Oil drops for 2 days in a row - PeachParts Mercedes-Benz Forum

Plantman · #1 07-16-2008, 08:47 PM

Oil tumbles again; prices fall over $10 in 2 days

By ADAM SCHRECK, AP Business Writer Wed Jul 16, 4:12 PM ET

NEW YORK - Oil prices settled sharply lower for the second time in a row Wednesday, leaving crude more than $10 cheaper in just two days of frenzied trading and prompting speculation that the hard-charging market may be running out of steam.
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Light, sweet crude for August delivery fell $4.14 to settle at $134.60 a barrel on the New York Mercantile Exchange, after earlier sinking as low as $132. The drop follows a $6.44 sell-off Tuesday, crude's biggest since the Gulf War.

The two-day slide of $10.58 a barrel marks a dramatic turnaround in crude prices, which as recently as Friday traded at record highs above $147 a barrel. But even with this week's sell-off, prices remain about 80 percent above where they were a year ago and up about 40 percent from the start of the year.

Analysts are unsure whether the drop represents a long-term shift in sentiment or simply a brief correction to crude's monthslong bull run. But the dizzying decline is prompting market veterans to ask how much support remains for such high prices.

"It's a sign that maybe the bull market is losing strength," said Michael Lynch, president of Strategic Energy & Economic Research Inc.

Perhaps just as significant as the declines was the sudden increase in volatility. Prices whipsawed by more than $10 Tuesday and $7 Wednesday ahead of the expiration of options contracts this week.

"I think anyone you talk to would have to be surprised by the magnitude of these huge price swings. This is extreme price volatility that no one can predict," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. Such large up-and-down swings, he added, can indicate the market is nearing its top.

Sharply increased crude and gasoline supplies were the immediate cause of Wednesday's decline.

The Energy Information Administration reported that U.S. crude oil supplies rose by 3 million barrels, or 1 percent, last week. That is the opposite of the 3 million barrel draw analysts surveyed by energy research firm Platts expected. Gasoline supplies also leapt unexpectedly.

"The numbers were decidedly bearish on just about all fronts," Ritterbusch said.

Industry observers cautioned that prices could still bounce back, just as they have following large drops in recent weeks.

"I do expect this bubble to burst. Is this is it? It might be ... but I'm not ready to say so yet," analyst and trader Stephen Schork said.

A number of market participants speculated that at least some of the week's sell-off was the result of cash-strapped banks selling energy contracts to raise money for other needs.

And widely used computers programed to sell once prices fall to certain thresholds can accelerate declines, much as an avalanche gains steam the further it slides.

"It absolutely adds a cascading effect," Schork said.

Yet concerns are growing that high energy prices are leading to real shifts in consumer behavior that could cause demand to shrivel considerably.

The Labor Department said consumer prices shot up 1.1 percent last month, the second fastest pace in 26 years. Rising energy prices accounted for two-thirds of that increase, which was far worse than expected.

Testifying before Congress for the second day, Federal Reserve Chairman Ben Bernanke said central bank policymakers are facing "significant challenges" in righting the troubled U.S. economy, which is being buffeted by weak growth and inflation driven largely by rapidly rising food and energy prices.

"This is clearly a rough time," Bernanke said. "It is clear (economic) growth has been slow and the labor market is weak. So conditions are tough on average families."

American Airlines and Delta Air Lines, two of the three biggest U.S. carriers, each reported a loss of more than $1 billion in the second quarter, largely because of higher fuel costs.

"With each passing day, we are reading about more car companies cutting back on production, airlines slashing flights, and consumers driving less," said Edward Meir, an analyst at MF Global. "Of course, these are not new factors, and energy markets have ignored them for several months now as they have relentlessly pushed higher, but we suspect that as the pace of demand destruction accelerates it will be harder to ignore."

The dollar strengthened against the euro, giving traders less reason to go bargain shopping in the suddenly discounted energy market. A weaker dollar has enticed investors to buy oil and other commodities as hedges against inflation and a weakening dollar, but that incentive diminishes when the dollar gains ground.

