Oil’s rout deepest in 16 years

Energy stocks are doing well today, but the price of oil is flat. Reuters notes that this is oil’s deepest rout in 16 years:

U.S. crude has dropped nearly $15 to hit a near six-month low of $63.50 a barrel on Wednesday, a fall only a hair shy of those in August-November 2005 and October-December 2004. In those cases, oil made new highs five to eight months later.
In percentage terms there have been bigger stumbles on oil’s recent ascent, propelled steadily higher since 2002 by the war in Iraq, soaring Chinese demand, constrained oilfield and refinery production, devastating U.S. Gulf Coast hurricanes, and most recently fears of a disruption to Iran’s exports.
But some say this latest setback — triggered by easing concerns on Iran, a weak storm season and a refocusing on healthy consumer nation inventories — may prove more lasting.
“Even though we’ve retraced certain percentages similar to this, it definitely seems that the market is different now,” says New York-based ABN AMRO broker John Brady. “Other times I saw (the corrections) leading to great buy opportunities, but I don’t necessarily think that this time.”
Technical analysts who study past price action for future direction, say the drop through the 200-day moving average last week and this week’s fall below a three-year trend line — intact since mid-2003 — both send worrying signals.

Wow, it seems as if it was only two months ago that I was reading this:

Oil’s march toward $80 a barrel seems inevitable, with multiple paths to get there.
It could follow another flare-up of Middle East violence. Or a hurricane in the Gulf of Mexico. Or maybe a refinery snag is all it would take.
“Mother Nature, physical disruptions and the politics of the world. All of those tell you that the risks are toward the upside,” said Larry Goldstein, president of the Petroleum Industry Research Foundation, a New York think tank financed by the industry.
Oil prices surged Thursday to a record near $77 a barrel in world markets agitated by the escalating Israel-Lebanon conflict and the threat of supply disruptions in the Middle East and beyond.

Posted by on September 13th, 2006 at 11:03 am


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