Business | Oil & Gas
Crude prices may fall as low as $50
Crude oil briefly fell below the key trading threshold of $60 (Dh220) a barrel last Thursday before rallying to positive territory for the first time in six days.
- By Ronald D. White, Los Angeles Times-Washington Post
- Published: 23:02 July 12, 2009
Washington: Crude oil briefly fell below the key trading threshold of $60 (Dh220) a barrel last Thursday before rallying to positive territory for the first time in six days.
And with motorists driving less and supplies growing even though the summer driving season is underway, some analysts are predicting $2.75 a gallon in California and $2.50 a gallon or less nationally before July comes to an end.
The supply of petrol in the US was climbing, beating the volume that had built up before prices crashed last year, according to the Energy Department's analysis released last week.
The low demand "was most noticeable in states like California, Nevada and Arizona," said Tom Kloza, chief oil analyst for the Oil Price Information Service, or OPIS, in Wall, New Jersey, who was predicting the big drop in retail gasoline prices.
California's widely publicised budget deficit was adding to the deep financial uncertainty of motorists and helping to rein in their driving even more, Kloza said.
"The good news is cheaper gasoline for the rest of the month. The bad news is state IOUs and your 401(k)," he said.
Crude oil supplies in the US were running 53.4 million barrels ahead of last year, with 347.3 million barrels on July 3, the Energy Department said. Gasoline inventory rose 1.9 million barrels to 213.1 million barrels.
Last Thursday, the average price of a gallon of gasoline in California was $2.939, according to OPIS, which with Wright Express tracks prices through about 100,000 daily credit card transactions at service stations across the US. That was about 4.6 cents below the week-ago price, and $1.613 lower than in July 2008, when gasoline prices neared their all-time record.
OPIS said the national average last Thursday was $2.580 a gallon, 4.9 cents below the week-earlier price and $1.528 a gallon below the year-ago price.
The OPIS numbers are posted every day on AAA's www.fuelgaugereport.com website.
Oil's direction was less clear last Thursday, but some analysts said a close below $60 a barrel could lead to a repeat of last year's oil collapse, possibly dragging down futures prices as low as $20 a barrel.
Crude oil futures for Aug-ust delivery closed up 27 cents to $60.41 a barrel on the New York commodities market on Thursday after trading as low as $59.25.
Oil was down about 17.7 per cent since trading as high as $73.38 on June 30.
"There are concerns that the green shoots of econ-omic recovery are withering and oil could go a lot lower," said Phil Flynn, vice president and senior market analyst for Alaron Trading Corp. in Chicago.
Some analysts also cited vast amounts of crude stored on supertankers at offshore locations, warning that oil could plummet if storage costs rise or if investors think that oil in fu-ture months will be worth less. They would then be encouraged to dump that oil back onto an already oversupplied market.
- Los Angeles Times-Washington Post News Service
New York (Bloomberg) Crude oil is in a downtrend that may lead to prices falling as low as $50 (Dh183.62) a barrel, according to Schork Group.
"Oil has indeed entered a bear channel," said Stephen Schork, president of the Villanova, Pennsylvania-based consultant. "The market gapped lower, therefore that gap - in between $66.26 and $65.65 - is now the top of resistance."
A decline of 12 per cent since the start of last week has pushed prices into a descending channel on the daily continuation chart. It has also left a price gap between the low of July 2 and the high of July 6 that will present a hurdle to rising prices in the coming week, Schork said.
Oil reached an eight-month high of $73.38 a barrel on June 30 on speculation a recovery from the global recession will spur demand for fuels, and following a surge in Brent on London's ICE Futures Europe exchange. Unauthorised trades at PVM Oil Futures, a unit of the world's largest broker of over-the-counter oil derivatives, may have caused London oil prices to jump in the early hours of June 30, according to exchange data.
New York oil futures have since fallen into a sustained descending channel. Prices are headed for a sixth day of decline after closing yesterday below the 50-day moving average for the first time in four months.
Crude oil on the New York Mercantile Exchange is in its longest losing streak since December. Oil for August delivery declined 74 cents to $62.19 a barrel in Singapore. Prices rose 41 per cent in the three months to June, the biggest quarterly gain since 1990, and increased 39 per cent so far this year. Oil may fall to $50 a barrel only after breaking support levels near $60, according to Schork.
"The market is clearly trending lower," he said. The support is in between the 50 per cent and 62 per cent retracements ratio scale, from $61.25 to $58.59, he said.
Business Editor's choice
-
‘Wrong Way' Krugman
The source of our economic malfunction lies with government-mandated bank regulations
-
Greek exit could make Eurozone stronger
Departure will show limits of bailouts and allow remaining members to act much more like a unit
-
UAE upholds values of free trade
Recently released statistics confirm an established fact, namely that of the UAE embracing the free trade principle in general and imports in particular
