NEW YORK (CNNMoney.com) -- Oil prices fell steeply Thursday, extending this week's decline to more than $14 a barrel, as natural gas prices tumbled and a report suggested that the United States may be establishing a diplomatic presence in Iran.
Light, sweet crude for August delivery fell $4.52 to $130.08 a barrel on the New York Mercantile Exchange. The price fell as low as $129.75 late in the session, marking the first time since June 6 that the price has been below $130.
A sharp drop in natural gas prices scared many investors out of the energy market, said Tom Orr, head of research at Weeden & Co.
The August natural gas contract fell 79.8 cents, or 7%, to $10.60 per thousand cubic feet after the government's weekly inventory report showed an unexpected increase in supply.
"When gas cracked, [oil] really just fell off a cliff," said Orr.
Iran: A report from U.K. newspaper The Guardian eased concerns about a disruption in supplies from Iran, the second-largest producing member of the Organization of Petroleum Exporting Countries. The paper said Thursday that the U.S. may announce a diplomatic interest section in Tehran in less than a month.
A State Department official said the Bush administration had not yet decided whether to seek the interest section, which would mark the first step to a permanent embassy, but indicated the administration's desire to have "people-to-people contact with the Iranian people," according to the Associated Press.
The diplomatic talk helped ease fears that the oil-producing nation could become embroiled in a conflict with the U.S. and Israel.
"The situation with this seeming olive branch with Iran from the [Bush] administration has taken out this speculative furor," said John Kilduff, energy analyst with MF Global.
Thursday's decrease in prices extends oil's losing streak to more than $14 a barrel in three days.
Crude fell $4.14 Wednesday to settle at $134.60 a barrel, following a huge $6.44 selloff the previous day - crude's biggest one-day dollar drop since the Gulf War in 1991.
Earlier in the week, Fed Chairman Ben Bernanke told Congress that high fuel prices and a slowing economy may be cutting into the U.S. appetite for crude.
His statements were later backed up by the Energy Department, which reported Wednesday that U.S. crude stocks had unexpectedly risen by 3 million barrels - analysts polled by Platts had expected a drawdown.
Fuel: The data suggested that demand was low enough to build up a surplus - supplies of gasoline and distillates, which are used to make heating oil and diesel fuel, also rose.
Major airlines such as Continental and US Airways (LCC, Fortune 500) have been faced with devastating fuel costs that make air travel more difficult and more expensive.
Driving habits have also changed, as gas prices - up more than 35% from last year, according to motorist group AAA - weigh on consumers.
Regular unleaded held its record high of $4.114 a gallon for the second day, while diesel prices hit a new high of $4.845, according to AAA.
Supply: The fear that demand from the United States, still the world's largest oil consumer, will tumble remained a major focus of most investors, but it had been countered by concerns about international supply, which have been a key factor in oil's meteoric rise.
Rachel Ziemba, energy analyst with RGE Monitor, believes that oil prices are still set to go down by the end of the year, but she said "there is still a bullish story in the long term."
Brazil: Talks stalled between striking oil workers and Brazil's state-owned Petrobras, the Associated Press reported. The workers are in the midst of a five-day walkout in the Campos Basin, which accounts for about 85% of the oil shipped from Brazil.
The AP reported that Petrobras issued a statement saying it had made a proposal that met workers' demands for more time off. The union, calling the proposal insufficient, said it would discuss it with members Thursday.
Nigeria: An explosion shut down a pipeline in Nigeria, Africa's largest oil producer Thursday, according to reports. Without mentioning the explosion, Italian energy company Eni, which owns the pipeline, said an unforeseen drop in pressure forced it to cut production by 47,000 barrels of oil per day.
According to the report, officials were uncertain whether it was an accident or a strike by militants. Rebel forces in Nigeria have targeted oil facilities previously. 
No comments:
Post a Comment