Downward trend in the market is not to be expected
World oil prices tumbled to one-month lows, losing over a dollar a barrel in London as speculative funds bailed out in response to an easing of supply fears and tensions in Iraq. New York's main contract, light sweet crude for October delivery, dipped 16 cents to 42.12 dollars per barrel in late deals on the New York Mercantile Exchange a day after a 90-cent drop. The price of London's benchmark Brent North Sea crude oil for delivery in October slumped 1.03 dollars to 39.61 dollars per barrel in closing deals, the lowest level for one month. "The falls (in London) follow yesterday's movement in New York, on signs of greater stability in Iraq," said Prudential Bache broker Christopher Bellew. New York trade was uneventful. "I think a lot of big traders are on vacation with the (Labor Day) holiday coming up and the Republican Convention" ongoing in the city, said Phil Flynn at Alaron Trading. But Flynn said he sees little room for prices to fall after a drop of more than seven dollars since the all-time high of August 20. "We'll probably see traders slowly start pushing the market back up," he said predicting a range of between 40 and 45 dollars. "The market has priced in all the good news, has corrected enough," he added. "We'll start worrying about the winter heating season. We've never faced a heating season with prices so high", informs Channelnewasia. Axccording to Bloomberg,Crude oil futures rose for a second session in New York after a blast damaged an oil pipeline in Iraq, renewing concern that violence may reduce supply from the Middle East's fifth-largest oil producer. Saboteurs caused the blast yesterday on the pipeline that links the Rumaila and Zubayr oil fields, Al-Hayat newspaper reported, citing an official from the South Oil Co. Iraqi exports in the Persian Gulf are unaffected, said three agents who provide services for tanker owners. Oil has fallen about $6 a barrel since reaching a record $49.40 a barrel on Aug. 20. ``The pipelines are having a little bit of an effect on oil prices,'' said Michael Fitzpatrick, vice president of energy risk management with Fimat USA in New York. ``When you come down $6 in a week there is going to be a little bargain hunting.'' Crude oil for October delivery traded up 29 cents at $43.47 a barrel at 10:01 a.m. on the New York Mercantile Exchange. Prices are 38 percent higher than they were a year ago. The International Petroleum Exchange in London was closed for a holiday. Vessels at the Basra terminal, the larger of Iraq's two export facilities in the Gulf, are loading at a combined rate of 60,000 to 65,000 barrels an hour, or about 1.5 million barrels a day, said the three agents, who asked not to be identified. The terminal's capacity is about 1.6 million barrels a day, they said. When an Iraqi militia threatened to blow up oil pipelines this month, oil prices shot up. Yesterday, when reports that pipelines in Southern Iraq had been damaged by insurgents reached the New York Mercantile Exchange, the market shrugged and prices sank The market mood has shifted dramatically in a matter of weeks. Instead of vaulting higher on bad news, prices are spiraling downward as speculators sell their futures positions because of fear that prices will go lower still, analysts said. As prices ratchet down, automatic selling ensues as traders fear getting caught holding high-priced contracts in a slumping market. The closing price for oil for October delivery was $42.28 per barrel yesterday, down 90 cents from Friday's close. The market peaked at a record of nearly $49 per barrel on Aug. 19. While oil prices have since eased, they remain higher than a year ago. In inflation-adjusted dollars, prices remain far below the peak of 1981. Some analysts said they did not expect the downward trend in the market to last much longer and predicted that oil prices would eventually climb again. However, they offered a wide range of predictions on how sharp any rebound would be, reports the Washington Post.
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