Oil falls again: Is the bubble bursting?

[steinravnik]

Oil falls again: Is the bubble bursting?

NEW YORK (AP) -- The price of oil recorded its biggest weekly drop ever, and a gallon of gas finally pulled back from its record high. So is it time to declare the energy bubble popped?

Experts won't go that far just yet.

"It's too early to say we've seen the worst of it," said Tom Kloza, publisher and chief oil analyst of the Oil Price Information Service in Wall, N.J. "We would be Pollyannish if we believe one week represents a trend."

Still, with oil recording yet another drop on Friday, some industry experts who just days ago thought there was more juice left in oil's meteoric run are reconsidering.

"If this is not the bubble's implosion, than it's a reasonable facsimile," analyst and trader Stephen Schork said in his daily market commentary. "Time will tell. Nevertheless, for the time being we no longer care to hold a bullish view."

Light, sweet crude for August delivery fell 41 cents Friday to settle at $128.88 on the New York Mercantile Exchange -- well below its trading record of more than $147 a week earlier.

The average price of a gallon of regular gas fell about a penny for the day, to $4.105, according to auto club AAA, the Oil Price Information Service and Wright Express. Diesel prices dipped three-tenths of a cent to $4.842 a gallon.

Some analysts said a nationwide average of $4 or even lower could be in the offing -- almost unthinkable in a summer when there has seemed to be no relief at the pump -- although they cautioned that there is no guarantee prices will stay low.

"We're going to see some relief from that relentless march higher," Kloza said.

Gas may be getting just a bit cheaper, but major changes in how Americans live and drive are already in motion.

Car buyers have been fleeing to more fuel-efficient models. U.S. sales of pickups and sport utility vehicles are down nearly 18 percent this year through June, while sales of small cars are up more than 10 percent.

While slashing production of more-profitable trucks and SUVs, automakers have been scurrying to build their most fuel-efficient models faster.

Toyota Motor Corp., which hasn't been able to keep up with demand for its 46-miles-per-gallon Prius hybrid, said last week it will start producing the Prius in the U.S. and suspend truck and SUV production to meet changing consumer demands.

Ford Motor Co. and General Motors Corp. also have announced plans to increase small car production, and GM has said 18 of the 19 vehicles it is launching between now and 2010 are cars or crossovers.

Some brave traders used the week's pullback in oil prices as a chance to buy barrels that suddenly seemed to be on sale. But oil analysts were advising investors to beware.

"Buying here is an opportunity if you are a deep believer in $200 (a barrel), otherwise we think that caution would be better applied," analyst Olivier Jakob of Petromatrix in Switzerland said in a research note.

If oil buyers sense that the slide was overdone, you'll probably notice at the pump quickly.

"If (oil prices) rebound, you're going to see a quick reaction at the gas station, because their profit margins are so stretched," AAA spokesman Geoff Sundstrom said. "They may be very fast bringing prices back up."

In other Nymex trade, heating oil futures fell 5.23 cents to settle at $3.6915 a gallon while gasoline futures edged up 0.73 cent to $3.1709 a gallon. Natural gas futures rose 3.3 cents to $10.57 per 1,000 cubic feet.

http://biz.yahoo.com/ap/080718/oil_prices.html

[Evo69]

Nope. I wouldnt be celebrating just yet, all it have to take is some BS rumour that US aircraft are bombing Kharg Island off Iran to send oil skyrocketing past $200/barrel. Or even worse the Iranians laying sea mines along the oil tanker routes and one of those mines hitting an oil tanker setting it ablaze... yep $200+ barrel oil right there.

Something has gone fundamentally wrong with the traditional supply and demand equation. There is no oil shortage to speak of yet oil costs has soared triple digits in percentage and price which is total BS in the worst way. I just hope some sense of normalcy returns to oil prices because its really robbing people of disposal income.

