Transcripts

Oil Prices Suddenly Slide

JEFF YASTINE: A big drop in oil prices today, on a bigger than expected increase in oil supplies. In New York trading, crude futures for March fell $1.27 to $87.14. Driving the sell-off, new data from the U.S. government showing oil and gas inventories rose sharply over the past week. Erika Miller takes a closer look at what that means for the energy prices this spring.

ERIKA MILLER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Stock investors aren't the only ones worried about a recession. The energy markets are falling on the same concern. Trader Anthony Grisanti says the big fear is a slowing U.S. economy will reduce demand for energy.

ANTHONY GRISANTI, OIL TRADER, GRZ ENERGY: The market seems to be following the economy right now, where as the stock market comes off, as economic indicators are weaker, crude oil starts coming off. So, the mindset on the floor is to kind of sell the rallies at this point.

MILLER: Fears of falling energy demand were reinforced today by inventory data from the Energy Department. Crude supplies climbed by seven million barrels last week, roughly triple the increase expected. Gasoline and distillate stockpiles also rose. Analyst Antoine Half predicts energy supplies will continue to climb this year, pushing prices lower.

ANTOINE HALFF, HEAD OF ENERGY RESEARCH, NEWEDGE: There is more supply coming in from Saudi Arabia. There's more projects due to come on stream within OPEC and from non-OPEC suppliers as well and that should ease things.

MILLER: There could be significant easing at the gasoline pump as well. Triple-A says recession fears could drive gasoline prices down $0.50 a gallon by the spring. But there are still some wildcards that could push energy prices back to record levels, including a flare up in political tensions between the U.S. and Iran.

HALFF: Those concerns have kind of eased and faded away. They could come back and should they come back, then the price would probably respond quite strongly.

MILLER: Another unknown is whether OPEC will change its quota levels at the March 5th meeting. Some member nations are pushing for a cut in production. But others want to increase output to capitalize on high oil prices while they last. Energy prices are expected to continue to take their cue from economic data in coming weeks. Traders say they're not just worried about a slowdown in the U.S., but world economies as well. Erika Miller, NIGHTLY BUSINESS REPORT, New York.