Suddenly, oil market bears are everywhere

From Times staff writer Walter Hamilton:

A month ago, almost nobody on Wall Street would have been willing to declare that "oil prices have peaked for the next few years."

But after another sharp retreat in crude prices, Lehman Bros. analysts said exactly that in a report to clients Friday. They concluded that oil’s dive over the last five weeks foreshadows persistent softness in prices for at least the next year.

"Is the bubble now over?" wrote Edward Morse, Lehman's lead analyst. "We believe almost certainly."

Oil prices traditionally have reached their zenith after the U.S. summer travel season, Morse wrote. But U.S. gasoline demand peaked around Memorial Day this year. And another major consumer -- China -- will feel less of a need to stockpile oil now that the Olympic Games have started, according to Morse.

There are plenty of analysts who view the pullback in crude as nothing more than a needed, temporary correction after the frenzied spike up in spring.

Still, there's no doubt that the global economic slowdown has caught up to commodities markets in general, as demand for raw materials weakens.

Even news of a supply disruption to a major Turkish pipeline carrying oil from Azerbaijan couldn’t halt the sell-off in crude on Friday. Near-term oil futures in New York finished the day down $4.82, or 4%, to $115.20 a barrel. The price has plunged more than $30 a barrel, or 20.7%, since it peaked at $145.29 on July 3.

That would qualify as an official bear in the stock market.

Many analysts lately have expected oil to bottom out around $110 a barrel, but some now say it could sink a bit lower as speculators flee what had been one of the year’s hottest trades.

Stephen Platt, a commodities analyst at Archer Financial Services, projects that oil will decline to around $110, but said he wouldn't be surprised to see it drop lower given the "overshot on the upside."

Commodities, it appears, are acting like commodities again -- with all the volatility, in both directions, that that implies.

Comments

[Sal B]

And what about all the articles saying that it was only supply and demand, not speculation, that was driving the run-up in the price of oil? Hmmm... we've been fed a line of bull, as usual, by the major media.

[Financial Planner]

Commodities have been over valued for sometime. I really doubt that the recent drop in price is due to the slow down in the world economy. It's just a price correction... another bubble bursting.

[Firozali A Mulla DBA]

Suddenly, oil market bears are everywhere
Sir:
Everything has time to go up and down. Remember when the UN tried to keep peace in Darfur, there was skepticism only to die for some time and the reality became clear. UN was attacked by the very people UN tried to keep peaceful.
So what is UN to do? Get out and state that this place is not for us.
Oil has seen the similar fiasco, if you want to call this in financial term if not like the UN.
The oil was 70 then 100, and then went to 143 to come down to 113.
What exactly is happening?
We know that we have one certainty or call this uncertainty. We do not know how much oil there is any place. May be one day the huge suppliers will tell us, “Sorry we are seeing the bottom and we cannot give you oil”.
Then there will be a problem.
So we are smart.
The oil corporations talk of Nigeria fights near the oil pipeline and the blast near the pies, sabotaged. Then they can short supply us. They make a huge profit but they tell us little. Instead they show us how very nice they are with us by showing the windmill that rotates slowly and show us the enthusiasm of al going green.
What has going green to do with the oil price surprises me unless when I re-read the above, I know it is diversion. They make money and tell us they are in search of alternative energy.
Why do they need alternative energy?
Please reduce the price of oil. We will use oil and not wood. The global warming will take care of itself.
I thank you
Firozali A Mulla DBA