Chris Cantell Discusses Markets: A huge oil prices drop by Petra Kamenicka

On Tuesday, oil prices plummeted by the second largest margin. This happened as a result of a behavior of investors, who feared a decline in U.S. demand after hearing the latest announcements from Ben Bernanke, the chairman of Federal Reserve. Bernanke in his report indicated, that inflation and high fuel prices will cut into demand of U.S. for oil. Bernanke also warned that current high prices of energy have helped to limit the purchasing power of American households. High energy prices will represent a burden on U.S. economy for the rest of this year.
Crude fell $6.45 a barrel; this was the second largest drop of oil price in dollar terms. The largest single-day drop of price was in January 17, 1991 when oil price fell by $10.56. In 1991, oil was trading at about $32 per barrel, so the drop of price represented 33% drop, this was a record amount. Now, oil is more than 10 percent cheaper in comparison with prices on Monday. A decline in gas prices is even higher. Gas prices have fallen by 20% since July 4. As Michael Rieke, a senior managing editor for power and gas adds: ,,Any time oil goes up or down on Nymex, it’s going to have a carry-over effect on natural gas.” A reason for sharp natural gas decline was increase of American supplies that was larger than expected.
A weak demand remains a problem. As Neal Dingman, a senior energy analyst at Dahlman Rose & Co. said: ,,There’s more demand destruction than people first perceived.”
Another fact that contributed to dramatic decline in oil and natural gas prices was fact, that inventories and supplies of gas and oil are exceeding all expectations.




related story: http://money.cnn.com/2008/07/15/markets/oil/index.htm?postversion=2008071516

by Petra Kamenicka for PocketNews (http://pocketnews.tv)

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posted by Lucia Adamova