Oil Drops as Low as $60.16 Today
Oil futures finished the day down $4.53, or seven percent, to settle at $60.77. Earlier today futures sank as low as $60.16, down nearly eight percent:
Falling Prices: Playing the Waiting Game
The recent reprieve in gas prices have gotten a lot of people thinking “why haven’t other prices dropped as well?” Well, there are a couple of answers, none of which will offer any immediate satisfaction. When it comes to falling prices, a key word is “waiting.”
As we’ve mentioned before on this blog, prices seem to rise faster then they fall. While it seems a price increase can be felt overnight, a decrease might take months. Everyone from farmers to airlines purchase commodities in the features market. They may lock in a price and agree to pay that price for a given set of time; for example farmers may sign contracts to purchase fertilizer (which has been extremely expensive) well into next year.
(Update 2) OPEC Cuts 1.5 Million Barrels a Day
The Organization of the Petroleum Exporting Countries took less than two hours to agree to cut 1.5 million barrels of oil a day from global markets. The cut, which represents 1.7% of the world’s oil demand, was made in order to rein in oil prices that finished today at $64.15, down 11% for the week.
OPEC Determined to Raise Oil Prices
While consumers celebrate cheap gas prices, OPEC is panicking. The Organization of the Petroleum Exporting Countries has rescheduled their “Extraordinary Meeting” three weeks early to deal with the 50% drop in oil prices since July. Oil prices rose to over $68 a barrel today after dipping as low as $66.12 yesterday afternoon.
“We should also remember that low prices will, without any doubt, result in the cancellation of many upstream and downstream projects, and this will lead to future long-term supply problems,” said OPEC Secretary General HE Abdalla Salem El-Badri in a speech delivered at the 3rd International Energy Week in Moscow this week.
Crude Prices Still Falling
As of 11:30 a.m., crude oil prices have dropped 6.4% to $69.73 a barrel, the first time in 14 months a barrel of crude has dipped below $70:
“The bottom line is that demand has dropped considerably, and … reduced demand is putting a lot of pressure on the oil prices,” said Charles Perry, president of energy-consulting firm Perry Management.
Consumer Demand Dictates Prices
Oil prices dropped below $76 a barrel to $75.62 on Wednesday, hinging on fears that the shaky economy will continue to contribute to weak consumer demand:
Beyond fears that demand would slow, expectations that the latest snapshot of U.S. crude supplies would show additional builds also weighed on markets.
Gas Prices — Good News for the Moment
According to the Wall Street Journal, crude oil dropped 2.7% to $86.59 a barrel this morning, down nearly $60 from its peak this past July. Some experts predict oil will soon settle to $75-$80 a barrel:
A study released by Bernstein Research of New York this week argues that oil prices will remain linked to the cost of producing supplies from difficult but crucial fields deep offshore and elsewhere, a cost the research firm puts at between $75 and $80 a barrel.
Oil Prices Down to $100.87
Crude prices dropped nearly two dollars this afternoon settling at $100.87 a barrel:
U.S. light, sweet crude [US@CL.1 100.67
-1.91 (-1.86%)] fell $1.71 to settle at $100.87 a barrel after dipping as low as $100.10, the lowest since early April.
London Brent crude [GB@IB.1 97.49
Consumers in Control of Their Gas Price Destiny
Oil prices were relatively unchanged this morning despite OPEC’s announcement yesterday that they were trimming daily production by 500,000 barrels. Just as we had predicted, OPEC’s modest trim had no immediate effect on rising prices. Oil producing countries have fresh memories of what record-setting gas prices did to consumer demand. While it’s highly likely that OPEC will do its best to keep oil prices from reaching July levels, they need to keep oil prices from dipping too much lower in order to maintain profits.
It will be a chess match between consumers and oil-producing countries to keep the price of oil at a level where both consumers will spend and producers can turn a steady profit. Maintaining the US’s dependence on oil will delay the production of alternative fuels and vehicles — good news for OPEC.
OPEC to Cut Production, Oil Prices Likely to Hold Steady
Just prior to the Organization of Petroleum Exporting Countries’ meeting yesterday, oil prices fell to nearly $103 a barrel. OPEC’s decision to reduce production by approximately 500,000 barrels a day is both a response to reduced global consumption as well as an attempt to create a bottom for oil prices, at least for now:
At a news conference after the meeting, (OPEC President Chakib) Khelil said the group was merely responding to oversupply.
