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Oil reaches $102.24, but then closes at $97.88
The Associated Press
By J.W. Elphinstone
Published on Thursday, September 18, 2008
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HOUSE APPROVES ANTI-SPECULATION MEASURES
NEW YORK — Oil prices broke back above $100 a barrel as investors
sought a haven from the financial sector's turmoil, but crude later gave
back its gains as the tenuous state of the global economy raised concerns
about future demand.
Light, sweet crude for October delivery closed with 72 cents at $97.88 a
barrel in afternoon trading on the New York Mercantile Exchange. Earlier,
the contract reached as high as $102.24 as worries intensified about the
stability of the U.S. financial system and investors fled the equities
market in favor of commodities.
"It's interesting to me that traders would view a commodity such as oil
that can move up and down by 40 percent in six months as a safe haven,"
said Jim Ritterbusch, president of energy consultancy Ritterbusch and
Associates in Galena, Ill. "I certainly wouldn't recommend it as such."
Ritterbusch expects worldwide demand deterioration to ultimately trump
the temporary flight to quality. Oil prices have steadily fallen since
reaching an all-time high of $147.27 a barrel on July 11 as investors fear a
weakening economy could curb demand for the commodity. Last Friday,
oil had fallen below $100 for the first time since April.
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Oil had jumped Wednesday as investors fled
equities to crude, gold and other commodities
as a short-term safe haven amid global
market unrest.
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New liquidity injected into the global financial system Thursday also helped to calm markets, said Phil Flynn, an energy analyst
at Alaron Trading Corp. in Chicago.
On Thursday, the Federal Reserve along with other foreign central banks pumped as much as $180 billion into global money
markets in an effort to stem a worsening global credit crisis. The emergency measure follows a week of chaos on Wall Street that
saw the demise of Lehman Brothers Holdings Inc., the forced takeover of Merrill Lynch and Co., and the unprecedented
government bailout of American International Group Inc.
Oil had jumped Wednesday as investors fled equities to crude, gold and other commodities as a short-term safe haven amid
global market unrest.
Stepped-up attacks by Nigerian militants against the country's oil infrastructure helped support oil prices earlier Thursday. In a
fifth day of violence, Nigeria's main militant group said Wednesday that it had destroyed an oil-pumping station and a pipeline
crossing southern Nigeria in a rare daylight attack.
A spokesman for Nigeria's state oil company said Wednesday that militant attacks are now cutting the country's daily oil
production by about 1 million barrels a day, 40 percent of what the country produced before the militant campaign began three
years ago.
"In the last few days, militant attacks in Nigeria have been stirring up again, but that's on the back burner right now," said Victor
Shum, an energy analyst with consultancy Gertz & Purvin in Singapore. "I see downward pressure on oil in the near-term, with
the key support level at US$90."
Meanwhile, the U.S. government reported Wednesday a bigger-than-expected drop in crude supplies, reflecting the shutdown of
virtually all Gulf Coast oil production because of Hurricane Ike and Hurricane Gustav.
The Energy Information Administration said U.S. crude stocks fell by 6.3 million barrels for the week ending Sept. 12, much
bigger than the 3.7 million barrel drop expected by analysts surveyed by the energy research firm Platts.
In other Nymex trading, heating oil futures fell nearly 2 cents to $2.7685 a gallon, while gasoline prices lost 2.56 cents to $2.40 a
gallon. Natural gas for October delivery slipped 5.39 cents to $7.484 per 1,000 cubic feet.
In London, November Brent crude declined 11 cents to $94.73 a barrel on the ICE Futures exchange.
Associated Press Writer Alex Kennedy contributed in Singapore and Associated Press Writer George Jahn in Vienna, Austria,
contributed to this report.
(source: The Trucker .com)
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