Oil Closes Below $59 for First Time in Seven Months
October 3rd, 2006 | by Brian Carr |The price of a barrel of crude oil briefly fell $2.35 today to close at 58.68, the lowest closing price in over seven months. In the last two days, the price of oil has fallen nearly 7%.
Today’s large price drop can be attributed to continued increases in world wide oil and gasoline inventories couple with decreased demand. For example, currently the United State’s crude oil inventories are 5% higher than last year’s levels, while inventories of heating oil are 15% higher than last year’s levels.
Another reason why the price of oil has continued to fall is because members of OPEC have called for oil production cuts (in addition to the already announced cuts by Venezuela and Nigeria) to help stop the dramatic decrease in the price of oil, which is down over 25% since the middle of July.
While this may seem counterintuitive, some analysts are stating that the call for a reduction in oil production has shown OPEC is desperate to maintain the current price level, which is giving new legs to the continued fall in the price of oil.
Thanks to the recent sell off, the average price of a gallon of regular gasoline has fallen to $2.31, which actually $.25 less than at the same time last year.
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