Wednesday, October 3, 2012

Big Oil Price Decline Today

Oil and copper prices took a big hit today in the markets.

Slowdown in China Saps Oil, Copper Prices summarizes today's market action:

"Prices for energy and copper are falling following the latest signs that China's economy is slowing down.

China, which is a huge importer of basic materials, reported that its services sector expanded at a slower pace in September. Days earlier, the country also reported a slowdown in manufacturing.

Energy prices dropped sharply as a result. Crude oil fell $3.75 to $88.14 per barrel in New York Wednesday. It was the biggest decline since May 4. Other energy futures also fell.

Copper, another commodity that is highly sensitive to changes in China's economy, fell 1.7 cents to $3.7840 a pound. Other metals prices were mostly higher." 

Summing Up

China uses only about 10% of the world's oil supply, so the price action today should be regarded with suspicion.

That said, the U.S. has lots of oil and lots of potential to increase our domestic output and supply.

My best guess is that oil prices will continue to drift lower over time but not necessarily because of the Chinese economy.

Instead it may relate to the strength of the U.S. dollar and steps being planned or actually taken to develop more of our own domestic energy resources.

But whatever the reason for oil prices dropping to $88 today, it's nice to see that commodity prices  are becoming more affordable.

That in turn will help keep more money in the consumer's pocket to be spent elsewhere this holiday season.

Maybe we'll have a reasonably solid Christmas selling season after all. That would be nice.

Thanks. Bob.

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