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Oil Prices Fall As Storm Misses Rigs

Storm misses oil rigs, prices sink

By Mark Huffman
ConsumerAffairs.com

July 22, 2008
Maybe now the smart money is on lower oil prices. A barrel of crude, which topped out at $147.27 on July 11, fell more than $5 Tuesday, hitting $126, a six week low.

Analysts say traders sold futures contracts after weather forecasters reported that the tropical storm in the Gulf of Mexico will bypass the oil rigs. It was the damage to rigs caused by Hurricane Katrina in 2005 that began oil's rapid ascent.

Prices began to fall last week, as more and more traders rushed to sell their contracts. There was little in the news to prompt the wave of selling. Congress has talked about limiting speculation in the oil market, but that threat isn't imminent, since lawmakers are about to leave for a month long vacation. Senate action, however, could come this week.

Perhaps prodding oil traders to liquidate their contracts was a sign last week that the falling U.S. dollar may have found a bottom. The dollar has continued a slight strengthening against the euro this week, reducing oil's appeal as a currency hedge.

At any rate, it all comes at a good time for weary motorists, who are paying in excess of $4 a gas nationwide. While the declines have yet to be felt at the pump, many analysts are hopeful they will. Gasoline for August delivery fell more than eleven cents Tuesday, to $3.10 a gallon. That's down from its July 11 high of $3.63. At a retail level, pump prices hit a record $4.12 a gallon on July 17.

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