Thursday, January 4, 2007

Oil Breaks Through Lower Support

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Who would have thought we'd see that? I certainly didn't.

And why is this happening?

Oil prices shed more than $2 Thursday to settle at their lowest level since June 2005, after the U.S. government reported higher-than-expected inventories of gasoline, heating oil and diesel fuel amid warm winter temperatures.

An unseasonably mild winter in the Northeast and Midwest has led to a buildup in inventories and, as a result, weaker prices.

"There is no winter at all, thus we have a lot of supplies with no home and prices have nothing to do but fall," said James Cordier, president of Liberty Trading Group in Tampa, Fla.


So we have an unseasonably warm winter. In addition, we also have higher stockpiles. Oil is still higher than average and gas and distillates and gas are all increasing.

I have to wonder is there is something more to this decrease though. Much like the copper sell-off, is this also the markets telegraphing their perception of slower US growth?