Amid Uncertainty, Oil Prices Surge
MICHELE NORRIS, host:
From NPR News, this is All Things Considered. I'm Michele Norris.
MELISSA BLOCK, host:
And I'm Melissa Block. Today's stocks went down, while oil shot up, way up. The Dow tumbled more than 370 points today, but the far bigger move came in the oil futures market. At one point, the price of crude was up more than 25 dollars a barrel. It fell back by the end of the day, but it still logged the biggest one-day jump on record. NPR's Scott Horsley explains what's behind the numbers.
SCOTT HORSLEY: Crude oil prices have now jumped by about 30 dollars a barrel in less than a week, but some of today's price jump could be a little misleading. This is the day when oil traders have to make good on their promises to buy or sell oil for October delivery, and as that deadline approached, traders who had been holding out for a lower price were forced to rush in and buy. John Kingston, who tracks oil for the industry publisher Platts, says that panic buying helped send prices climbing above $120 a barrel, higher than they otherwise would have been.
Mr. JOHN KINGSTON (Tracker, Oil Industry Publisher, Platts): The world economy is not going to be paying $120, just a couple of traders who got themselves caught on the wrong side of the trade.
HORSLEY: Indeed, you can still buy a barrel of oil for November delivery for less than $110 a barrel, or about $10 below the October price. That's still a sizable jump from a week ago when oil was trading in the low 90s. Kingston notes that oil production in the Gulf of Mexico is still largely shut down in the wake of Hurricanes Gustav and Ike.
Mr. KINGSTON: This is going to cause some tightening. That doesn't necessarily mean we're going up to $140. But I think everybody got a little bit too giddy in thinking that we were headed down to 80 or 85 dollars, even as we lost a significant chunk of U.S. and world output.
HORSLEY: Some investors have also been buying oil as a hedge against the falling dollar, which has been pushed down by the prospect of the government's $700 billion financial rescue. Even if that rescue happens, though, Kingston thinks over the long run, oil prices will take a hit. If the financial turmoil slows the economy, as seems likely, that will ultimately mean less demand for oil, and that should translate to lower oil prices. Scott Horsley, NPR News.
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