It will be some time before any declines — assuming they hold — show up at the gas pump, where prices continued to advance.

U.S. retail gasoline prices added half a cent to $4.114 per gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. Diesel prices also marched higher, up nearly a penny to $4.839 a gallon.

In other Nymex trading, heating oil futures shed 7.8 cents to settle at $3.841 a gallon while gasoline futures lost 10.54 cents to settle at $3.2794 a gallon. Natural gas futures fell 7.9 cents to settle at $11.398 per 1,000 cubic feet.

August Brent crude fell $2.56 to settle at $136.19 a barrel on the ICE Futures exchange in London.

Hatterasguy · #2 07-16-2008, 08:53 PM

I know its coming, if this isn't it, the real pop is right around the corner.

Once oil comes down a bit people will have more spare cash, so the economy should move along a bit better. The housing market/credit problems are in their grand finale.

The next 12 months should be interesting.

firemediceric · #3 07-16-2008, 08:56 PM

Yet the cost of gasoline and diesel continue to tick up in this area.

MTI · #4 07-16-2008, 08:56 PM

Yup, I bet those GM workers and airline flight crews are all just giddy with excitement.

Mistel · #5 07-16-2008, 10:54 PM

http://charts3.barchart.com/chart.asp?sym=CLU8&data=A&jav=adv&vol=Y&divd=Y&evnt=adv&grid=Y&code=BSTK&org=stk&fix=

you can see that it has broken the uptrend by making a lower low than the previous low of a week earlier.

time to go short, but I wouldn't sell your Exxon stock just yet

mpolli · #6 07-17-2008, 02:14 AM

Quote:

Originally Posted by Mistel

time to go short

Are you SURE about that ! Every time it acted this way before (the past year) it rallied soon after. And if the Iranians cough or scratch their nose (or 100 other things) it could go straight up again. You could have done well on USO puts the last couple of days. I was looking for the drop but it came a day or 2 early.

300SD81 · #7 07-17-2008, 03:20 AM

Burst..damnit...burst! I want $3 diesel again!

Mistel · #8 07-17-2008, 02:19 PM

Quote:

Originally Posted by mpolli

Are you SURE about that ! Every time it acted this way before (the past year) it rallied soon after. And if the Iranians cough or scratch their nose (or 100 other things) it could go straight up again. You could have done well on USO puts the last couple of days. I was looking for the drop but it came a day or 2 early.

If I knew for sure I would be very rich , but I'm not.

Technically, it has broken the uptrend.

All those political problems are dealing with the fundamental side of things.

It looks like it has good support around $132. Once it goes through that, it should keep going down a bit more

I just put my money where my mouth is and bought a put, but don't follow my advice! (you might be better off to do the opposite!)

tankdriver · #9 07-17-2008, 06:14 PM

Quote:

Originally Posted by 300SD81

I want $3 diesel again!

lol. It ain't never going back.

Plantman · #10 07-17-2008, 06:26 PM

Oil markets: Bottoming out or taking a breather?

By ADAM SCHRECK, AP Business Writer 1 hour, 12 minutes ago

NEW YORK - Oil prices tumbled below $130 a barrel for the first time in more than a month Thursday, as crude's dramatic slide entered a third day accompanied by a sharp sell-off in natural gas.
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The declines accelerated amid growing concerns that the weakening economy and creeping inflation are eroding demand for fossil fuels in the U.S. and other large energy-consuming nations.

Oil is now more than 10 percent cheaper per barrel than it was on Monday; natural gas prices are down more than 20 percent just since the Fourth of July. Still, experts are not convinced that prices have turned a corner.

"There's no bell that tells you when the market has turned," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.

Light, sweet crude for August delivery dropped $5.31 to settle at $129.29 a barrel on the New York Mercantile Exchange. Prices have fallen nearly $16 in just the past three days.

