gasoline inventories fell 1 million barrels for the week, and distillate fuel inventories also declined.

However, refinery utilization eked out a surprise gain last week to 88.7% from 87.3% after falling the previous four weeks, and domestic motor gasoline production rose more than 300,000 barrels a day from the previous week to 9.4 million barrels per day.

Read the full version of Oil Prices Slip on New EIA Data.

From Energy Markets Tumble on Nat Gas Data:

The EIA's Energy Information Administration natural gas report estimates that working gas in storage increased last week by 102 billion cubic feet to 2,757 billion cubic feet in total underground storage. That increase puts total current storage in the high end of the five-year average range for this time of year.

Recently, energy markets have been flooded with reports of falling demand for energy around the globe, which, in concert with a strengthening U.S. dollar, have clobbered crude oil prices down to about $112 a barrel from $148 a barrel just six weeks ago.

Crude prices had been strong in Thursday Aug. 28 pre-session trading, buoyed by hurricane-related fears in the Gulf of Mexico.

While Tropical Storm Gustav remains a threat to offshore drilling platforms, the Port of Houston, and to the many oil refineries lining the Texas and Louisiana coasts, the storm all but disappeared from energy traders' radars once the EIA's natural gas report was released Thursday morning.

Read the full article. (Note: Aug. 28, crude oil closed at $115.59 a barrel, down $2.56.)

From Farrell: Russia's Power Play Could Shift Oil Flows:

There was a report earlier from a Turkish news source that Kazakhstan is considering moving its oil through Russian pipelines and not shipping it to Baku for transport through the Baku-Tbilisi-Ceyhan (BTC) pipeline.

Currently, Kazakhstan ships 500,000 barrels a day by tanker across the Caspian Sea to the BTC pipe and is half the capacity of that pipe. This is the pipe that goes through Georgia to Turkey.

This is only one of the "reassessments" we will surely see as former Soviet satellites consider the newly aggressive Russia and the events in Georgia and South Ossetia.

Read the full article.

From Oil Falls on Global Woes, Stronger Dollar:

The European Union's economic statistics office reported Thursday Aug. 14 that Europe's gross domestic product constricted by 0.2% in the second quarter of this year. Europe hasn't reported negative quarterly GDP growth in more than a decade.

The poor data from the Euro-zone means that four out of five of the world's largest economies are now alarmingly close to recession.

On Wednesday Aug. 13 the U.S. Energy Information Administration updated its outlook on how the slowing U.S. economy is dampening domestic demand for petroleum products.

Read the full article.

From Oil in Flux as Dollar Strengthens:

Crude oil prices look weak early Tuesday Aug. 12 at the New York Mercantile Exchange on a stronger dollar, falling oil demand in China and a possible resolution to Russia's military engagement with Georgia.

The overnight performance of the U.S. dollar was mixed, falling slightly against the euro and yen while making a small gain against the British pound. However, the dollar is trending markedly upward, having advanced strongly against all three currencies over the past seven days of trading.

Read the full article. Plus, don't miss Oil Sinks on EIC Demand Data (Aug. 12), Oil Bulls Fret Weekly Inventory Data (Aug. 13) and Oil Rises on Surprise Inventories Drop (Aug. 13).

From Oil Sinks Despite Georgian-Russian Turmoil:

Today Aug. 11 at the New York Mercantile Exchange, futures for September West Texas crude fell 75 cents to $114.45 a barrel, and Brent settled flat at $113.33 a barrel.

Russia's new full-scale war -- its largest military engagement since the dissolution of the Soviet Union -- was generally overlooked by most energy traders today. However, the long-term ramifications of the conflict could alter global oil supplies in a major way and will likely have a much larger impact on oil prices in the long run than will minor adjustments to U.S. GDP growth.

If the reports are correct, Russia is within 100 miles of assuming control of the Baku-Tbilisi-Ceyhan (BTC) oil pipeline. The second longest oil pipeline in the world, the BTC pipeline carries oil from Azerbaijan 1,099 miles through Georgia and Turkey to the Ceyhan Marine Terminal on the Mediterranean Sea.

Read the full article.

From Cramer: Oil's Fall Is Econ 101:

Nigerian rebels, Iranian saber-rattling, potential Israel-Iran war, hurricane warnings Turkish pipelines, BP ( BP) woes in Russia, all of these at one time have allegedly contributed to the strong oil price. Every time we rallied a couple of bucks, the usual suspects were rounded up and given credit for the rally.

