Tropical storm’s course helps oil slide
NEW YORK (AP) — Oil prices plunged in a massive sell-off Monday, briefly falling below $120 a barrel for the first time since early May after Tropical Storm Edouard appeared unlikely to threaten oil and natural gas facilities in the Gulf of Mexico.
Also weighing on prices was a report by the U.S. Commerce Department that consumer spending fell in June as shoppers dealt with higher prices for gasoline, food and other items. That fed investors’ beliefs that a U.S. economic slowdown is forcing Americans to cut back on energy use.
Light, sweet crude for September delivery fell more than $5 at one point to $119.50 a barrel on the New York Mercantile Exchange, its lowest level since May 6.
The contract later recovered slightly, trading $3.56 lower, or 2.85 percent, at $121.54 a barrel. Crude has now fallen in six of the last nine sessions and has shaved 18 percent off its trading record of $147.27 reached July 11.
Natural gas futures also fell sharply, dropping 60.9 cents, or 6.49 percent, to $8.78 per 1,000 cubic feet. And gasoline futures fell 8.43 cents, or 2.73 percent, to $3 a gallon.
The dramatic dive in oil came shortly after traders learned that Edouard, aiming for the coasts of Texas and Louisiana, likely would not damage offshore oil and natural gas drilling platforms that sit in the storm’s path.
That has taken a lot of pressure off the market. It looks like the thinking is that we dodged another bullet, said Phil Flynn, analyst at Alaron Trading Corp. in Chicago.
Still, oil market traders expressed surprise that a potential hurricane in the Gulf coupled with escalating tensions with Iran didn’t send prices higher — an almost certainty just a few weeks ago.
Any market that really doesn’t respond to seemingly bullish news is often a tip-off that we’re going lower, said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Illinois.
