Brent Crude Closes below $100/bbl

[Col. Crackpot]

linky

First time since April 2nd

[Sikon]

Ah yes, quite a drop from its high of $147 a few weeks ago.

[Guardsman Bass]

The high was on July 3, so it's closer to two months ago.

In any case, this is good news. It means the airlines won't get damaged quite as badly as I thought they were going to be.

[Col. Crackpot]

Ah yes, quite a drop from its high of $147 a few weeks ago.

30 percent in a month. Personally i'm waiting for the bloated corpse of congress to close the barn door now that it is burned down... These hearings should make the Enron investigation look like a game show.

[Big Phil]

How much of this has to do with the strengthening dollar vs. reduced demand/increased supply?

[J]

How much of this has to do with the strengthening dollar vs. reduced demand/increased supply?

I don't have my charts handy, off the top of my head I believe the USD has strengthened around 10-15% since oil hit its highs. Inventories in OECD countries have fallen so unless something wonky is happening in the rest of the world the supply/demand situation is just as tight as before. There've been some large oil hedge fund kablooies which have taken down the price of oil in large steps, these are the days when we see sudden large moves down with huge volume spikes, August 4th being a prime example. That took care of the rest.

Also, OPEC just cut their quotas, futures prices are back in the green. I've given up trying to predict moves with the huge mess in the world's financial markets.

[PeZook]

This isn't actually good, because people will now start screaming that Peak Oil is not gonna happen, everything will be peachy, etc.

While a faux speculation-inflated price drove innovation forward, while in reality helping cut demand and thus buying us a little bit more time.

[white_rabbit]

Quick! Start using your cars again!

[Surlethe]

How much of this has to do with the strengthening dollar vs. reduced demand/increased supply?

That's a good question. Another good question is: how much of the reduced demand is a decrease in purchasing power caused by the price rise, and how much of it is substitution, with people biking more, buying more efficient cars, and even moving closer to work, etc.? Given the inelasticity of oil demand, I suspect more of the former than the latter, but it would be interesting to find out whether one factor dominates the demand drop.

[Admiral Valdemar]

It's actually really quite strange watching hurricane after hurricane hit the GOM and OPEC talk of cutting output, yet crude has fallen so far it's making people dizzy. With things like huge cuts in driving in the US and the lowest car sales in the UK since the '60s, I imagine we've seen the vast majority of easy demand destruction get off to a good start, with the price hovering around $100/bbl. because of the KSA's new 500 kilobarrel field news and OPEC cuts with recession news acting against one another.

[Surlethe]

Actually, I noticed that the price of gas in my area has jumped about $0.30 to nearly $4.00 again in the past couple of days. The hurricane's impacts are being felt; it's just that this is not new territory anymore, so people are sort of blase about seeing a "3" in the first digit of the gas prices. There's not the underlying shock and fear that accompanied the gas price rise earlier in the summer.

[J]

Actually, I noticed that the price of gas in my area has jumped about $0.30 to nearly $4.00 again in the past couple of days. The hurricane's impacts are being felt; it's just that this is not new territory anymore, so people are sort of blase about seeing a "3" in the first digit of the gas prices. There's not the underlying shock and fear that accompanied the gas price rise earlier in the summer.

From the DOE oil inventory report:

Total motor gasoline inventories decreased
by 6.5 million barrels last week, and are below the lower boundary of the
average range. Both finished gasoline inventories and gasoline blending
components inventories decreased last week.

Total gasoline inventory is sitting at just under 188 million barrels which is barely above the generally accepted minimum operable level of 185 million. That's why gasoline prices are headed up even though oil is falling. If hurricane Ike goes the wrong way there's a good chance pipelines & distribution depots will run dry.

[Col. Crackpot]

Total gasoline inventory is sitting at just under 188 million barrels which is barely above the generally accepted minimum operable level of 185 million. That's why gasoline prices are headed up even though oil is falling. If hurricane Ike goes the wrong way there's a good chance pipelines & distribution depots will run dry.

the refiners are desperately trying to slow the decent (and make a buck) by keeping inventories of refined product low. Dangerous game to play.

[Admiral Valdemar]

Even better when Ike, a storm that could hit Cat. 4 is looking to go through five megabarrels of refinery capacity any day soon. We will at least see what the real MOL is for modern operations then.

[J]

the refiners are desperately trying to slow the decent (and make a buck) by keeping inventories of refined product low. Dangerous game to play.

There's some of that, yes, however crude oil inventories are falling just as fast as inventories of finished products. If crude oil stocks run too low the refiners will have to do a full plant shutdown, or if they're unlucky and don't catch it in time it becomes an emergency shutdown which may damage the plant. That would be bad.

Refiners must adjust their refinery runs to balance inventories of crude and finished products, of course they want to make a fat profit while they're at it but not if it results in a plant shutdown because the result of that is serious losses.

[Rightous Fist Of Heaven]

My apologies if this is considered a necro. Just as an update to the original OP.

WTI drops below 100$/bbl