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Oil drops below US$100 first time since Feb
May 5, 2012, Saturday
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The price of oil dropped below US$100 per barrel for the first time since February. The dramatic drop - US$5 per barrel by midday - is easing fears that high energy prices would cripple a US economy that is struggling to overcome high unemployment, stagnant wages and weak growth.
The catalyst was yesterday's weaker than expected report on job growth in the US That added to recent signs that the global economy is weakening, meaning demand for oil should slow.
Earlier this year, world oil demand looked to be rising quickly at the same time that world supplies were threatened by a host of small production outages and the prospect of drastically reduced production from Iran, the world's third biggest exporter.
Those developments raised the prospect that world supplies would be at their most tenuous just as the summer driving season in the developed world was arriving. The price of the US benchmark oil rose to US$110. International oil spiked even higher, to US$128 per barrel.
Gasoline prices in the US appeared to be on track to soar past US$4 per gallon (US$1.05 a liter) nationwide and break the 2008 record of US$4.11
That picture has now been turned upside down. World oil supplies are growing while demand is falling. US gasoline prices have fallen to US$3.80 per gallon (US$1 a liter) from a peak of US$3.94 in early April. Now they could go as low as US$3.50 per gallon by July 4, according to Tom Kloza, Chief Oil Analyst at the Oil Price Information Service.
On Friday, Benchmark West Texas Intermediate crude fell US$4.83 to US$97.70 in afternoon trading - a drop of 4.7 percent.
Oil prices have been falling since Wednesday because of a renewed focus on the economy. The Labor Department said Friday that the US economy added just 115,000 jobs in April - far fewer than the pace of hiring earlier this year. Government data show that US oil consumption dropped 5.3 percent in the first quarter. Meanwhile, supplies have been growing for the past six weeks and hit a 22-year high in Cushing, Oklahoma, where benchmark crude is delivered.
The European economy also is slowing down as governments on that continent struggle with oppressive debt.
"We're fearful that the economy is slowing more than we originally thought," PFGBest analyst Phil Flynn said.
US oil prices haven't dropped this much since Dec. 14, 2011, when the benchmark price fell by US$5.19, or 5.2 percent, to US$94.95 per barrel.
The price of the US benchmark crude has crossed the US$100 mark 21 times during the past year. It rose as high as US$109.77 on Feb. 24 this year. Last year it rose to US$113.93 per barrel April and fell as low as US$75.67 per barrel on Oct. 4.
In other futures trading, heating oil lost 5.12 cents to US$3.0357 per gallon, wholesale gasoline lost 4.55 cents to US$3.0045 per gallon, and natural gas lost 4.6 cents to US$2.294 per 1,000 cubic feet. Brent crude, which is used to set the price of oil imported into the US, lost US$1.98 to US$114.10 per barrel.
The catalyst was yesterday's weaker than expected report on job growth in the US That added to recent signs that the global economy is weakening, meaning demand for oil should slow.
Earlier this year, world oil demand looked to be rising quickly at the same time that world supplies were threatened by a host of small production outages and the prospect of drastically reduced production from Iran, the world's third biggest exporter.
Those developments raised the prospect that world supplies would be at their most tenuous just as the summer driving season in the developed world was arriving. The price of the US benchmark oil rose to US$110. International oil spiked even higher, to US$128 per barrel.
Gasoline prices in the US appeared to be on track to soar past US$4 per gallon (US$1.05 a liter) nationwide and break the 2008 record of US$4.11
That picture has now been turned upside down. World oil supplies are growing while demand is falling. US gasoline prices have fallen to US$3.80 per gallon (US$1 a liter) from a peak of US$3.94 in early April. Now they could go as low as US$3.50 per gallon by July 4, according to Tom Kloza, Chief Oil Analyst at the Oil Price Information Service.
On Friday, Benchmark West Texas Intermediate crude fell US$4.83 to US$97.70 in afternoon trading - a drop of 4.7 percent.
Oil prices have been falling since Wednesday because of a renewed focus on the economy. The Labor Department said Friday that the US economy added just 115,000 jobs in April - far fewer than the pace of hiring earlier this year. Government data show that US oil consumption dropped 5.3 percent in the first quarter. Meanwhile, supplies have been growing for the past six weeks and hit a 22-year high in Cushing, Oklahoma, where benchmark crude is delivered.
The European economy also is slowing down as governments on that continent struggle with oppressive debt.
"We're fearful that the economy is slowing more than we originally thought," PFGBest analyst Phil Flynn said.
US oil prices haven't dropped this much since Dec. 14, 2011, when the benchmark price fell by US$5.19, or 5.2 percent, to US$94.95 per barrel.
The price of the US benchmark crude has crossed the US$100 mark 21 times during the past year. It rose as high as US$109.77 on Feb. 24 this year. Last year it rose to US$113.93 per barrel April and fell as low as US$75.67 per barrel on Oct. 4.
In other futures trading, heating oil lost 5.12 cents to US$3.0357 per gallon, wholesale gasoline lost 4.55 cents to US$3.0045 per gallon, and natural gas lost 4.6 cents to US$2.294 per 1,000 cubic feet. Brent crude, which is used to set the price of oil imported into the US, lost US$1.98 to US$114.10 per barrel.
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