And then the biggest actual ruckus of all -- a war between major oil producer Russia and Georgia -- rages on, and oil cascades lower into the escalation. LOWER! If this incursion were to rank with the parade of horribles that allegedly spurred oil from $90 to $148, it would be off the charts. It is the real deal that can interrupt pipelines and cause a calamity in the European market. It should have sent natural gas -- the Europeans live off Russian natural gas -- into the stratosphere, as it should have caused hoarding and a spike even here for recognition that no liquefied natural gas could come here because it would be needed so badly in Europe.

So why didn't it?

Read the full article. Plus, don't miss this related video on TheStreet.com TV: Cramer: Georgia's Not on Oil Market's Mind (Aug. 11).

For more recent "Wall Street Confidential" videos on oil, check out Cramer: Stocks to Buy on Oil's Slide (Aug. 8) and Cramer: Don't Buy Oil's Rally (Aug. 7).

From Media Ignores Russia's Role in Oil's Decline:

Reuters, for one, had a headline about how "Cheaper oil may lift stocks" this week, with a lead that echoed the sentiment -- but guess what? Read the market summary article backwards and forwards and tell me if you see even the slightest mention of Russia's violent contretemps with Georgia.

The area is close to prominent oil pipelines and can potentially have a big (at the very least short-term) impact on oil prices. But Reuters, so taken by the trend in recent price movement, is blind to the new factor. Typical. At one point, it mentions "reasons to tread lightly," but then it starts talking about stimulus from the tax rebates fading. Not war. Not the nearby pipelines.

Read the full article. Plus, don't miss this related video on TheStreet.com TV: They Just Don't Get Oil! (Aug. 11: Marek Fuchs skewers the business media for not mentioning the impact of the Russia-Georgia conflict on the oil market.)

Aug. 12: Russia to Halt Georgia Military Operation

From Simons: Will Crude Grease the Market?:

There are 69 industry groups accounting for 68.6% of the S&P 500's market capitalization with statistically significant negative relationships to crude oil prices. These groups are concentrated in the consumer-related and financial sectors. If we multiply their weights by the betas relative to crude oil, we get a negative impact of -3.56%.

There are only 16 industry groups accounting for 18.84% of the S&P 500's market capitalization with statistically significant positive relationships to crude oil prices; these are concentrated, obviously, in the energy and utility sectors. However, their betas are much higher, so when we multiply them by their weights, we get a positive impact of 5.08%.

The net impact across industry groups is 1.51%. Every 1% rise in crude oil prices should lead to a 0.0151% rise in the S&P 500, all else held equal.

Read the full article.

From CVX Preview: Is Downstream Up the River? ( RealMoney):

Chevron ( CVX) is expected to earn $3.03 per share on revenue of $92.41 billion. In the year-ago quarter, Chevron earned $2.27 per share on revenue of $50.31 billion. The revenue growth could be directly related to the rise in crude oil and gasoline prices.

As we saw from today's Jul. 31 disappointment at Exxon Mobil ( XOM), the problems are with the downstream (i.e., refining and retail) operations. The upstream (i.e., exploration and production, or E&P) businesses are performing much better. We should expect much of the same from Chevron.

Read the full article (RealMoney registration required).

To listen to Chevron's second-quarter earnings conference call, click here.

From Exxon Energized by Crude Rebound Before Report ( RealMoney):

The Street is looking Thursday for Exxon Mobil to report EPS of $2.52 on $144 billion of revenue, and that estimate has moved up very steadily from $2.19 on April 1 -- despite huge swings in oil.

Naturally, where XOM may lose in exploration & production, it will gain downstream in refining, which has been a cruddy business all around due to weak crack spreads.

Concern is running high on downstream, after Chevron reported poor refining and marketing results. Many of Chevron's issues, such as final price realization, marketing conditions, etc., are generally industrywide issues.

Read the full article (RealMoney registration required).

From XOM Gets Drilled on a Two-Bit Miss ( RealMoney):

Exxon Mobil missed expectations by a fairly large amount, 25 cents below an estimate of $2.52... The company missed last quarter as well, when it also should have been booming.

