Oil Price Prediction

Oil prices fall dramatically

Oil plunged 5% today, crashing below technical support levels as the reduction of the top-tier US credit rating hammered markets and stoked concerns of an economic slowdown.

Brent crude broke through the 200-day moving average after shedding nearly $US13 a barrel since the start of August in the first session since Standard & Poor's cut the AAA US credit rating.

"In the tumultuous aftermath of the US downgrade from S&P, the world also is downgrading the oil market," said Phil Flynn, analyst at PFGBest Research in Chicago.

Trading volumes spiked as the oil sell-off accelerated late in the day, triggered by a rapid drop in stock markets that sent the S&P 500 Index down 6%, the biggest daily drop since late 2008.

Brent crude dropped $US5.63 to settle at $US103.74 a barrel, substantially below the 200-day moving average of $US106.89 that it had managed to settle above on Friday.

US crude traded down $US5.57 to settle at $US81.31 a barrel, the lowest close since November 23. It then dropped as low as $US80.17 a barrel in post settlement activity.

"We're watching the $US80 area (for US oil) after taking out the morning lows, and the 1,100 area for the S&P 500, but there is so much uncertainty and fear about a double-dip recession that it's hard to say we'll find any support at those levels," said Gene McGillian, analyst for Tradition Energy in Stamford, Connecticut.

US crude trading volumes were nearly 30% over the 30-day average in late afternoon activity, while Brent volumes were 23% over that average.

Investors again flocked to gold as a safe haven, sending prices to a record over $US1,700 an ounce, while selling off other commodities including grains and copper.

The 30-year US Treasury bond's price jumped more than 3 points.

The S&P downgrade added to concern about energy demand in the world's top oil consumer. US gasoline demand for July fell to the lowest level since 2003, according to data from the US Energy Information Administration.

"Investors are looking at the weakness in the stock market as it signals that oil demand will be hurt," said Joe Posillico, broker for MF Global in New York City.

Oil company shares were slightly weaker than crude futures, with the CBOE Oil Companies Index shedding 6.30%, led by declines in EOG Resources, Apache Corp and Chevron Corp.

Analysts warned oil prices could fall further if a second recession takes hold, but both Merrill Lynch and Goldman Sachs maintained their 2012 price forecasts.

Crude oil price outlook and spot oil daily forecast for 8 August ...

There are still concerns over the markets’ reaction to the news that came over the weekend of Standard and Poor’s downgrading the US credit rating ; currently the markets in the US demonstrate falls (as expected). In Europe, ECB is likely to purchase Italian and Spanish bonds in an attempt to cool down the markets’ anxiety . In any case, the oil prices continue to show sharp falls. Today, the Chinese inflation rate for July will be published. crude oil price (WTI) bounced back from the sharp falls on Thursday and inclined by 0.29% to $86.88/b; this is after for five consecutive business days crude oil prices were traded down.