Posted on 09/01/2015 10:16:59 AM PDT by thackney
A 7% dive to $45 a barrel comes after prices soared higher to close Monday above $49 a barrel -- a nearly 30% rise in three days.
Just a week ago, oil plummeted below $38 a barrel for the first time since 2009.
The drop in prices Tuesday following the Chinese factory report seemed to make more sense than the rapid rebound. Concerns about a slowdown in Chinese economic growth has been one of the factors driving prices lower.
Concerns in markets about a supply glut may have been eased a bit on Monday with a new government report that downgraded its estimate for U.S. oil output so far this year.
But that report hardly appeared to justify the surge in oil prices that followed. And U.S. oil production is still up from a year ago.
Oil prices were also boosted by hope that OPEC may finally be willing to cut back on output in an effort to balance the market. It was fueled by an OPEC publication released Monday that reiterated that the oil cartel "stands ready to talk to all other producers."
Emotionally, in the short term, a lot seems to have changed in the oil market. That can happen when a turbulent commodity mixes with outsized bets by large investors like hedge funds.
"It's really being driven by the speculators. That's why we're seeing such wild swings," said Anthony Starkey, energy analysis manager for Bentek Energy, an analytics and forecasting unit of Platts.
The big volatile swings in oil markets over the past year has made it a sexy area for investors to gamble by making bets on prices. But when bets go the wrong way, it leads to panic trading.
A lot of shorts getting covered yesterday.
Most of the time, price has very little to do with supply/demand.
Give us market set interest rates and cut off the tsunami of free money from the fed. Watch the speculation slow down...a lot.
In your case, US$1.35 to US$1.45/US gallon for 87 pump octane unleaded could happen by November.
Short term changes, it is more the expected supply and demand.
Long term price average, it is supply and demand, but it includes all factors, not just free market factors.
I bought a diesel version in 2008 for $20K off sticker when diesel was approaching $5.00gal.
Sold it three years later for what I paid for it - $32K.
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