Upstream realized substantially higher prices, but production was down 8%, more than originally expected by the analyst community. Management has guided to a "slight decline" in production in 2008, with a rebound in 2009... Issues such as extended maintenance work, slower North Sea ramps and changing pricing entitlements all factored in, but mature field declines may be the biggest issue.

Read the full article (RealMoney registration required).

From Cramer: Exxon a Major Disappointment (Video, Jul. 31):

Jim Cramer: "Exxon has never believed in the price of the commodity oil. They never believed that it would get to this high, so they have not 'turned on the juice'... They've been a disappointment in finding oil... When I rank the oil stocks, I always rank Exxon last... It's just not the play for this group. I like Occidental ( OXY) more... I like Chevron more ... But more importantly, I like the independents... I think Devon's ( DVN) great..."

To watch the video, click the player below:

Plus, don't miss these Exxon Mobil-focused videos on TheStreet.com TV: Mad About Options: Exxon Out of Gas (Jul. 14: Jud Pyle and Matt Buckley review Jim Cramer's recent bearish comments about Exxon Mobil and offer options strategies for traders and investors.) and Cramer: Head for the Exit With Exxon (May 1: Cramer says after Exxon's latest numbers, look for the exit fast, and think about getting into integrated or natural gas stocks that are down.).

To listen to Exxon Mobil's second-quarter earnings conference call, click here.

From Cramer Interviews National Oilwell Varco CEO (Video, Jul. 31):

Jim Cramer: "When oil's down three in one day, do you get a lot of cancellation of rig orders?"

Pete Miller: Not at all, Jim. If you take a look, our National Oilwell Varco ( NOV) backlog today is at $10.8 billion. A lot of that backlog stretches out well into 2011, and we don't put something in our backlog unless it's contractually contracted for and it's also in many cases, a prepay. So the price of oil escalating and going up and down like that does not impact our capital business one iota."

Watch the video on TheStreet.com TV.

To listen to National Oilwell Varco's second-quarter earnings conference call, click here.

From ConocoPhillips Sees Profits Skyrocket:

ConocoPhillips ( COP), the world's fourth-largest publicly traded oil company, announced Wednesday Jul. 23 that its second-quarter earnings topped expectations and surged from the year-ago period.

Profits rose to $5.44 billion, or $3.50 a share, a 31.4% increase over last quarter and handily ahead of analyst estimates of $3.33.

The results clearly demonstrate to investors that Conoco has fully recovered from its nightmare second quarter in 2007, during which Venezuela expropriated $2.1 billion worth of its assets. The oil company was ultimately left with a dismal $301 million in net income, or 18 cents a share, in the year-ago-period.

Conoco's balance sheet has a heavier percentage of exploration-and-production assets than most other integrated supermajors, and its E&P segment kicked into high gear in the quarter, capitalizing on soaring global prices for crude oil and natural gas.

Net operating income from E&P activities were just under $4 billion, beating its first-quarter E&P results by 39%. Its E&P segment recorded a $2.4 billion loss during the same period last year.

Read the full article.

From Halliburton Hits Adjusted Profit Target:

Oilfield-services provider Halliburton ( HAL) announced Tuesday Jul. 22 that its second-quarter net income fell 67% from a year ago after accounting for the disposal of its KBR ( KBR) ( KBR) unit, but on an adjusted basis profits were higher.

The company earned $507 million, or 55 cents a share, in the second quarter of 2008. Soaring prices for hycrocarbons convinced the firm to tweak its operating strategy last year, and it spun off its KBR unit to focus its attention on strengthening its international presence.

High prices for energy commodities spurred a wave of capital investment in worldwide drilling activity in the last 12 months, resulting in large increases in revenue from every continent where Halliburton operates.

Operating income from the firm's well-completion and production segment was $561 million last quarter, compared with $555 million a year ago and $529 million in the first quarter. The segment managed to overcome a 13% year-over-year decline in North American income with double-digit increases in its overseas regions.

Read the full article.

From Crude Oil Futures Fall Below $125:

West Texas crude for September delivery dropped $3.98 to $124.44 a barrel Jul. 23, and Brent crude lost $4.27 to $125.28 a barrel.

The declines came after data showed that total petroleum product consumption over the past four weeks was 2.1% lower than the same period last year. In particular, motor gasoline demand fell 2.4%, and jet fuel demand dropped 3.6%.

