Why have oil prices dropped $12 pb in 2 weeks?

lorenzo · Fission Joined: Jan 01, 2005 Posts: 2231

I don't understand, a few years ago, a movement of $12 pb in under 2 weeks time would have grabbed headlines and sent shockwaves through the oil world.

Today, it just happens and nobody talks about it.

The anti-Bush, anti-neocon report on Iran's nukes, ok.
The fact that demand is slowing a bit, ok.
The fact that Iraq is doing very well, ok.

But $12 in 2 weeks? Common.

To me, this can only mean there's a huge amount of speculation in the market. Nothing else explains this crazy volatility.

Are we in for a drop to $60 before the end of the year? We have three weeks left. It's not impossible.
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seldom_seen · Fission Joined: Apr 12, 2005 Posts: 2062

Come on silly, do you think "they" are going to let oil hit 100 dollars per barrel during the most holy and sacred event of consumer-industrial culture...the Christmas Shopping Season?

They will pull out all the stops to keep oil from hitting 100, it will still happen, but blessed be thy name, not during the Christmas Shopping Season. Amen.

aflurry · Intermediate Crude Joined: Mar 28, 2005 Posts: 839

all these posts about "why" the market moves the way it moves are kind of silly.

all of the expectations we have about how the price should move are already built into the current price, even as that price fluctuates.

put another way, market movement is what is left after all rational elements have already been factored in.

lorenzo, when you say there is a huge amount of "speculation" in the market, do you mean as opposed to what?

alokin · Intermediate Crude Joined: Aug 24, 2007 Posts: 883

All what I read about this was demand destruction, a weaker US economy needs less oil. And the Chinese will follow as there are less people willing or able to buy made in China.

I wonder what the US economy will do next year. And what will happen with the oil price if there will be no economically growth or if there will be a decline of , let's say 3-5%? will there be sufficient oil then?

Blacksmith

I think we should remember the cup is still half full.
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lorenzo · Fission Joined: Jan 01, 2005 Posts: 2231

Mudpuppy · Tar Sands Joined: Dec 31, 2006 Posts: 33 Location: Japan

Keep in mind that the higher the price the more volatility in dollar movement, but percentage wise it is relatively the same.

For example, 10 years ago a $12 oil movement would have been massive, but that was because oil was $20 a barrel, so a $12 movement is equal to around 60% change.

But when oil was $20 a barrel, a movement of price up to $21.20 or down to $18.80 would have been the same as a movement of 12% or so over the last few weeks.

The drop or rise in price in dollars is insiginifacant, as it si the movement in percentage that matters. I mean if oil is $400 a barrel then a $25 movement is scarecly anything to move an eye about. A $1.50 movement at $10 a breel though is quite a change.

Concerned · Light Sweet Crude Joined: Sep 23, 2004 Posts: 1553

I would say the Iran factor would be significant. Clearly any attack on Iran or news that favors that event will send oil higher.

So we have a breather for now until the on going declines set in and entrench themselves.
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pup55 · Expert Joined: May 26, 2004 Posts: 3840

Crude oil prices have dropped because the refiners were not making any money.

Note the thread on refinery profits that I have just bumped up.

With crude prices so high, during the fall when gasoline demand is typically low, and demand for heating oil has not skyrocketed yet, why get out the wallet and pay all that money for crude oil?

We are within a couple dollars of the bottom. Refinery margins are starting to go back up a little bit. It might get soft again at the end of January/early February if the weather is mild this year in the US NE.

Note that this year, the "bottom" is about where we are now. Maybe a little lower if the current market momentum takes over. Last year, the "bottom" was between 55 and 60 dollars/bbl for crude, so that is still a pretty dramatic increase.

AirlinePilot

I say this every time we get to one of these threads.........

Two steps forward, one step back. Volatility will be the name of the game, and do not pay too much attention to large moves in short periods of time.

pup55 has the most important point of all here. Look where we were
last year or two years ago and then where we are now. The difference is huge. There in lies the real story.

gnm

I agree. I don't see $12 as huge considering the moving average is like 20% higher than this time last year. THATS HUGE. Keep that up year over year and its going to hurt.

-G
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jbeckton · Expert Joined: Jan 05, 2007 Posts: 1922

roccman

jbeckton · Expert Joined: Jan 05, 2007 Posts: 1922

I agree that the comparrison between this fall and last fall is much more significant than the last 2 weeks but we also need to keep in mind the political climate changes between this fall and last fall as well.

Iran and the US dollar have contributed to investor specualtion and activity, but that alone can't account for the entire difference.

Personally, I think that investor specualtion driven price increase is the best thing for us right now. It's a measuring stick.
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