Oil got off to a strong start today, climbing over $3 earlier in the session, but the last couple hours have seen the precious crude give back its earlier gains and is now trading down slightly on the day at $80.88, down $0.31.The early day jump was in reaction to continued optimism that a full blown global recession could be avoided with the infusion of $125 billion by the U.S. government into nine major banks.
Last week at this time, we were pretty much all asking ourselves the question of just how bad are things going to get, and this led to a week-long panic in the market that sent all the major international exchanges into free fall. Now it seems like, for the moment, the panic is behind us and investors are starting to suspect that perhaps things are not going to be as bad as people were beginning to believe last week. We won't be looking at the next Great Depression, or so we hope, but with this market, emotion seems to change in a heartbeat.
With yesterday's massive move in the markets, and with the quick start that we saw today, oil has been enjoying a nice boost as well. Oil has been falling sharply since this summer as investors have feared that a full blown recession would lead to huge decreases in demand, but for now those fears seem to be on the sidelines and fresh enthusiasm should help oil rebound in the upcoming weeks.
One sign that global demand may not be getting hit as hard as some people have feared was a recent move by China to actually increase its oil imports. China is the world's leading energy user, and it decided that it needed to increase its oil imports by 10% in order to meet growing demand for its refineries.
Tomorrow will be a pivotal day for oil prices, as we will get the current weekly inventory report from the Energy Department which is expected to show that oil inventories last week grew by 2.6 million barrels, and that refineries were operating at 83.8% during the week, which would mark an increase of 2.9%.
Another thing that we are going to have to keep an eye on is OPEC. Should prices continue to remain at $80 or even start to move lower, we could hear more about possible production cuts. Just yesterday, Iraq announced that it would be considering production cuts if oil was not able to rebound.
OPEC was scheduled to meet again in December, but announced last week that they would be gathering in November instead. The focus of the meeting will be on possible production cuts to curb oil's recent slide.
Let's close by taking a look at a chart for oil so we can get a better perspective on just how sharply prices have fallen since their all time high this summer:
Michael Fowlkes has worked as a stock trader for seven years and spent the last four years working as an analyst for the online investment advisory service Investor's Observer.
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Reader Comments (Page 1 of 1)
10-14-2008 @ 3:54PM
prousahelp said...
OPEC are liars.. They said the oil price should be some where around $60-$70 per barrel when the oil hit the peak at $140+. Now the oil is at $81.00 per barrel, they want a meeting to cut production to keep the price in line.. This is another reason we should Drill dill drill .. hear that ms. Queen "B" Pelosi??!!
10-14-2008 @ 5:28PM
william lindblad said...
We need to do more than drill, but that is a good start. Back in 73 the concept of new energy sources was on the front burner and by 78, all but forgotten. Since our leadership decided not to pursue solar, wind, exploration, water and everything else at our disposal we remain at the mercy of others. That is 30 years that have been wasted. None of the new technologies have been developed into mass production status where the price would become affordable. Think of it - if battery tech. had been pushed we might have vehicles that could give 100 miles on a charge and plug into any electric outlet.
Let's see what happens this time.
10-15-2008 @ 3:37AM
Gary E. Sattler said...
Yes, the panic has subsided temporarily.
Now, reality sets in...
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