Read the full article. Plus, don't miss these related stories: Crude Roughed Up by Dollar (Jul. 22), Crude Oil Lifted by Tropical Storm Threat (Jul. 21), Crude Oil Prices Continue to Slide (Jul. 17), Crude Oil Pummeled Again (Jul. 16) and Crude Oil Futures Fall Hard (Jul. 15).

Cramer: Oil's Headed to $110 (Video, Jul. 17)

Jim Cramer says consumption is down and natural gas will be the fuel of the future.

Plus, don't miss this oil-focused options strategy on TheStreet.com TV: Oil Selloff Pumps Up Valero (Jul. 15: The sharp drop in oil is boosting shares of Valero ( VLO). If this trend continues, options expert Steve Smith says, the best strategy is to buy call options on the refiner.).

From Crude Oil Climbs Back Above $140:

The International Energy Agency's monthly report on global oil markets, released to the public early Thursday Jul. 10, upped the agency's forecast for total global oil consumption in 2008 by 1% to 87.7 million barrels.

The IEA is infamously known for making large changes to its energy predictions month-to-month. However, its outlook has remained steady the past several months as signs of demand being destroyed have trickled in from more and more global economies.

Read the full article.

From Pickens: Oil May Fall to $100 in Next 2 Years:

T. Boone Pickens, the legendary wildcatter turned takeover artist who now commands the hedge fund B.P. Capital Partners, said in a Tuesday Jul. 8 television interview that oil prices will likely stay around $150 a barrel for the foreseeable future.

However, Pickens told CNBC that crude could fall back to $100 a barrel in the next two years as consumption patterns adjust to exorbitant prices.

Earlier in the day, Pickens hosted a meeting with reporters in which he introduced his version of a new energy plan aimed at reducing U.S. dependence on foreign oil. The plan proposes that gasoline-powered auto engines be converted to run on natural gas. Additionally, Pickens says the existing power-generation system that currently runs on natural gas and old coal technology should be replaced with a new system powered largely by wind and solar power.

Read the full article.

From Crude Futures Fall as Dollar Strengthens:

Crude futures are heading south again Tuesday Jul. 8 at the New York Mercantile Exchange, pressured by strength in the U.S. dollar and the slight unwinding of tensions between Iran and Israel.

West Texas crude was recently down $3.17 at $138.20 a barrel, and Brent crude was falling $3.02 at $138.85 a barrel.

The dollar made a strong showing against other major world currencies overnight, gaining roughly 1% against the euro and the pound sterling and half a percent against the yen.

Crude prices tend to fall when the value of the U.S. dollar rises, because oil is traded in dollars in international markets.

Read the full article. Plus, don't miss these related stories: Crude Oil Futures Take a Tumble (Jul. 7) and Oil Jumps on Fears Iran Could Be Attacked (Jul. 1).

From Crude Prices Pass $145:

Crude oil futures soared past $145 a barrel for the first time ever Thursday Jul. 3 before a bounce in the U.S. dollar cut into the gains.

Energy futures in the U.S. tend to stay firm ahead of holidays, as traders are usually unwilling to expose themselves for a long weekend to geopolitical strife, infrastructure breakdowns or other threats that can leave oil supplies unbalanced.

Read the full article. Plus, don't miss this related story: Rising Oil, GM Selloff Wallop Stocks (Jul. 2):

From Crude Oil Steady Ahead of Inventory Report:

Crude oil was trading laterally early in Wednesday's Jul. 2 session at the New York Mercantile Exchange, with market participants apparently content on lying low until the Energy Information Administration releases this week's report on petroleum storage levels.

West Texas crude was down a hair at $140.87 a barrel, and Brent crude was adding 14 cents at $140.81.

Read the full article. Plus, don't miss these related stories: Crude Oil Drops After Inventory Report (Jun. 25), Stocks Limp Out of Second Quarter (Jun. 30), Crude Oil Strikes Another Intraday Record (Jun. 30) and Libya, OPEC Remarks Spark Crude Oil Rally (Jun. 26).

China Watch: Breaking Into Oil (Video)

Brittany Umar and Patrick Schultz break down how to play China's emergence into the oil-fields services industry.

