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FirmhandKY -> Crude's steep drop (8/4/2008 10:24:36 PM)
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Oil prices drop nearly $4 after storm threat eases
Monday August 4, 4:39 pm ET
By Stevenson Jacobs, AP Business Writer
Extracts:
NEW YORK (AP) -- Oil prices plunged to a three-month low Monday, briefly tumbling below $120 a barrel in another huge sell-off after Tropical Storm Edouard seemed less likely to disrupt oil and natural gas output in the Gulf of Mexico.
Crude's steep drop -- prices fell more than $5 at one point during the day -- dragged down other commodities from corn to copper and mimicked the big nosedives of the past three weeks, adding to growing beliefs that the oil bubble is at least temporarily deflating.
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Still, oil market traders expressed surprise that a potential hurricane in the Gulf coupled with escalating tensions with Iran didn't send prices higher -- an almost certainty just a few weeks ago.
"Any market that really doesn't respond to seemingly bullish news is often a tip off that we're going lower," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Ill.
He and other analysts have predicted that, barring any surprises, crude could tilt toward $100 a barrel by the end of the year.
Meanwhile, retail gas prices kept falling, reflecting the continuing price-driven drop in U.S. fuel demand. Gas has fallen 5.6 percent since hitting an-all time high above $4 a gallon on July 17, but so far hasn't kept up with oil's steep descent, suggesting struggling filling stations are still saddled with gas bought when crude prices were higher.
"They still have expensive gas to feed into the system, so they're reluctant to drop prices," Ritterbusch said. "Prices never come down as fast as they go up."
Still, Monday's drop in crude was expected to help make retail gas cheaper.
Adding to the bearish sentiment around oil, Democratic presidential candidate Barack Obama on Monday proposed that the government sell 70 million barrels of oil from its strategic reserves to help lower gasoline prices. He had previously opposed tapping the supplies, but said in a major energy speech that past releases from the reserve have "lowered gas prices within two weeks."
My main reason for posting this was to counter the "bad news sells" threads that bemoaned the cost of gas over the past few months. Will it ever be as cheap as it was before? No. But (absent another ME war), it isn't going to stay unnaturally high, either.
A second reason for posting was to give an example of how the market will eventually take care of a lot of issues (there was a lot more in the article about how lessening consumer demand is playing a part in the lowering prices).
A third reason - which I will leave others to comment directly on - is how one of the Presidential candidates reacts to events, revealing something of his economic beliefs ... and I'm waiting to see if he claims "credit" as the prices drop towards the end of the year.
Also, finally, a question. Will the lowering prices help the Democratic, or the Republican candidate this election?
Firm
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