The price of oil grew bearish after dropping below $77 a barrel on the New York Mercantile Exchange Thursday after The Energy Information Administration released their weekly report, the Dow slipping after a week of big gains and the almighty dollar continuing to recover.
Dropping $2.34 from yesterday, the price of light, sweet crude oil for December settled at $76.94 on the NYMEX. Moreover, natural gas gained momentum and closed at $4.30 per thousand cubic feet, making the fossil fuel burn bright on the NYMEX.
"The price of oil has been trading between $76 to $82 for several weeks as the dollar weakened, gold reaching all-time trading highs and energy consumption decreasing, making today's trading price lower," stated Darin Newsom, senior analyst with DTN in Nebraska.
"As far as oil climbing above the $85 threshold anytime soon, I think it will be difficult," Newsom added. "It seems like once oil gets to the $81 to $82 range, it just runs out of buying orders; so we need to see if the dollar doesn't come under pressure again and see what happens with gold and other commodities in order to see if enthusiasm will build in the crude oil market to push it past the $85 mark."
Oil Seeps Into Bear Market, EIA Releases Report
The Energy Information Administration released its weekly report stating that oil and gas supplies increased amid refineries decreasing production levels to a 14-month low. From the first quarter until the end of the third, oil prices have doubled despite decreased consumption as investors snatched up other commodities to safe guard their investments.
Additionally, The Internal Energy Agency predicted an economic recovery would stall if energy prices continued to rise. The agency increased its forecast for global oil demand to 85 million barrels a day in 2009, 1.7 percent or 1.5 million barrels less than last year.
"Yes, we are seeing lower energy demands now than we did in '08 and '07, and that is not expected to change until the early part of 2010, but that does not mean money can't come back in this market on the idea that the demand is going to pick up and push us closer to the predicted $100 level in 2010," expressed the analyst.
Also inside the weekly report from EIA, Saudi Aramco announced that it would start to price crude oil, delivered to the U. S. Gulf Coast market, based on the Argus Sour Crude Index (ASCI) published by Argus Media, replacing the West Texas Intermediate (WTI) spot index.
"This new index could start to lead to some liquidation in the West Texas Intermediate trade on NYMEX, so it will be interesting to watch," noted Newsom. "If that happens, then yes, it could put pressure on the NYMEX market just from liquidation. An eye will have to be kept on it, but I don't feel it will be a major market influence."
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