MD:Oil rally that began with Libya ends with Europe
The financial crisis in Europe could end a four-month rally in oil markets that began in Libya.
With riots in Greece over proposed austerity measures and three big French banks facing potential losses on Greek bonds, worries are intensifying that Greece's problems could spread to other financially troubled European countries like Spain, Portugal and Ireland.
Ongoing economic troubles in Europe, which consumes about 18 percent of the world's oil, could slow demand for energy.
“Things are very unsettled right now,” Michael Lynch, president of Strategic Energy & Economic Research, said. Three years after the banking meltdown in the U.S., investors remain skittish about banks, Lynch said. “Just a whiff of a crisis, and everyone's ready to bolt.”
Crude oil plunged $4.56, or 4.6 percent, on Wednesday to settle at $94.81 per barrel on the New York Mercantile Exchange. That's the lowest level since late February.
Gasoline prices in the Louisville area continued slippling from $4.11 a month ago to average $3.64 per gallon, according to prices posted at www.courier-journal.com/gas. The national average was $3.70 Wednesday morning, according to AAA.
Oil began a steady rise in February from about $84 a barrel, when unrest swept through Libya and shut down its 1.5 million barrels of daily oil exports, which is less than 2 percent of the world's crude. It continued to climb as anti-government protests broke out in other countries in the oil-rich region and concerns grew that shipments from the biggest oil producer in the world, Saudi Arabia, could be disrupted.
Oil hit a three-month high of $113.90 in early May and then headed down as experts warned high energy costs were slowing the global economic recovery. Gasoline demand in the U.S. fell as pump prices hit $4 a gallon or more in a number of states.
Oil fell on Wednesday despite the Energy Information Administration's report that crude supplies in the U.S. shrank more than expected last week while wholesale gasoline demand increased.
The EIA said gasoline supplies increased last week, though much less than analysts expected. Industry analyst Jim Ritterbusch said the U.S. continues to sit on a comfortable supply and relatively high pump prices should limit drivers' trips to the gas station.
“I just don't see demand improving for gasoline this summer on a sustained basis,” Ritterbusch said.
