Oil Prices... Peak or Pullback?
Wednesday, June 04, 2008SUSIE GHARIB: Crude oil prices continued their slide today and are now down about 10 percent from their record high set two weeks ago. In New York trading, July crude futures closed at $122.30 a barrel, down just over $2. The sell-off came despite mixed news about U.S. energy supplies. The Department of Energy said crude oil stockpiles fell by nearly five million barrels last week, but gasoline and distillate inventories each rose by more than two million barrels. Suzanne Pratt looks at whether the outlook for oil prices is changing.
SUZANNE PRATT, NIGHTLY BUSINESS REPORT CORRESPONDENT: Is this it? Have crude oil prices finally reached a top? As is often the case with commodities markets, the answer depends on who you ask. Oil trader Ray Carbone says prices have not peaked yet.
RAYMOND CARBONE, OIL TRADER, PARAMOUNT OPTIONS: I think this is a pullback. Markets do not go straight up. This is a prime example of it. We've had pullbacks before and we've rallied. I'm looking for a place to buy. I am not a seller here.
PRATT: But Wachovia securities oil expert Bill O'Grady thinks the May high of $135 a barrel was a near-term top because it made American drivers change their behavior.
BILL O'GRADY, CHIEF INVESTMENT STRATEGIST, WACHOVIA SECURITIES: Americans are reacting to this. We've finally reached a price level where Americans, A, believe it's going to be permanent and B, are going to do something about it.
PRATT: According to the Department of Energy, gasoline consumption in the U.S. fell by 1.4 percent in the past four weeks. Those demand concerns, along with a stronger U.S. dollar, have helped knock more than $10 off the price of crude in the last two weeks. And now, there are signs that worldwide consumption may also decline, as India and Malaysia today raised their domestic fuel prices. Still, some experts predict global demand will stay strong no matter happens here in the U.S.
CARBONE: I still think any slowdown in the European market or the U.S. market is going to be snapped up by the emerging markets.
PRATT: Others expect crude prices to remain in a trading range this year and only move significantly higher if outside forces affect supply, such as a hurricane or increased tension in the Middle East.
O'GRADY: I suspect we're going to stay between this $100-$130 level most of this year, bouncing back and forth. And then as the economy picks up later this year, early next year, we will start to see those upper levels challenged again.
PRATT: While crude prices have pulled back some, the price of gasoline is still moving higher. Today, it reached a national average of $3.98 a gallon or about 27 percent higher than a year ago. Suzanne Pratt, NIGHTLY BUSINESS REPORT, New York.
