Ample supplies helped send oil prices down to near $85 per barrel on Friday.Benchmark oil for December delivery was down 80 cents to $85.25 a barrel at late afternoon Bangkok time in electronic trading on the New York Mercantile Exchange. Oil hasn't been that low since July 10.
Oil prices hovered around 8-month lows near $80 a barrel Thursday after the U.S. central bank balked at implementing vigorous stimulus measures to boost waning economic growth and U.S. crude stockpiles rose unexpectedly.
Just as fast as gas prices rose, they're now in retreat. Monday's AAA Fuel Report Gage puts the national average of regular at $3.703, down from $3.970 a month ago. Several factors could push gas below $3.50 over the next several weeks, and almost none of them were part of the economic landscape a quarter ago.
With an oversupply of oil on the market and OPEC afraid that higher prices will impair the U.S. recovery and sap demand, the fundamentals point to an oil price drop in the near term. Yes, markets move on emotion, and fears about unrest in Egypt have reversed that downward price trend, but the drop is probably coming.
In OPEC's June report, released today, the oil cartel doesn't see global demand changing much. It's sticking with its 0.9 million barrels per day increase (1.1%) for the remainder of 2010. It notes that demand rose a "marginal" 0.4 mbd in the first quarter, so it's already trending a bit behind its yearly forecast.