We took a look at how oil prices were starting to fade yesterday afternoon, and in today's session, they have continued right where they left off. Prices have fallen $2.59 to $95.11 as traders worry about a slowing economy and a possible production increase from OPEC. Earlier this week, it looked as though oil was going to be making its final charge to break through $100 a barrel, but now the mood has changed as concerns are mounting over the effect an economic slowdown could have on oil demand. Since the middle of this year we have been hearing whispers from Wall Street that a possible recession is on the way, and this chatter has seemed to really pick up over the past week.
Just today we got even more worrisome news when the current consumer confidence figures showed a drop down to 87.3, which is the lowest level we have seen confidence since back in October 2005. There has also been a rise in people thinking that the economy is in trouble to 19.1%, up from 16.6%.
As we all know, a slower economy leads to less demand for oil and gas, and that seems to be the theme of things today. This, of course, could all change tomorrow if we see a very bullish report for last week's oil inventories. Heading into tomorrow's report, analysts are predicting a drop of 400,000 barrels, so anything more dramatic that that could reverse prices and send them back into the upper $90s.
Another reason why we are seeing prices starting to come back down is increased speculation that we are going to hear of a production hike from OPEC during its meeting next week. Over the weekend, Iran officially stated that it would be willing and able to lift its production if the oil cartel decides that this would be the needed course of action.
I will be waiting on tomorrow's inventory numbers, and will definitely update you with all the figures and market reaction.
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)
11-27-2007 @ 2:47PM
debbie said...
I don't understand the entire energy thing with not enough oil and the price of it. I am in the heating field, my father was in it all his life and this is what I am hearing from the public. They are tired of the oil prices, they are turning to more efficient units to heat their homes, sealing up their homes more efficiently, turning to better cars, being smarter and going green. The demand will be going down more so because of the efficiency of consumers.....not usage on a whole. The oil industry will probably be in for a great shock when more and more people wake up and do the right thing by simply using less through efficiency and brains. Yes, the public is afraid of a recession but a lot of people are doing a lot on the energy end of it....so those with the fat wallets because of oil better look elsewhere for their capital.