Light sweet crude, after opening at a record high of $62.30, this morning plummeted to $59.05 after news of the London subway bombings on Thursday morning. The price started a rally but didn’t go back above $61.
Heating oil and gasoline dropped slightly after hitting record highs yesterday at $1.81 a gallon.
Three major factors are messing with the heads of traders right now. First, the London bomb blasts during the rush hour this morning and in the financial district had an immediate effect upon investors in oil and most other markets. The price of crude dropped $4 pretty quickly on the London exchange. That’s kept prices down for the most part today because many fear an economic downturn in London similar to what the U.S. saw following 9/11.
Next would be the unexpected events in U.S. oil and refined products inventories. Crude dropped 3.6 million barrels compared to the Reuters survey suggesting a 1.6 million barrel decline. The big surprise cam in distillate inventories. Distillates, which includes heating oil, diesel and jet fuel, was expected to climb about 1.5 million barrels and went up a barrel busting 4.1 million to 117.2 million barrels. This might takes some pressure off traders as refineries hit 98.1% of capacity.
The final, unknown quantity is this dirty ol’ man named Dennis working his way through the Caribbean. The big ugly hurricane is kicking around sustained winds of 110 mph and promises to give old Fidel more grief than a Republican convention in Havana.
Projections have the storm ripping right through the Gulf of Mexico after it’s done with the Caribbean and as Tropical Storm Cindy reduced all but stopped oil production in the Gulf, Dennis should be a doozy.
Last year’s hurricane onslaught did serious damage to a number of platforms in the gulf and Dennis is predicted to hit level 3, the same as Ivan from last year.
In any event, a lot of factors are playing into the oil prices right now. Investors and experts will be watching the news from London very closely as well as news from the Gulf, though any major news from Gulf damage will
likely come after markets close for the weekend.
John Stith is a staff writer for Murdok covering technology and business.
