Oil Down To $106 As Gustav Blows Itself Out

Now that Hurricane Gustav is Tropical Storm Gustav and no significant damage was reported by the major oil refiners, oil is resuming its freefall.

The price fell to below $106 in early morning trading and as of 6am EST is still hovering around that number. That’s about a $10 drop since last week.

The two major forces driving oil down are:

  • a continued strengthening of the dollar
  • further weakening demand from global economic weakness

The question is when (if), the following factors will arrest the fall:

  • Hurricane Hanna, Hurricane Ike, Hurricane…
  • Putin, Iran sabre-rattling & Nigerian rebels
  • OPEC
  • The “peak oil” story that became consensus when oil hit $147

The answer? In our opinion, oil got ahead of itself, but the long-term supply-demand story is still intact. The US has been granted one more chance to develop a sustainable energy strategy before it’s too late.

See Also:
Congress Desperate To Save Oil-Price Scapegoat, Investigates CFTC
Natural Gas Supply Booms And Prices Crash: Is Oil Next?

 

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