Oil Touches 18-month Low as Speculators Rush Exits
Crude oil prices were whipsawed, losing $2.20 (U.S.) a barrel to an 18-month low of $53.88 in early trading, before recovering to close at $55.64.
The price has dropped 9 % in the early days of 2007, and analysts say the money managers who had piled into energy commodities over the past three years are now looking to get out.
Motorists are seeing the benefit of that crude oil decline, as pump prices fell in most markets across the country last week.
In its weekly survey released yesterday, the company said the national average pump price for regular unleaded gasoline fell to 88.9 cents (Canadian) a liter, down 2.9 cents.
The national average hit $1.10 a liter last summer, and has been hovering above 90 cents for the last several months.
Analysts blame the unseasonably warm weather in northeastern United States and Europe for the weakness in crude prices, but the decline has been exacerbated by the sheer volume of hedge fund and pension fund money that was invested in energy futures in recent years.
The influx of investment money into the commodity market in the past three years added some $35 (U.S.) to the price of crude oil, when it peaked at $78.20 a barrel last summer.
But what the funds drove up, they are now forcing lower, by getting out of energy-based indices and short selling energy futures. (In short selling, a trader essentially makes a bet that a given security will decline in price.)
Weather is not the major factor here, the severity of this move points to funds exiting.
The intra day decline below $55 a barrel breached a key resistance level, setting the stage for even lower prices in the coming days. However, the market appeared to set a new floor when it rebounded after traders had concluded the market had sold off too quickly.
The price has dropped 9 % in the early days of 2007, and analysts say the money managers who had piled into energy commodities over the past three years are now looking to get out.
Motorists are seeing the benefit of that crude oil decline, as pump prices fell in most markets across the country last week.
In its weekly survey released yesterday, the company said the national average pump price for regular unleaded gasoline fell to 88.9 cents (Canadian) a liter, down 2.9 cents.
The national average hit $1.10 a liter last summer, and has been hovering above 90 cents for the last several months.
Analysts blame the unseasonably warm weather in northeastern United States and Europe for the weakness in crude prices, but the decline has been exacerbated by the sheer volume of hedge fund and pension fund money that was invested in energy futures in recent years.
The influx of investment money into the commodity market in the past three years added some $35 (U.S.) to the price of crude oil, when it peaked at $78.20 a barrel last summer.
But what the funds drove up, they are now forcing lower, by getting out of energy-based indices and short selling energy futures. (In short selling, a trader essentially makes a bet that a given security will decline in price.)
Weather is not the major factor here, the severity of this move points to funds exiting.
The intra day decline below $55 a barrel breached a key resistance level, setting the stage for even lower prices in the coming days. However, the market appeared to set a new floor when it rebounded after traders had concluded the market had sold off too quickly.
posted by Ottawa Gas Prices | 5:42 AM
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