Steep plunge in oil prices

Actually, there has been a big sell-off in all commodities. Crude futures fell more than $9 to settle at $99.72 a barrel (they had been running $113 just a few days ago). Should that level hold, gas prices are almost certain to drop, which is good news in a bad news sort of way. Why the fall? Much of it started earlier in the week with a big drop in the price of silver. Add to that some unsettling jobs data, plus shrinking demand for oil, plus a jump in the dollar. From the WSJ:

After driving commodity prices higher for much of 2011 amid worries about supply shortages, investors now fear that high prices will lower consumption. Central banks around the world are raising interest rates and ending other programs designed to speed up the economic recovery, and some policy makers are worried high food and energy costs will threaten continued growth. Cotton in particular has been battered by falling consumption after hitting an all-time high in March, and the economic data raised fears about the United States' recovery and whether consumers will struggle to deal with rising costs for basic goods such as clothing and food. "We've been on such a tear since August of last year in commodities overall, so we're due to have some kind of correction," said Jimmy Tintle, a broker and analyst with Transworld Futures. "Everything doesn't go up forever."

Some analysts are already warning that the price drop may be temporary - that the markets remain volatile because of Libya, the economy, etc. Others believe this is the beginning of a sustained sell-off. Take your pick.


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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
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