OIL futures ended a turbulent session lower yesterday after Federal Reserve Chairman Ben Bernanke issued a warning about the US economic growth that sent stocks tumbling and tempered some of the energy market's supply concerns.
In congressional testimony, Bernanke said the housing slump and high oil prices, among other factors, will slow economic growth considerably in coming months.
"That's not going to help crude values," said Jim Ritterbusch, president of Ritterbusch and Associates in Galena, Illinois.
Light, sweet crude for December delivery fell 91 cents to settle at US$95.46 a barrel yesterday on the New York Mercantile Exchange, after alternated frequently between gains and losses. Prices fell slightly Wednesday after the government reported a smaller-than-expected decline in crude inventories.
Crude prices are within the range of inflation-adjusted highs set in early 1980. Depending on how the adjustment is calculated, US$38 a barrel then would be worth US$96 to US$103 or more today.
Energy investors worry that a slowdown in the economy will crimp demand for oil and gasoline. They were particularly on edge following the Dow Jones industrials 350-point drop on Wednesday. Stocks were also sharply lower yesterday.
Economic data was mixed yesterday. The number of people filing claims for unemployment benefits dropped more than expected last week, while several big retailers reported disappointing October sales.
In the North Sea, meanwhile, ConocoPhillips and BP PLC shut down platforms that normally pump 220,000 barrels of crude a day. The closures will likely last no longer than five days, but traders grow concerned any time there is a supply disruption, said Addison Armstrong, an analyst with TFS Energy Futures LLC in Stamford, Connecticut.
"There's very little margin for error right now on the supply side of the equation," Armstrong said.
Oil prices were also supported by word of an early morning power outage and fire at Valero Energy Corp's 325,000 barrel a day refinery in Port Arthur, Texas. While it's too early to tell how much production will be affected, the outage added to investor concerns about the adequacy supplies.
December gasoline fell 0.3 cent to settle at US$2.4376 a gallon on the Nymex, while December heating oil fell 1.17 cents to settle at US$2.6058 a gallon.
December natural gas rose 8.9 cents to settle at US$7.713 per 1,000 cubic feet on the Nymex after the government reported inventories rose last week by 36 billion cubic feet, in line with expectations.
In London, December Brent crude fell 45 cents to settle at US$92.79 a barrel on the ICE Futures exchange.
Estimates of where crude prices will head from here vary. Many analysts expect prices to rise to at least US$100 a barrel, but a growing chorus is warning that futures are due for a sharp downturn soon. Few analysts believe the underlying fundamentals of supply and demand support such high prices.
Many analysts blame speculative investing fueled by the weak dollar for oil's recent runup. Oil futures offer a hedge against a weak dollar, and oil futures bought and sold in dollars are more attractive to foreign investors when the greenback is falling.
The dollar has been hitting multiple-decade lows against other major currencies, and slid again against the Euro yesterday.
At some point, the investment funds fueling oil's rise are going to pull the plug, Ritterbusch said. Indeed, the fund managers who have ridden oil higher have an economic incentive to sell soon, Ritterbusch said, because they need to book profits before the end of the year to boost their bonuses.
"I think you're going to see some significant profit-taking here before the end of the year," Ritterbusch said. |
About Us 