To watch the video, click the player below:

From High Crude Oil Prices? It's the Fed, Stupid:

To be sure, geopolitical strains and global supply-and-demand forces are impacting the rising price of crude. But oil is priced in dollars and the dramatic decline in the value of the greenback of late has to be giving upward momentum to crude prices.

By keeping interest rates low, the Fed is raising the supply of dollars and other forms of liquidity in the financial system, thus weakening the value of the U.S. currency. But the lack of scrutiny of the central bank in the current oil debate is curious.

Read the full article. Plus, don't miss Oil's High -- Suck It Up (Jul. 1) on TheStreet.com TV, where RealMoney's Dan Dicker argues that the U.S. government will soon take a disastrous action to remove speculation in the oil markets.

From Cramer: Don't Be Fooled by Dollar-Oil Excuses (Video, Jul. 1):

Cramer: "Oil has nothing to do with the dollar, other than a miniscule amount of pricing... This thesis has cost you billions... It has made you focus on the dollar as opposed to focusing on supply and demand, it has made you feel that the U.S. is the 'swing vote' in oil -- it's clearly not. The swing vote is China."

Watch the video on TheStreet.com TV. Plus, don't miss these oil-focused "Wall Street Confidential" videos on TheStreet.com TV: Cramer: Best Time to Buy Oil (Jul. 1), Cramer: Factors Pumping Up Oil Prices (Jun. 30), Cramer: U.S. Oil Inventories Don't Mean a Thing (Jun. 27), Cramer: Calling Out the Oil Lies (Jun. 21), Cramer: No Stopping Oil Prices (Jun. 19), Cramer: If Your Stock Needs Oil, Don't Own It (Jun. 9), Cramer: This Is Not a Recession Led by Oil (May 20), Cramer: Disregard Oil Inventory (May 7) and Cramer: What Controls Oil Prices (May 6).

For more oil insights from Cramer, read Cramer's 'Mad Money' Recap: Reaping the Benefits of High Oil Prices, as well as his five-part "Mad Money" series on "wildcat" drillers: Cramer's 'Mad Money Recap': How to Beat High Oil Prices, Cramer's 'Mad Money Recap': Putting Housing Ahead of Inflation, Cramer's 'Mad Money' Recap: Peru Play, Cramer's 'Mad Money' Recap: A Home-Grown Natural Gas Play and Cramer's 'Mad Money' Recap: Next Week's Game Plan.

From How to Play $200 Oil:

Anadarko ( APC) is especially prepared for the prospect of $200 oil, both on the natural gas side and on the oil side. It has international exposure, but with oil that high, transportation costs will become an issue for the major oil companies. For U.S. domestic usage, the Gulf of Mexico is a strong local source. Anadarko is drilling deep to develop new fields, and it has the best rig inventory lockups in the Gulf. In both the Miocene and Lower Tertiary Prospects, it is planning on drilling an additional 10 to 15 wells for exploration and appraisal. More oil and gas means more profit.

On land, Anadarko has an equally impressive record.

Read the full article. Plus, don't miss these videos on TheStreet.com TV: Cramer: Why I Love Anadarko (May 6) and Cramer Interviews Anadarko Petroleum CEO (Mar. 25).

From Airline Stocks Could Triple If Oil Settles:

Avondale Partners analyst Bob McAdoo, in a report Wednesday Jun. 25, said there was "little chance" airline shares could rise much with crude oil prices fluctuating between $2 and $4 a day.

"Once oil stabilizes, and it becomes clear to the broad group of investors and pundits that the legacy airlines are not all going out of business, we expect a doubling or tripling in airline share prices," he wrote.

Read the full article.

From Oil's Attendant Job Cuts Weigh at American:

As flight attendant No. 17,702 at American Airlines ( AMR), Mary McAlee faces the very real possibility that she will be laid off next month August. Because of her position at the bottom of the seniority list, McAlee has a clear view of the harsh realities of higher fuel costs on the airline industry.

To be sure, it is not just airline employees who are hurt by skyrocketing fuel costs. Investors have watched American shares plunge 65% this year. Executives are being forced to shrink the company they helped to build, and passengers must pay more as fares and fees climb.

Read the full article.

From Kass: Oil at a Tipping Point?:

The importance of the future price of energy products was underscored yesterday Jun. 24 in lynx-eyed economist Ed Hyman's summary on the U.S. economy and in his attendant strategy. In that assessment, the price of oil weighed heavily on both calls.

