What a difference a week can make! It wasn't that long ago, August 1 to be exact, that oil prices were setting record high prices and appeared to be ready to charge above the psychological $80 barrier. Well, that was 9 days ago and 10.2% above oil's current price, as concerns over the U.S. economy have pushed prices down by more than $8 a barrel.Currently we are seeing prices down another 87 cents to $70.72.
So what is the major problem here? I wish I could pinpoint the concerns down to one single factor, at least that way we would be able to try to figure out exactly how deep the problem goes, but unfortunately there are several factors weighing down oil prices at this time. They include (but are not limited to):
- Reports suggesting a sluggish U.S. economy
- Concerns that the subprime mortgage woes are spreading into different areas in the market
- Jobless claims have been on the rise
- Disappointing July retail numbers
- Ongoing uncertainty over supply coming out of the Middle East
We started seeing the first signs of oil's fall on Monday, and that time I wrote that I would not be surprised to see prices continue to fall a bit, but that I thought they should be able to hold in the $72 to $73 range. So we can't be right all the time, right? Do I think we are going to see prices head under $70? Two days ago I would have bet the farm against that possibility, but after the last few days your guess is as good as mine!
Should be a very telling week ahead of us. Is the market going to be able to find a bottom and start to move higher again? I am sure everyone reading this is hoping that will be the case, and when the market is able to get a bounce we should also see oil's fall stop and prices move higher again. If I had to go out on a limb and predict where we would see prices this time next week... I would once again estimate somewhere around $73. We will see how good I do on my guess this time around!
Just how bad has the past week been? See for yourself...
Michael Fowlkes has worked as a stock trader for seven years and spent the last two years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
8-11-2007 @ 6:12PM
john said...
To understand the market for and fluctiations in crude oil-
just take a longer-term viewpoint and it's really much easier. Short-term doesn't really matter-except to short-term traders. The longer term picture is very clear to anyone who is willing to look at the facts. They are as follows: we're using five BBLS for every one we're finding in the world every day. No meaningful new fields (super giants which matter) have been found for 20 years. World demand is growing 3% per year, and 13 of the 14 largest fields in the world are in decline. Oil is getting harder to find and more expensive to produce daily. Go to the Matt Simmons site and read his research. The facts are the facts. Oil will be at $100 or higher in one to two years, and continue to move higher from there. Get ready for it, and forget the short-term movements which don't matter.