Oil Falls On Demand Concerns, 10/02/08

As the American Dollar strengthened against the Euro, oil prices fell by $2. The decline results from investors buying heavily in commodities to defend the strength of the dollar and use the commodity stocks as a hedge against inflation. But as the currency strengthens, investors sell the commodities and return to the Dollar. Also, recent data show that American fuel demand is falling while supplies are growing. The Energy Information Administration reported that crude oil stocks rose by 4.3 million barrels, (1.5%), and gasoline inventories rose by 900,000 barrels, (0.5%). At the same time however, fuel consumption for the four-week period ending September 26, 2008, was only about 19 million barrels/day, down 7% from the same period last year. Jonathan Kornafel, the Asia Director for Hudson Capital Energy in Singapore predicted that oil would be traded between $80 and $90 dollars per barrel over the next few months due to falling demand. However, he also warned that if prices do dip below $80 per barrel, OPEC would certainly take action to stem the tide of falling prices.


See the article here. -V