Natural gas futures for August delivery fell more than 8 percent Thursday, marking their biggest one-day drop in nearly a year, according to Nathan Golz, researcher at Wachovia Securities in St. Louis. Prices for the key heating, cooking and power generation fuel settled 86.1 cents lower at $10.537, their lowest point since April.

A number of market observers say there simply wasn't enough support for the recent run up in natural gas prices, and that this week's sell-off of oil has only helped speed the declines.

"Any time oil goes up or down on Nymex, it's going to have a carry-over effect on natural gas," said Michael Rieke, senior managing editor for power and gas at energy research firm Platts.

The immediate cause of Thursday's sharp natural gas decline was a larger-than-expected increase of U.S. supplies.

The Energy Department's Energy Information Administration said in its weekly report that natural gas inventories rose by 104 billion cubic feet to more than 2.31 trillion last week. Analysts had been expecting supplies to grow by only 86 billion to 91 billion cubic feet, according to a Platts survey.

A similar report Wednesday showed oil, gasoline and other fuel supplies unexpectedly rose sharply. Traders saw both the petroleum and natural gas reports as reasons to sell, as they reinforce data that show consumers are cutting back on their energy use.

"We're seeing some worries about demand destruction in oil, so I think that's creating some fear among investors and leading them to sell," said Tom Pawlicki, commodities analyst with MF Global Research in Chicago.

Some market observers have said last Friday's record above $147 a barrel could represent a peak price for oil, at least for the time being. But like a number of others, Pawlicki was reluctant to say whether the market's latest swoon represented a lasting shift.

"I think it's too early to call a top to this market," Pawlicki said.

Crude's drop weighed heavily on other commodities Thursday, with gold, silver, soybeans, corn and other agriculture futures all ending sharply lower.

Stocks rallied for the second day. That fueled speculation among some analysts that large investors are pulling money out of oil and other commodities — which had been seen as safe havens given the financial turmoil of the past year — and pumping it back into the beaten-down stock market.

Reports of a pre-dawn explosion that damaged an oil pipeline in Nigeria's restive south — the sort of threat to supply that has helped fuel crude's recent rally — did little to prop up prices Thursday.

A Nigerian military official said the blast on a pipeline owned by Agip, a subsidiary of the Italian energy giant Eni SpA, "affected output," although he did not say by how much.

Col. Chris Musa, head of the Bayelsa State military, also did not say how severe the damage was, and declined to comment on what might have caused the explosion. The company said a sudden drop in pressure led it to halt production on pipelines carrying 47,000 barrels of oil a day.

Attacks on oil industry infrastructure in the past two years have slashed oil output by almost a quarter in Nigeria, Africa's top crude producer.

At the gas pump, prices held steady at a record $4.114 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. Diesel rose to a new record of $4.845, up more than half a penny.

In other Nymex trade, heating oil fell 9.72 cents to settle at $3.7438 a gallon, while gasoline futures fell 11.61 cents to settle at $3.1633.

Brent crude for September delivery fell $5.12 to settle at $131.07 on the ICE Futures Exchange in London.

BrierS · #11 07-17-2008, 06:37 PM

Locally, the upcoming winter season pre-buy programs are being received with a heating oil range between $4.73 and $4.78. Some are even offering a price protection for an additional $0.40 per gallon. The latest survey of the local suppliers not only provided me with the range above but also another interesting piece of info. Two suppliers are not offering the pre-buy this season since they believe prices will be substantially lower. They do not want to gouge their loyal customers. Last year I scoffed at the pre-buy prices and ate my shirt. This year I am going to take the same approach since I believe their are stronger indications prices will settle lower than the current contracts show. I might lose again...
Steve

Hatterasguy · #12 07-17-2008, 07:02 PM

http://www.wtrg.com/daily/crudeoilprice.html

Its to early to get excited, but it could be the start of a downward trend.

$3ish a gallon diesel here we come, sweet!