Hyman says that we are not yet in a recession but he sees actual growth in the economy as increasing by only about a 1% over the next year. Hyman sees oil at a tipping point as the rate of decline in worldwide economic growth decelerates. (European growth will slow demonstrably.) Accordingly, he expects oil to drop to $100 per barrel, and if it stays there, the domestic economy can avoid a recession as headline inflation declines (coincident with the price of energy products) and the Fed eases.

If Hyman is correct on the price of crude oil -- and my guess is that he may be -- there will be a change in leadership and profound implications for sector investing in the second half of 2008.

Read the full article.

From Bolling: How to Solve the Oil Crisis:

After several conversations with officials from major drillers like Transocean ( RIG) and Diamond Offshore ( DO), I am even more convinced that we need to start the long process of exploration and producing oil from all available sources, especially the OCS.

After many discussions with these drillers, I am convinced that there is great reason to believe that Cuba has not only discussed the possibility of allowing China and Venezuela to drill on her sovereign leases, but has already begun seismic studies. This may seem innocuous, but it is not. You may say, "so what ... let Cuba ruin its coastline ... we are going to protect ours." There is a very important fact that no one has addressed. They all agree that these oil finds are immense. The scary scenario plays out like this:

Cuba, China and Venezuela develop some of these oil fields. They sit on Cuban land, which is adjacent to U.S land. The majority of the oil may actually sit underneath our land. If they get a jump on us and develop those fields, they may be pulling oil right out from under our feet.

If you want a real reason to lift the moratorium on our offshore oil leases, look no further.

Read the full article.

From Bolling: Profit on Offshore Drillers

While I like all the drillers on shore or off, I think the opportunity lies with the offshore specialists for now. I think the OCS is the most likely to receive the green light to drill. The threat of losing the oil to adjacent countries like Cuba and Venezuela may inspire some in Congress to move faster there.

Transocean, Diamond Offshore and Noble ( NE) are the biggest offshore oil platform drilling service providers. They aren't overly expensive either with price-to-earnings ratios of 10, 20, and 13, respectively. And with the prospect of future rigs becoming available, any money they spend in purchasing these rigs will be money well spent (pardon that one).

After all, it is possible that China, through China National Offshore Oil ( CEO), is already either in production or through the lengthy process of accumulating data prior to dropping a drill into the ocean floor. If that is so -- which I wholeheartedly believe -- then we may choose to first lift the moratoria on OCS.

Read the full article. Plus, don't miss Bolling: Emerging Solutions for the Oil Crisis.

From Bolling: Brazil Knows Oil:

Speculators are a funny group. They change their minds fast, and when a big one switches, the masses follow. If Boone Pickens or some of the other well-followed oil longs bail, watch how fast the pump price reads $2.50 or $2.75 per gallon.

In the meantime, if Petrobras ( PBR) has anywhere near the oil and gas it thinks it has from that recent oil find (Tupi Field), it will become a world leader in oil and gas production.

The company believes that there may be up to 8 billion barrels of oil equivalents there. It already has 11 billion of proven reserves and may also have massive finds in its Carioca and Guara fields.

Read the full article.

From Petrobras and Vale: The Keys to Brazil's Growth:

As for the energy sector, if you want to get me excited, just say the word "Petrobras," sing the words "Tupi oil field," and I will be in investor heaven. But please forget about Chevron ( CVX) don't bore me with ExxonMobil. These corporate sloths don't deserve the light of day until they can actually grow their reserves and production.

To me, Petrobras is now the global energy leader and "energy market tell." Is it just me, or does it seem like Petrobras announces a new energy discovery every couple of weeks? On the other hand, while companies like ExxonMobil have been recording record profits, I don't believe they're as well positioned for the future as is Petrobras. As an example, XOM ExxonMobil has spent more money in the past year on buying back stock than prospecting for more oil (as defined by capital expenditures).

Read the full article.

From Hypothetical Oil Bubble Hypothetically Could Burst:

The Barron's author stresses the impossibility of predicting anything with total accuracy (of course this is true, but investors, unlike journalists, must risk such predictions) before returning to the "ifs" and adding the nutty notion that even under ideal circumstances, oil will only fall to $100:

"But it's impossible to know with precision when the bubble will burst. The Saudis could roil the markets with a pronouncement June 22; the dollar could revive or demand could plummet, or all three. And if prices start falling, the downturn could accelerate, sending crude back to $100 -- where it would be cheaper, but still far from cheap."

