Crude continued its slide today on the New York Mercantile Exchange, falling more than $2 from the close on Wednesday. With a US holiday weekend at hand and foul economic news emerging concerning unemployment numbers in the US, crude oil prices were dealt two big blows.
Tempering trading today, US unemployment numbers rose to a more than 25-year high of 9.5% for the month of June. With less employees traveling to and from work, demand from the world's largest consumer of oil is being questioned by anxious traders.
In Thursday trading, crude oil settled on the NYMEX ahead of the holiday weekend at $66.73 a barrel, falling another $2.58 a barrel during the day.
"The employment report obviously seemed to put a damper on the holiday spirit," said Phil Flynn, vice president in charge of research for PFG Best in Chicago. "People going into the three-day weekend reacted to bad economic news."
Furthermore, Flynn feels that the lack in US consumer confidence reported earlier this week helped to stoke the market's fears that the economy is not rebounding quite as quickly as previously believed.
"It really started earlier in the week when we looked at the falling consumer confidence," Flynn explained. "That signaled to the market that maybe things aren't as rosy as we hoped they would be, maybe that the green shoots weren't quite as green; and then, of course, the employment report took the wind out of the sails."
Holiday Jitters Affecting Crude Rates
With trading closed on Friday in New York due to the US holiday, buyers were not ready to make a commitment to oil over the long weekend.
"Now, the one thing that I'll say is that the oil market has been resilient; and I really wonder if it weren't a situation where we were going to go into a long holiday weekend, if the market might have shown a little bit more life," the analyst added. "It really seems that we reacted to the bad employment early in the day, and then we pretty much flat-lined and faded away into the darkness."
Oil Prices Play the Odds
The analyst points to two outcomes after the holiday weekend. Either the market stays strong or the bears take the reigns, and it continues to slide.
"We still know that oil has been defying traditional measures of supply and demand lately," he said of the optimistic outcome. "We know that the market is very sensitive to the whims of the dollar and the stock market; and if we find some stability in the stock market or some weakness in the dollar next week, there's a strong possibility we could see another rebound."
Yet, after a dismal week of trading, the possibility has surfaced that oil will continue to fall.
"If, on the other hand, the market gets into the type of mood that we are going to go back into a double-dip type of recession, or if they are disappointed that the Obama administration stimulus isn't doing enough to stimulate the economy, we really could get into a negative mode," Flynn said. "If that happens, we would have to wait and see if that stimulus could get the market going again."
Ultimately, the analyst believes that the price of oil is at a critical point and that the next couple of days could define where the market is headed: up to $75 or down toward $50.
"If we don't hold after the weekend, I think there's a good chance that we'll continue the downside move," Flynn continued. "If we do hold over the weekend, it's very possible that we've set the bottom for the summer today."
Whatever the outcome, the analyst looks to Monday to determine the market and where it is headed.
"I think we've got to wait until Monday, see what happens over the weekend, before we write the obituary on this recent bull run," he concluded.
Most Popular Articles
From the Career Center
Jobs that may interest you