Friday, January 9, 2009

Oil Prices Continue to Drop on Slowing Demand

Crude Oil for February delivery ended the session at $40.83, a decline of 87 cents, or 2.1 percent. Prices fell as low as $39.38 on the New York Mercantile Exchange during the day.

So far the announcements and compliance of OPEC nations in cutting production hasn't been a factor in determining the prices of crude. Demand continues to be the main driver of prices, rather than supply.

Many investors fled the sector Friday, fleeing from energy companies in droves.

Energy sector watchers now think the announcement of oil service behemoth Schlumberger (SLB) that they are going to cut 1,000 jobs in the U.S., along with overseas workers as well, is the beginning of further cuts in the industry. Halliburton (HAL) also said they're going to be laying off workers too.

To add fuel to the fire, Chevron (CVX) issued a warning today that their fourth-quarter results were going to be "significantly lower" than the heady third quarter's results. While that's not a surprise, combining those elements together shook up energy investors today.

This is going to be the wave of the near term, and the companies are going to suffer dramatically in contrast to recent success.

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