Thursday, June 16, 2011

Oil dropped 4% yesterday

Yesterday, I wrote:
I just checked the corner gas station, where I'm going to fill up my car in a few minutes on the way into work. They're selling unleaded regular for $3.75/gallon, and that's the credit price.
I actually ended up paying $3.72/gallon because I was using my Speedway card, which was a pleasant surprise. It also means that my prediction from April was dead wrong, as I paid less than last time, when gas cost me $3.81. Lucky me, I managed to avoid buying any gas during the time it went back over $4.00.

Back to what I posted yesterday.
If that price holds, AAA Michigan and the Detroit Free Press will have another price drop to report next week.
I'm sure they will, as the price of oil dropped 4% yesterday.
(Reuters) - Oil slid more than 4 percent on Wednesday, as signs of further economic weakness fed demand worries and a rising dollar weighed, triggering technical sell stops and sending U.S. crude to its lowest since February.

U.S. crude weakened early on data showing a rise in core inflation and shrinking New York manufacturing. After a brief rise on news of a big drop in weekly U.S. crude stocks, prices succumbed to intensifying selling pressure, breaking below the 150-day moving average and $95 key support.

"It's a rush for the exits. The market has been overvalued for some time now...the Brent market has been a bubble and the bubble is bursting today," said Tim Evans, energy analyst at Citi Futures Perspective.

"In my opinion, WTI would be fairly valued at $85 a barrel and Brent at $90 a barrel," Evans added.

U.S. July crude fell $4.56 to settle at $94.81 a barrel, the lowest since February 22. It hit a session low of $94.01, also the lowest since that day.
As I've written before, a price drop like this is not entirely good news; it's a response to bad economic news elsewhere.

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