Oil prices fell 15% this week, the steepest decline in two and a half years, and futures prices for light, sweet crude fell below $100 a barrel on the New York Mercantile Exchange.
By Jeff Chiu, AP
A price board is shown Thursday at a Shell gas station in Novato, Calif.
By Jeff Chiu, AP
A price board is shown Thursday at a Shell gas station in Novato, Calif.
Crude shed $2.62 a barrel Friday after Thursday's 9% drop, falling to $97.18.
Oil hit a two-year high of $114.83 Monday. Its all-time high is $147.27 in July 2008.
After tanking Thursday, commodities prices, including oil, headed back up early Friday, following a U.S. job growth report that showed the economy stronger than many thought. And a stronger economy means higher demand for fuel. But the rally in oilwas brief.
Oil sank Thursday after a weak U.S. report on new claims for unemployment benefits. West Texas Intermediate crude plunged to $99.80 a barrel, raising hopes that the soaring price of gasoline had finally peaked.
Thursday was the first time oil had closed below $100 since mid-March.
"If these price levels stick, it's great news for the consumer and it could mean we've seen the highs for 2011," said Peter Beutel, president of energy risk manager Cameron Hanover. "There's a 20% to 25% chance we've seen the high for the year."
But Beutel and others said it was unclear whether the sell-off was more than a blip. Gas prices at the pump rose for 44 straight days until Friday, when they stayed basically flat at $3.984 a gallon on average, according to AAA. That's more than $1.05 higher than a year ago.
"Clearly, the falling price of crude oil is good news, although it's too early to say that we've turned the tide," says Nigel Gault, chief economist for IHS Global Insight. "If this sticks, it's worth about 20 cents off the price at the pump."
Even if crude oil prices stabilized at Thursday's levels, consumers wouldn't see any immediate effect.
"Crude would have to stay around $100 for five to 10 days before we see gas prices come down," says Darin Newsom, senior analyst at energy trader DTN. He expects seasonal demand to lift prices to as much as $4.20 a gallon, surpassing July 2008's $4.11 record.
"Maybe (Thursday's sell-off ) puts the brakes on the big increases we've been seeing. We'll hold here for a while until the market figures out what signals (traders) were giving us today," Newsom says.
Thursday's plunge was part of a broader selloff of silver, gold and other commodities, which also pushed prices down on Wall Street. The dollar also rose, which helped push oil prices lower.
All that changed Friday, when the April jobs report raised the prospect of a steady U.S. economy.
Anthony Sabino, a former energy industry executive who teaches business at St. John's University in New York, expects little relief soon, with gas prices ranging from $4.10 to $4.25 through Labor Day.
"We may be near the peak with respect to prices," Sabino says, "but there's no great wave of relief for consumers."
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