Recession fear sends oil plummeting

Crude oil prices fell on Thursday following the terrorist bombings in London

Crude oil prices fell on Thursday following the terrorist bombings in London, according to Bloomberg news service. After reaching a record $62.10 a barrel in New York, oil prices dropped as much as $4.08. It was the biggest price swing in 14 years.

“My initial reaction was like everyone else’s in which we typically view a terrorist attack as something that would move prices higher because it adds to fears,” Doug MacIntyre, senior oil market analyst for the U.S. Energy Information Administration told Fleet Owner. “However, the market interpreted [the attack] instead as more akin to the aftermath of 9/11, that is, it would drive economies down and oil demand lower. Following 9/11 we saw a dramatic drop in economic activity, which pushed down crude oil prices.”

West Texas Intermediate crude oil prices on Nov. 15, 2001 closed at $17.50 per barrel, marking a 37% drop from the Sept. 11 closing price of $27.65.

“England is one of the top consuming countries and any attack on a major consuming country may solicit the same type of reaction,” said MacIntyre. “And again the question this brings up is how might this impact people traveling to Europe. But it took only hours to see the market reaction as an overreaction. Prices actually went above the Wednesday close yesterday before settling slightly below Wednesday closing prices. The initial reaction was that demand is in for another post-9/11 recession and then the market quickly discounted that.”

Thursday’s oil prices reached their peak at about 5 a.m. New York time amid concern that Hurricane Dennis will reach the Gulf of Mexico and disrupt production as Hurricane Ivan did last September. A report showing rising U.S. supplies of distillate fuels, a category that includes heating oil and diesel, also helped to push prices lower.

Crude oil for August delivery fell 55 cents, or 0.9 percent, to close Thursday at $60.73 a barrel on the New York Mercantile Exchange. Oil is up 55 percent over all from a year ago, however.

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