Oil prices dropped sharply today, ending below $80 a barrel, and other energy futures followed suit as investors locked in profits from the recent record-setting rally.
The third consecutive day of oil price declines after eight straight sessions in which futures hit new records is igniting a debate among analysts over whether the move is a correction in a bull market or the beginning of a long-term decline in crude prices.
"It's certainly not unexpected that after such a strong run-up we'd have a pullback," said Addison Armstrong, an analyst at TFS Energy Futures LLC in Stamford, Conn.
Crude futures peaked near $84 a barrel on Thursday, the day the October contract expired. The November crude contract began its life as the front-month contract Friday more than $1.50 lower, and has declined in every session since.
Today, November light, sweet crude fell $1.42 to settle at $79.53 a barrel on the New York Mercantile Exchange.
"What we're seeing now is just a very normal correction in the market," said Stephen Schork, a Villanova, Pa.-based analyst and publisher of The Schork Report. But if prices keep falling, he said, "It could be the end of the bull run."
The key will be whether crude futures find a psychological support level at which investors are comfortable, Schork said. If they do, prices could rally again. But if prices fall through support levels in the mid-$70s, Schork said, the path could be paved for $70 oil, or lower.
There was little news affecting oil prices today, analysts said. If anything, the oil-related stories would seem to support higher prices: An opposition group in Nigeria, a major oil producer, has ended a cease-fire and said it will resume attacks on oil installations; and analysts expect the government to report Wednesday that oil inventories fell last week.
"When you do have bullish headlines ... and the market does not react, that's a real tell-tale sign," that a rally may have run its course, Schork said.
Other energy futures followed oil lower. October gasoline fell 4.55 cents to settle at $2.0379 a gallon, and Nymex heating oil tumbled 4.93 cents to settle at $2.1813 a gallon. In London, November Brent crude lost $1.29 to settle at $77.62 a barrel on the ICE Futures exchange.
October natural gas, which expires Wednesday, fell a cent to settle at $6.36 per 1,000 cubic feet on the Nymex after spending much of the day in positive territory. Trading in expiring contracts is often volatile as investors square positions.
Traders were keeping an eye on three tropical weather systems, one in the southwestern Gulf of Mexico, one entering the Caribbean Sea and one, Tropical Storm Karen, in the central Atlantic. But investors aren't convinced any of the three directly threaten critical oil and gas infrastructure in the Gulf.
"Until we see some firm evidence of a storm coming into the Gulf, I think the market's sentiment will be lower," Armstrong said.
Both natural gas and heating oil are more expensive than they were a year ago. The National Energy Assistance Directors' Association today warned that an average household will spend 28.1 percent more on heating oil, or 5.3 percent more on natural gas this winter than last year.
At the pump, the average national price of a gallon of gas rose 0.2 cent overnight to $2.811 a gallon, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, are rising to catch up to the recent spike in oil prices, analysts say. Prices could rise as much as 10 to 15 cents a gallon in some areas in coming weeks.
The third consecutive day of oil price declines after eight straight sessions in which futures hit new records is igniting a debate among analysts over whether the move is a correction in a bull market or the beginning of a long-term decline in crude prices.
"It's certainly not unexpected that after such a strong run-up we'd have a pullback," said Addison Armstrong, an analyst at TFS Energy Futures LLC in Stamford, Conn.
Crude futures peaked near $84 a barrel on Thursday, the day the October contract expired. The November crude contract began its life as the front-month contract Friday more than $1.50 lower, and has declined in every session since.
Today, November light, sweet crude fell $1.42 to settle at $79.53 a barrel on the New York Mercantile Exchange.
"What we're seeing now is just a very normal correction in the market," said Stephen Schork, a Villanova, Pa.-based analyst and publisher of The Schork Report. But if prices keep falling, he said, "It could be the end of the bull run."
The key will be whether crude futures find a psychological support level at which investors are comfortable, Schork said. If they do, prices could rally again. But if prices fall through support levels in the mid-$70s, Schork said, the path could be paved for $70 oil, or lower.
There was little news affecting oil prices today, analysts said. If anything, the oil-related stories would seem to support higher prices: An opposition group in Nigeria, a major oil producer, has ended a cease-fire and said it will resume attacks on oil installations; and analysts expect the government to report Wednesday that oil inventories fell last week.
"When you do have bullish headlines ... and the market does not react, that's a real tell-tale sign," that a rally may have run its course, Schork said.
Other energy futures followed oil lower. October gasoline fell 4.55 cents to settle at $2.0379 a gallon, and Nymex heating oil tumbled 4.93 cents to settle at $2.1813 a gallon. In London, November Brent crude lost $1.29 to settle at $77.62 a barrel on the ICE Futures exchange.
October natural gas, which expires Wednesday, fell a cent to settle at $6.36 per 1,000 cubic feet on the Nymex after spending much of the day in positive territory. Trading in expiring contracts is often volatile as investors square positions.
Traders were keeping an eye on three tropical weather systems, one in the southwestern Gulf of Mexico, one entering the Caribbean Sea and one, Tropical Storm Karen, in the central Atlantic. But investors aren't convinced any of the three directly threaten critical oil and gas infrastructure in the Gulf.
"Until we see some firm evidence of a storm coming into the Gulf, I think the market's sentiment will be lower," Armstrong said.
Both natural gas and heating oil are more expensive than they were a year ago. The National Energy Assistance Directors' Association today warned that an average household will spend 28.1 percent more on heating oil, or 5.3 percent more on natural gas this winter than last year.
At the pump, the average national price of a gallon of gas rose 0.2 cent overnight to $2.811 a gallon, according to AAA and the Oil Price Information Service. Retail prices, which typically lag the futures market, are rising to catch up to the recent spike in oil prices, analysts say. Prices could rise as much as 10 to 15 cents a gallon in some areas in coming weeks.
Via|Chron|by John Wilen
PETROLEO|
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