I wasn't planning on this blog entry. But I am being forced to. Crude oil has dropped to $52 per barrel. A level it hasn't seen since May of 2005. I had recently written about the subject a month ago on December 7, 2006 when it was $10 higher. Naturally, I was pleasantly surprised. I immediately started scooping around to see what the professional reasons would be. It took a while to find a decent bit of reflection but I think I got a pretty good one. Apart from the usual assignment of fundamental reasons, it appears that the strong one is that market bulls have abandoned ship. This is a frequent occurring in financial markets which today consist of more speculative trading than actual buying and selling. When a lot of speculators take a position or bet which becomes popular, things happen if matters don't turn out as expected. The market appeared to be eyeing the $72 peak levels for crude oil and good old OPEC was talking about cutting production to 'stabilize' prices. When the climb was largely resisted at the $65 level people started to get worried. Pretty soon they started unwinding their bets to cut losses or book whatever profit is in the bag. Prices usually tumble in these situations which reach a state of frenzy. And when the frenzy is over, prices will recover somewhat but should be in a sober state.
Gas prices at the pump in the US are yet to follow suit. As per Gasbuddy.com they are only 3 cents lower than a month ago. The average price is in the low $2s. Seems hardly true, doesn't it?
Related:
Why gas prices move like "rockets up and feathers down" at AUTOBLOGGREEN
Natural-gas futures end almost 7% lowerCrude futures fall under $52 a barrel to end near a 20-month low
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