Oil Market Summary from: 05/10/2010 to 05/14/2010
Crude oil prices plunged nearly 4% on Friday and were off almost 20% from their 18-month high less than two weeks ago, as the euro continued to lose ground against the dollar and U.S. oil inventories continued to build.
The benchmark West Texas Intermediate contract settled at $71.61 a barrel on Friday, down $2.79 on the day, compared with $75.11 a week earlier, and the lowest price in three months. Oil prices hit an 18-month high of $87.15 on May 3.
The euro on Friday reached its lowest point against the dollar since October 2008, falling below $1.24 from just above $1.25 on the previous day. As the dollar strengthens, it puts downward pressure on oil prices.
Oil futures fell below $71 a barrel in intraday trading, and analysts now feel that prices may test the $70 threshold. OPEC has repeatedly said it would like oil prices to stay in a range of $70 to $80 a barrel, and the oil cartel might be prompted to cut production if prices fell below $70.
The buildup of inventories continued to weigh on the Nymex contract. The European benchmark, ICE's Brent crude, which normally trades at a discount to WTI, settled at $77.18 on Friday.
The weekly inventory report from the U.S. Energy Information Administration on Wednesday showed an increase of 1.95 million barrels in oil stocks. In Cushing, Okla., the delivery point for Nymex crude, inventories rose by 784,000 barrels to a record 37 million barrels.
The oil price decline on Friday came in spite of an increase in the Reuters/University of Michigan consumer sentiment index for May. The index rose to 73.3 from 72.2 in April, indicating a possible pickup in demand.
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