Thursday, March 20, 2008

Oil Prices drop below $100 a Barrel

The ups and downs of commodities, the U.S. dollar, and the oil market continue, as oil futures dropped below $100 a barrel today, making it a plunge of about 10 percent since it hit record highs of $111.80 a barrel on Monday.

Light sweet crude for New York oil in May fell to $99.20 a barrel, while London's Brent North Sea crude dropped by $2.50, to end at $98.42 a barrel.

"Crude fell below 100 dollars a barrel as fears of a US recession, its impact on the rest of the world, and on oil demand growth continue to dominate headlines," said Sucden analyst Michael Davies on Thursday.

Much of the ups and downs comes from the declining U.S. dollar, which commodities are denominated in. The strength of foreign currencies provides cheaper buy-in for investors.

As far as available reserves in the U.S., the US Energy Information Administration (EIA) said for the week ending March 14, they increased by 200,000 barrels, to bring the total to 311.8 million barrels. That's the typical amount for this time of year, although the market thought it would rise to about 2.3 million barrels.

The banking and credit problems are seen as another key contributor to the price decline in oil, which could potential slow global growth down significantly.

It's going to take some time for this to all work itself out, as so many variables are floating around out there. Until those things settle down, the price of oil won't, neither will a lot of other commodities.

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