Oil Continues Retreat, Spurring Stock Market
The stock market is rallying on the heels of falling oil prices, which are at their lowest levels since the beginning of May. Despite the conflict that erupted between Russia and Georgia that threatens oil pipelines, oil continues it’s free fall, retreating nearly $35 from it’s July high.
“It’s become clear that demand is cratering, which is making it hard to rally,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “It’s hard to imagine that the market will shrug off the potential loss of 1 million barrels a day of pretty good quality crude but that appears to be the case.”
Oil producers have long stated that the natural price of oil should be around the $80 a barrel mark. Heavy speculation and a falling dollar pushed oil above $100 at the start of the year and close to $150 by mid July.
Demand is falling across the globe so unless there are significant disruptions to supply, the price of oil could continue to fall. There is no question that oil is the leader of the commodities market and it’s slide is having a spillover effect on the rest of the market.
Traders are leaving the commodities market in droves and pumping some of that money back into the stock market, fueling a rally that some experts feel could last a few weeks. The bubble is bursting for commodities in general and it looks like the Fed was correct when it predicted that inflation pressures would ease as global demand cooled.
The stock market is taking advantage with it’s largest weekly gain since April. So far, shipping and transportation companies are benefiting the most from falling fuel prices.