The article mentions how airlines and retailers might benefit if an oil bubble pops. And it points to oil companies like Devon Energy ( DVN), Apache ( APA) and XTO Energy ( XTO) that can get hit badly, while larger ones like ExxonMobil, Chevron and ConocoPhillips might fare better. Are they saying that if oil plummets, airlines and retailers will do well?!? That's crazy talk!

And the specific breakdown is, again, way too hedged. How small oil companies would get creamed and larger ones fare better I don't know. It seems that if all those "ifs" happen, all the oils will get creamed.

Read the full the article.

Plus, don't miss these oil-focused "Business Press Maven" videos on TheStreet.com TV: They Just Don't Get Oil! (Jul. 7: Marek Fuchs marvels at the obvious error The Wall Street Journal made in predicting $200 oil.), They Just Don't Get Oil! (Jun. 23: Fuchs cleans up Barron's tragic oil spill.), They Just Don't Get Oil! (May 21: Fuchs slaps his knee in laughter at a Business Week headline about oil prices.) and They Just Don't Get Oil! (May 13: Fuchs bemoans the fact that the business media ascribes 1,423 reasons to May 12's blip in oil prices.).

From How Oil and Water Futures Affect Ag Stocks:

There is a clear connection between water, grain, animal protein and oil. Irrigation of farm land is far and away the biggest use of water (at about 70%). Food production is also very energy intensive. Agriculture accounts for a full sixth of U.S. energy consumption.

Between 1945 and 1994, the U.S. crop yield grew three-fold, but the energy input grew four-fold. The trend has reached the point of diminishing returns. Oil itself has become more energy intensive. In the 1940s, it took about one barrel of oil to get 100 barrels. Now that ratio is closer to 1 to 10.

At current production rates and given the current level of technology, some oil producers are projected to run out of oil in the next 10 to 15 years. Many countries are going to face severe water shortages. There are some pundits who suggest that the next wars are more likely to be over water than oil.

Read the full article.

From The Money's in Oil Refineries (Video):

Dan Dicker says regulatory involvement is bringing oil down, but it's still a long-term bull story.

Dicker: "There's clearly going to be -- again -- an enormous desire to have exposure in the oil markets... I have the refiners on my radar now. I mean I've been suffering with them -- they've had a horrible time in terms of margins, based on high crude oil and low prices of relative products to them. However, now that oil has come off a bit, those margins are restoring themselves very, very quickly and Tesoro ( TSO) and Valero -- particularly Tesoro has made a tremendous move."

To watch the video, click the player below:

From Forget Fundamentals When It Comes to Oil:

So here, in no particular order, are the arguments and proofs of "speculative oil."

The Growth Factor

First, the growth of commodities as an asset class is unprecedented. We need no litany of numbers to prove this point. We can merely look at the volume numbers being posted by all the major commodity exchanges over the last few years.

In oil, I will draw upon numbers from my previous trading home, the New York Mercantile Exchange. At the end of 2007, Nymex reported average daily volumes of 1.485 contracts per day, an increase of 25% over 2006. So far in 2008, growth has continued at an astronomical pace: January volumes increased 6% over the same period in 2007, February was up 28% and March increased an astounding 62%.

We don't need to be geniuses to recognize where most of this growth is coming from. It's not new commercial interests looking to hedge exposure to the ramping oil markets. Whether from managed futures, algorithmic programs, hedge funds or individual traders who are widening their repertoire from just stocks, it all represents an enormous increase in flow of speculative trade.

Read the full article.

Need Oil Exposure? Don't Know Where to Start?

In " How to Outperform the Market and Manage Risk With ETFs," Scott Rothbort writes that you can use an industry-specific exchange-traded fund (ETF) as a "placeholder" as you do the necessary homework on individual stocks. The U.S. Oil Fund ( USO) ( USO) and Oil Services HOLDRs ( OIH) are two oil-focused ETFs.

To stay up to date on oil, visit the TheStreet.com's Energy/Commodities section.

This article was written by a staff member of TheStreet.com.

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