Oil Prices Fall Sharply as General Market Sells Off
Oil Market Summary for 02/01/2010 to 02/05/2010
After starting the week on a firmer note, oil prices fell
sharply toward the end of the week in a general market sell-off as investors
sought the dollar as a safe haven amid worries about European Union economies.
Debt problems that have plagued Greece are now spreading to
Portugal and Spain, driving the euro down temporarily below $1.36 and bringing
the dollar to an 8-month high. Because oil and other commodities are priced in
dollars, gains in the U.S.
currency usually translate into declines in oil prices.
Even a decline in the U.S.
jobless rate below 10% on Friday could not stop the downward trend in
commodities.
Some analysts were predicting that crude oil futures, which
crashed through the longtime support level of $72 dollars a barrel to dip
briefly below $70 for West Texas Intermediate in Friday afternoon trading, were
sliding downward into a new trading range of $65 to $72 a barrel, after oscillating
between $72 and $80 the past several weeks. Crude oil, which settled just above
$71 a barrel on Friday, has dropped nearly 15% since hitting its 15-month high
just above $83 on Jan. 6.
Energy news also depressed prices. Crude oil inventories in
the U.S.
rose 2.3 million barrels in the week, several times what economists had been
expecting. In Asia, China
is importing more crude than it needs, analysts said, apparently with intention
of exporting more refined products, which would weigh on the global market.
Earlier in the week, positive manufacturing data from
several economies had driven up energy prices to above $77 a barrel as market
participants saw signs of stronger economic recovery. But that gave way to the
concerns about a debt contagion in Europe and
the impact of austerity measures to bring debt under control.
The new scramble into the dollar as a safe haven was evident
in the sharp drop in gold prices, which fell more than 4% on Thursday, and fell
further on Friday to about $1,050 an ounce. Gold had risen in the past few
months as a safe haven from the dollar.
Now cash – dollar cash – seems to be the preferred safe
haven for many investors. The Dow Jones Industrial Average, which spent most of
the day well below 10,000, recovered in a late rally to close above that
threshold with a small gain.
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Darrell Delamaide writes for OilPrice.com and focuses on Fossil
Fuels, Alternative Energy, Metals, Crude Oil Price and Geopolitics. To find out
more visit their website at: http://www.oilprice.com
