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Oil prices continue three-week slide
Source: Agencies |
May 20, 2010, Thursday
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OIL prices continued a three-week slide yesterday, as U.S. petroleum stockpiles grew and Europe's financial troubles shook confidence in the world economy.
Benchmark crude for June delivery dropped US$1.19 to US$68.22 a barrel on the New York Mercantile Exchange. Prices had fallen as low as US$67.90 earlier in the day, the cheapest price for an oil contract since Sept. 30. On May 3, a barrel of oil sold for US$87.15, the highest price in 18 months.
Most of the trading already has moved away from the June contract, which is set to expire on Thursday. The July contract fell US$1.38 to US$71.32 a barrel.
Many analysts believe that oil prices are destined to rise in the long run, but the direction they may take in the near term is unclear. Oil prices have been tumbling for weeks as Europe struggles to contain its debt crisis. The situation has rippled through equities and commodities markets around the world, pushing the euro lower, which has in turn lifted the dollar. Oil, which is priced in dollars, tends to fall as the greenback rises and makes oil contracts tougher to buy with foreign money.
Crude prices also have plunged as big investors take advantage of a huge markup between the June and July oil contracts. The July contract is currently worth about US$3 a barrel more than the June contract, which means investors can make money by simply storing their June oil and selling it a month later.
As a result, supplies at the benchmark delivery point in Cushing, Oklahoma, have bulged to an all-time high. That forces prices even lower.
"There's a lot of opportunism happening there," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Overall, crude supplies grew less than expected last week to 362.7 million barrels, according to the Energy Information Administration. Gasoline supplies dropped to 221.8 million barrels.
Oil has dropped so far this month that it's starting to affect gasoline prices.
Retail gas prices slipped overnight, ahead of the Memorial Day weekend and the unofficial start of the summer driving season. A gallon of regular unleaded fell less than a penny to a new national average of US$2.852, according to AAA, Wright Express and Oil Price Information Service.
Gasoline is 1 cent cheaper per gallon than it was a month ago, but it's still 53.8 cents more expensive than the same time last year.
Analysts continue to monitor effects of the Gulf of Mexico oil spill on the country's oil supplies. The massive spill isn't expected to affect energy prices this year. But if it alters U.S. interest in offshore drilling, Credit Suisse analyst Ed Morse said the spill could shape up to be "as bullish an item as one can think of" for oil prices in coming years.
In other Nymex trading in June contracts, heating oil fell 3.23 cents to US$1.9292 a gallon, and gasoline dropped 3.38 cents to US$2.0093 a gallon. Natural gas tumbled 18.2 cents to US$4.160 per 1,000 cubic feet.
In London, Brent crude's July contact fell US$1.35 to US$73.08 on the ICE futures exchange.
Benchmark crude for June delivery dropped US$1.19 to US$68.22 a barrel on the New York Mercantile Exchange. Prices had fallen as low as US$67.90 earlier in the day, the cheapest price for an oil contract since Sept. 30. On May 3, a barrel of oil sold for US$87.15, the highest price in 18 months.
Most of the trading already has moved away from the June contract, which is set to expire on Thursday. The July contract fell US$1.38 to US$71.32 a barrel.
Many analysts believe that oil prices are destined to rise in the long run, but the direction they may take in the near term is unclear. Oil prices have been tumbling for weeks as Europe struggles to contain its debt crisis. The situation has rippled through equities and commodities markets around the world, pushing the euro lower, which has in turn lifted the dollar. Oil, which is priced in dollars, tends to fall as the greenback rises and makes oil contracts tougher to buy with foreign money.
Crude prices also have plunged as big investors take advantage of a huge markup between the June and July oil contracts. The July contract is currently worth about US$3 a barrel more than the June contract, which means investors can make money by simply storing their June oil and selling it a month later.
As a result, supplies at the benchmark delivery point in Cushing, Oklahoma, have bulged to an all-time high. That forces prices even lower.
"There's a lot of opportunism happening there," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Overall, crude supplies grew less than expected last week to 362.7 million barrels, according to the Energy Information Administration. Gasoline supplies dropped to 221.8 million barrels.
Oil has dropped so far this month that it's starting to affect gasoline prices.
Retail gas prices slipped overnight, ahead of the Memorial Day weekend and the unofficial start of the summer driving season. A gallon of regular unleaded fell less than a penny to a new national average of US$2.852, according to AAA, Wright Express and Oil Price Information Service.
Gasoline is 1 cent cheaper per gallon than it was a month ago, but it's still 53.8 cents more expensive than the same time last year.
Analysts continue to monitor effects of the Gulf of Mexico oil spill on the country's oil supplies. The massive spill isn't expected to affect energy prices this year. But if it alters U.S. interest in offshore drilling, Credit Suisse analyst Ed Morse said the spill could shape up to be "as bullish an item as one can think of" for oil prices in coming years.
In other Nymex trading in June contracts, heating oil fell 3.23 cents to US$1.9292 a gallon, and gasoline dropped 3.38 cents to US$2.0093 a gallon. Natural gas tumbled 18.2 cents to US$4.160 per 1,000 cubic feet.
In London, Brent crude's July contact fell US$1.35 to US$73.08 on the ICE futures exchange.
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