Oil prices still falling along with sharp natural gas sell-off

Associated Press

July 17, 2008 08:21 pm

— NEW YORK — Oil prices fell below $130 a barrel for the first time in more than a month Thursday, as a dramatic slide entered a third day along with a sharp sell-off in natural gas.
The declines accelerated amid growing concerns about the weakening U.S. economy.
“The entire bullish scenario ... is starting to crack,” said James Cordier, president of Tampa, Fla.-based trading firms Liberty Trading Group and OptionSellers.com.
Light, sweet crude for August delivery dropped $5.31 to settle at $129.29 a barrel on the New York Mercantile Exchange. Prices have fallen more than $15 in just the past three days.
Natural gas futures for August delivery fell as much as 8.2 percent in the day, the biggest one-day drop in nearly a year. Natural gas fell 13.8 percent on Aug. 20, 2007, according to Nathan Golz, researcher at Wachovia Securities in St. Louis.
A number of market observers say there was nothing supporting the run up in natural gas prices, which peaked in early July, and that this week’s sell-off of oil has only helped speed the declines.
“Any time oil goes up or down on Nymex, it’s going to have a carry-over effect on natural gas,” said Michael Rieke, senior managing editor for power and gas at energy research firm Platts.
The immediate cause of Thursday’s sharp natural gas decline was a larger-than-expected build of U.S. supplies.
Oil prices fell more than $10 over the previous two days on growing concerns that inflation and other economic concerns could reduce demand for crude. A surprisingly large gain in oil and refined fuel inventories in the U.S. prolonged the sell-off, because it suggested more supplies were heading into storage rather than consumers’ fuel tanks.
Reports of a pre-dawn explosion that damaged an oil pipeline in Nigeria’s restive south — the sort of threat to supply that has helped fuel crude’s recent rally — did little to prop up prices Thursday.
At the gas pump, prices held steady at a record $4.114 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. Diesel rose to a new record of $4.845, up more than half a penny.
Wall Street reacted enthusiastically to the decline in energy prices with the Dow Jones industrial average surging 207 points. The Dow closed Thursday at the 11,446 level, bringing its two-day gain to more than 480 points.