The past two weeks we have seen oil prices steadily trade higher, but the sellers came out today in reaction to rising concern over consumer confidence and pushed prices lower.Oil dropped under $67 a barrel today as Wall Street learned that consumer confidence had dropped for the second straight month in July. A major reason for low consumer confidence can be attributed to rapidly rising unemployment in the country.
Oil dropped $1.67 to $66.71 and earlier in the session hit a low of $66.48.
Oil has been moving higher the past couple of weeks mainly in reaction to a strong earnings season which has thus far yielded some rather impressive corporate earnings for the second quarter of this year.
Strong earnings have been able to help investors assume a more positive sentiment towards the economy, but after the current earnings season passes we are still going to be left dealing with unemployment, rising foreclosures, and a shrinking GDP.
The American economy has not contracted for four straight quarters since the Great Depression, yet it could be getting ready to do just that. MarketWatch took a poll of analysts that predict the GDP likely dropped by 1.2% during the quarter. The bad news is that this is the fourth quarter in a row GDP has shrunk, but the good news is that it is a big improvement over the 6.3% drop in the fourth quarter, and 5.5% dip in the first quarter.
Tomorrow we will get our weekly inventory report, which should direct oil's movement for the next couple of days, and then on Friday the GDP numbers should control the action.
Here is a current chart of oil so you can see how strong prices have reacted to the current earnings season:
What are your predictions on the economy? Are we going to break out of the recession this year, or are we going to have to wait for 2010 to see the end?
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Reader Comments (Page 1 of 1)
7-28-2009 @ 9:37PM
Chuck said...
Breaks my heart! I would like to see oil speculators driven out of business. The pain they ravaged on the working men and women of the world should never be forgotten!
I think most of them should be in jail for insider trading. They ran up oil and the oil companie stock went up too.
7-28-2009 @ 10:35PM
Diane said...
I agree with you, Chuck. But, actually, it wasn't insider trading. The problem is that futures traders can buy on high margin with no limits. Some lawmakers are trying to change that, but there's a lot of opposition from the futures traders.
7-29-2009 @ 5:13AM
al coholic said...
I thought the original idea for allowing speculation on commodities futures was to help farmers plan their crops. Wouldn't the prices be more realistic if we outlawed the leverage people use to distort the market?
7-29-2009 @ 5:33AM
ZAP said...
I speculate to say, the $4.00 a gallon prices started the downfall we are in now.Thank You Mr. Oil Man Bush, and your pals. May you get what you truly deserve.
7-29-2009 @ 2:16PM
Iridium said...
I think something very funny is going on in the market right now. Oil has dropped almost $4 by 1:30 PM.
I think traders are selling off contracts to lock in profits before the Beige Book. The think the report will show som esigns of moderating and then the traders will start buyinf oil like mad spiking the price over $70.
Something is not right about a huge selloff before a market report.