Sponsored by: Investment Center

Something new in your business?  Click here to submit your business press release

Chamber Corner | Main Street News | Job Hunt | Classifieds | Calendar | Illinois Lottery 

Oil prices sink below $92 on Wall Street tumult

Send a link to a friend

[September 17, 2008]  NEW YORK (AP) -- Oil prices extended their retreat Tuesday, shedding $10 a barrel in a violent, two-day slide as tumult on Wall Street dims hopes for a swift economic recovery and signals another drop in U.S. energy demand.

Crude, which shot up near $150 a barrel only two months ago, is now down 8 percent for the year.

Meanwhile, gas prices edged higher at the pump, topping $3.85 a gallon amid the aftermath of Hurricane Ike. However, given crude's continuing slide, retail gas was expected to turn lower within a few weeks.

As uncertainty grips Wall Street, evidence mounted that U.S. consumers and businesses were bracing for a protracted economic downturn that should guarantee more of the money-saving energy conservation measures of the past year: Americans will cut back on driving, airlines will keep fewer planes in the air and U.S. manufacturers will be shipping fewer products. That in turn was expected to keep crude prices down.

"The economic slowdown is completely unavoidable now and people will be driving less, trucking less and buying less," said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com. "Energy consumption will fall dramatically."

Health Care

Light, sweet crude for October delivery fell $4.56 to settle at $91.15 a barrel on the New York Mercantile Exchange, after earlier dipping to $90.51, its lowest level since Feb. 8. On Monday, prices closed below $100 for the first time in six months, shedding more than $5 and wiping out all of oil's gains for the year.

Crude has fallen about $55 -- or 37 percent -- since shooting above $147 on July 11.

Oil's steep correction comes as traders were riveted by rapidly unfolding events on Wall Street. Fears rose Tuesday about the health of insurance giant American International Group Inc. after several ratings agencies reduced their ratings on the company. That amplified worries of more turmoil after Lehman Brothers Holdings Inc. filed for bankruptcy and Merrill Lynch & Co. was bought by Bank of America Corp. in a rush sale intended to save the troubled company.

Repair

Analysts say another big round of commodities liquidation may be in the offing if Lehman, a major player in commodities, moves to unwind its positions to raise capital. Others big banks, institutional investors and hedge funds may follow suit on worries that the downward momentum on oil and other commodities may have reached a tipping point where prices will not rebound.

"It's like a snowball effect," said Cordier. "The unwinding of all this debt is getting oil prices to go to these levels much quicker than people thought possible."

Also pressuring crude prices was a decision Tuesday by the Federal Reserve to hold interest rates steady. Investors viewed the move as another drag on oil; lower interest rates would likely have depressed the dollar, potentially sending the price of oil and other commodities higher if investors had shifted money into hard assets to hedge against inflation.

But analysts said the biggest weight on oil prices was the slumping economy and continuing demand destruction. On Tuesday, computer maker Dell Inc. said it sees "further softening" in demand for information technology products around the world. That means the company will likely be shipping less products around the globe, further reducing demand for fuel.

[to top of second column]

Investments

Meanwhile, pump prices edged higher Tuesday due to Gulf Coast refinery shutdowns after Hurricane Ike slammed into Texas over the weekend. A gallon of regular jumped more than a penny overnight to a new national average of $3.854, according to auto club AAA, the Oil Price Information Service and Wright Express. Prices topped $4 a gallon in parts of Alabama, Illinois, Kentucky and Tennessee.

Virtually all oil production in the Gulf and about 94 percent of natural gas output remained shut down after the passage of Ike and Hurricane Gustav last month, according to the U.S. Minerals Management Service.

Crude's decline has come despite ongoing tensions with Russia, militant attacks in Nigeria, saber-rattling by Iran and the loss of 25 percent of U.S. refining capacity due to Ike -- bullish events that likely would have sent prices skyrocketing only months ago.

"I guess the market was telling us it never belonged at the $100 level in the first place and got there on a lot of hype," said Peter Beutel, energy analyst at Cameron Hanover, New Canaan, Conn.

In other Nymex trading, heating oil futures fell 7.15 cents to settle at $2.7197 a gallon, while gasoline prices dropped 16.06 cents to settle at $2.4008 a gallon. Natural gas for October delivery fell 9.5 cents to settle at $7.279 per 1,000 cubic feet.

[Associated Press; By STEVENSON JACOBS]

Associated Press Writers George Jahn in Vienna, Austria and Alex Kennedy contributed to this report from Singapore.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Schools

Housing

Auto Repair

Investments

< Recent articles

Back to top


 

News | Sports | Business | Rural Review | Teaching & Learning | Home and Family | Tourism | Obituaries

Community | Perspectives | Law & Courts | Leisure Time | Spiritual Life | Health & Fitness | Teen Scene
Calendar | Letters to the Editor