Oil plunges to 13-month low on global slowdown

yahoo.com ^ | 10/10/2008 | Stevenson Jacobs

[vrwc1]

NEW YORK - The stunning collapse in oil markets accelerated Friday, sending a barrel of crude plunging below $78 as investors grow more pessimistic about resolving a mushrooming global economic crisis.

Oil hasn't been this cheap in 13 months — a rare silver lining for consumers amid a rapidly imploding financial landscape.

[vrwc1]

No, I think lack of credit has driven the speculators from the market.

[vrwc1]

Wouldn’t that be nice! Too bad the price never goes down at the pump with the same speed that it goes up.

[SAJ]

Speaking as a 30+ year spec trader, you're nuts when it comes to the futures markets. Margin requirements are going DOWN, not up, in futures, as commodity mkts everywhere are crashing hard. Open interest dropping? Not really -- in some mkts, yes; in others, no. Check the COT figs every week, why don't you?

Do you even know how margin requirement is calculated for futures mkts? Yah, I didn't think so.

It is FAR cheaper to spec the short side of crude/products on the way down than it was to spec the long side on the way up.

Specs driven out of the mkt? Bwaahahahahahahahahahahahaha.

[Brilliant]

It’s a plot by George Soros. Why is it falling just as Obama is becoming President?

[familyop]

You’ve seen the stampede of bears. Moo! OPEC will be mad when its peoples run out of toilet paper again. Next, east and south Asia will further stock-up reserves.

[Batrachian]

"It wasn't just speculation -- it was a steep decline in the value of the U.S. dollar."

The two are linked but it's much more than a linear relationship. Not only is there the direct inflationary effect of a weak dollar, but also that speculators buy commodities as a hedge against inflation. This causes a multiplication effect which shoots the price up to the levels we've seen.

[Osage Orange]

Well that Bush......him and his cronies can manipulate anything....!!

[vrwc1]

No need to get insulting with your reply. You prove my point however - speculators are driving the price of crude, as opposed to normal market forces. Others agree.

"Today's session in the oil pits confirms that energy prices are being driven by more than fundamentals. The global balance of oil supply and demand does not change rapidly in a single day. Oil demand growth has decelerated and the global economy's prospects have weakened, suggesting lower rather than higher prices for crude." Moody's Economy.com, 9/22/08

[Osage Orange]

Naw, Bush and Cheney are helping their buddies at Halliburton.

/s

[Osage Orange]

Most times in many, many markets price is driven by more than just fundementals.

[dragnet2]

Be patient. Let the rest of the commodities reach their natural level.

Well sure, the oil sultans and assorted bearded fanatics are sitting around their palaces in Alurbuks, watching CNN, seeing the government get their piece out of the American taxpayers...You know what they're thinking...

[R W Reactionairy]

IMO it was not speculation per se, but the most highly leveraged speculators did become part of the game. The basic supply / demand for oil does not look that bad.

Oil. Metals [except for maybe gold]. Stocks. Debt instruments other than treasuries. All getting beat into the ground by the great de-leveraging as cash becomes king ... at least for now. When the commercial paper market isn't functioning, cash prevails over maintaining optimal product inventories.

You may see $50 oil in the near future, but if so it will not be a cause for celebration. It will mean that world economy is in the dumpster / the financial markets are tied up in knots or both. Longer term, look for higher oil prices at least in real terms. It isn't getting easier to find or cheaper to produce anywhere on earth and at 86 million barrels a day the world needs to find another billion barrels every 12 days ... and that ain't happening nearly often enough.

[xmission]

Why aren’t we hammering the fact that the oil drilling bans have expired, and the price is dropping? The MSM is tying this to the economy, and letting the libtards off the hoof for holding the price of oil high by holding America’s assets hostage.

[RobRoy]

And as the last layer of “perceived inflation” is peeled away with oil prices, our deflation is fully exposed.

It’s hard to monetize debt when you are in deflation. And we have never needed to monetize it more than right now.

My gosh this is going to get ugly! At least we’ll have relatively cheap gas for a while...

[RobRoy]

No, but it will be, at the rate things are going.

[vrwc1]

Personally I think the huge, steep drop in crude prices has more to do with shorting due to fear, and lack of credit on the part of speculators than the expiration of the drilling ban. I think you're going to have a real hard time getting traction with your argument in today's economic environment.

I agree though, that as new wells come online due to expiration of the ban, it will have an effect on the price of crude.

[KevinDavis]

Ever since the offshore oil ban has expired and Bush lifted it. Of course if Obama wins, it won’t matter..

[Batrachian]

"Well that Bush......him and his cronies can manipulate anything....!!"

I sense your sarcasm, but Bush had no problem with his Saudi friends making a few hundred billion extra dollars this summer. Sort of like a school kid doing a paper route during summer break. Who could oppose that?

[Alberta's Child]

I dunno . . . that’s a good point. It hasn’t quite happened yet this year, but then again it’s never been up over $140/barrel before, either.

[Alberta's Child]

Hmm . . . good point.

Is a commodity like oil a good hedge against inflation, considering that these contracts typically have a short delivery date?

It's one thing to buy gold that can be stored for long periods of time, but oil is extracted, refined, delivered and consumed over a pretty narrow window of time, no?