[tollytime]

Originally Posted by Evo69

Nope. I wouldnt be celebrating just yet, all it have to take is some BS rumour that US aircraft are bombing Kharg Island off Iran to send oil skyrocketing past $200/barrel. Or even worse the Iranians laying sea mines along the oil tanker routes and one of those mines hitting an oil tanker setting it ablaze... yep $200+ barrel oil right there.

Something has gone fundamentally wrong with the traditional supply and demand equation. There is no oil shortage to speak of yet oil costs has soared triple digits in percentage and price which is total BS in the worst way. I just hope some sense of normalcy returns to oil prices because its really robbing people of disposal income.

Very interesting, and probably right. I say this guy may have the crystal ball.

[BrickTamland]

As much as I like hearing this news, if someone in Iran cuts a loud fart, oil futures will take sudden, dramatic rise. I bet many of us knew the bubble would burst sometime, but we can not celebrate yet. The selfish douchebags, I mean speculators, are not going to give up on oil after just a few days of lower trading.

[jkennedy293]

I think it will take a few weeks of supply builds and demand drops to convince the speculators to vacate the market. Once that happens the price of oil will drop off a cliff.

[FenwickHockey65]

It would be so awesome if oil prices went the way of the housing market.
But like people posted above, the smallest thing could set off skyrocketing prices once again.

[silvergoat2k6]

And who knows how high oil prices would go if a Cat 4 or 5 hurricane were to hit the U.S. from the Gulf of Mexico.

Way too early to be celebrating the fall of oil prices...and if someone decides to start dropping bombs on Iran, all bets are off.

[wildgoosechase]

Or even worse, there is speculation that if Iran is bombed then they will drop a nuke into the Saudi oil fields poisoning it forever.

[Odin]

I don't think oil will crash anytime soon, but I am only filling up 15 or so litres at a time, as I'm waiting for the 17 to 18c drop in prices per litre to flow through to the pump, in aussie dollar terms 1 dollar per barrel equates to around a 1 cent price different at the pump.

[SlySy]

Could this also be because of the talk in Washington of lifting the offshore oil drilling ban. I was thinking that this (drilling ban) could have a few effects. I know we can't meet our entire oil needs this way but it will give us a little say in the price of oil. Also, our dollar could increase in price further driving down the cost of oil because we will get more for our money. Hopefully this is a preliminary effect of our changing our ways.

[RamJet502]

Maybe, for two reasons:

1) Bush lifting the ban on drilling

2) Bush changing position on talking directly with Iran lessens the chances for war

Its good to see some good decisions coming out of Washington lately.

[jbernie]

Originally Posted by BrickTamland

As much as I like hearing this news, if someone in Iran cuts a loud fart, oil futures will take sudden, dramatic rise.

The sad thing is that is about all it takes these days. The market as a whole seems bent on over reaction.

If we see a steady (it can be dramatic too...really!) fall in oil prices for a month or so then it might be enough to get some of the speculators who really shouldn't be playing moving on to ********* up something else. It will probably need to get down to around $110 or less first to move people on.

[GM-Joe]

Originally Posted by RamJet502

Maybe, for two reasons:

1) Bush lifting the ban on drilling

2) Bush changing position on talking directly with Iran lessens the chances for war

Its good to see some good decisions coming out of Washington lately.

3) Inflation

[RamJet502]

Originally Posted by GM-Joe

3) Inflation

I was under the impression that inflation raised the price of commodities like oil.

[jkennedy293]

Originally Posted by SlySy

Could this also be because of the talk in Washington of lifting the offshore oil drilling ban. I was thinking that this (drilling ban) could have a few effects. I know we can't meet our entire oil needs this way but it will give us a little say in the price of oil. Also, our dollar could increase in price further driving down the cost of oil because we will get more for our money. Hopefully this is a preliminary effect of our changing our ways.

Lifting the offshore drilling ban does nothing for today's price because it wil take 5-10 years for those platforms to come online. And the dollar will only start recovering once the Treasury starts raising interest rates.