Oil Closes July with Fireworks Near $70
It has been a rocky road for crude oil in the market place this month. With highs above $70 at the start, the energy commodity tumbled mid-month to reach well into the $50s --only to rally again. Crude oil climbed again today on the New York Mercantile Exchange, closing just below $70.
Trading Friday on the NYMEX saw crude oil prices drop about $1.50 early in the day, but rise again to rally more than $2.50 from Thursday’s close. Crude oil settled on the last day of July at $69.45 a barrel, mirroring a dramatic rise on Wall Street.
With the value of the dollar against the euro dropping, as well as the Dow Jones climbing, crude oil found strength in the market. After a government report showed that the US economy contracted less than expected, hope of an economic turnaround helped to spur investments in both stocks and oil.
Oil Has Been on a Rollercoaster Ride
"What didn't happen in the market today?" commented Phil Flynn, vice president in charge of research for PFG Best in Chicago. "We had everything. You could be a bull; you could be a bear; you could be neutral. You had a little bit of everything, but obviously at the end of the day, the bulls ruled the roost."
A blow-by-blow saw the price of oil today trade lower in the morning and then reverse for a bullish end.
"So oil got off to a rocky start after the first number, but then you got the producer price index, which was much better than expected," said Flynn. "That got the speculative juices going again that maybe the economy would be getting better. That really turned the market around; and as the other markets started to respond, oil just got caught up in all the excitement."
The hope that the global economic recession will soon be overturned fueled an exciting month of investments.
"We saw the dollar hit a new low against the euro," Flynn said. "You saw the stock market end up July with some explosive firework action. The month of July was incredible. You had the biggest selling month in the stock market since 2002, obviously we had to go down a long way to get to that point, but this incredible end to July is raising hopes that there are better days around the corner."
Nonetheless, the price of oil did drop below where it started.
"As explosive as we ended the month, we're still ending the month on oil lower than we started it," Flynn continued. "Oil had a huge sell-off in the month of July, had an incredible comeback, but it ended the month short of the high for the month."
With so many ups and downs experienced in trading during July, the price of oil next month could go bullish or bearish.
"In August I think all the gloves are going to be off," Flynn predicted. "The bulls are going to go in with a slight edge, but I still think this market is near a major top."
Natural Gas Continues Dropping
In trading on Friday, the price of natural gas continued its descent, closing 9 cents below Thursday’s settle at $3.653 per mmBtu. Weak demand and abundant supply continue to keep the price of natural gas below the $4 mark.
"This is another sign that the natural gas market is disconnected from the rest of the world," Flynn remarked. "If I was a natural gas trader, I would feel ostracized from the rest of the commodity community because it's one of the few commodities that went lower today. It doesn't care about an improving economy because even if the economy improves, there’s enough supply to meet that."