It is obvious that a barrel price below $60 on the NYMEX is bad news for oil companies. Part of the drop reflects a strengthening American dollar, but recent demand forecast revisions are bleak. Governments, companies and investors think a prolonged recession or period of low growth is in the offing, and everyone should take note.
Clearly Monday was not particularly good news for oil companies. With futures settling below $90 per barrel, ($87.81 when Benchmark went to proofing) the industry is seeing the lowest prices since February.
Another rough day for investors this Monday. As it became clear that the American House of Representatives would reject the authorization law for the executive’s $700 billion financial sector bailout plan, commodities began to tank. Oil futures shed more than $10 of their value during the day, dropping to $96.37 per barrel.
The expiration of October trading certainly played a disproportionate role in the record one-day gain, as it exercised a huge pressure on short positions. The meteoric rise also illuminates how much the vacillation is due to speculative activity.
Barrel prices were pushed gently northward in early trading on Monday, as a confluence of factors threatened supply and made it an attractive alternative investment. The dollar’s decline relative to the euro increased anti-inflation hedging activities in commodities.
This column will not be trying to determine who started the war or who is in the right, but how the war might affect the future of Caspian oil extraction and Caucasian transhipment. Aside from the direct damage of the war, ripples will be felt throughout the Black Sea, Caucasian and Caspian regions, with somewhat paradoxical effects on who benefits and who is placed at a disadvantage.
Oil prices jumped from a 14-week low in New York on concern that the Russia-Georgia conflict may affect crude supplies from the Caspian Sea. For full news, click here
Crude oil futures traded near $119 a barrel in New York as U.S. supplies unexpectedly gained amid slowing demand and dollar climbed. For full news, click here
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