Oil Has Biggest 1-Day Drop In More Than 2 Years

Oil plunged nearly 9 percent to settle below $100 per barrel. Investors who had ridden a months-long rally fled the market Thursday because of concerns about weakening demand for fuel in the U.S.

The decline of $9.44 per barrel, or 8.6 percent, brings the week's loss for oil to $14.13, or 12.4 percent. Other commodities like silver and cotton have plunged as well.

Oil rose 35 percent from mid-February through the end of April. As it climbed above $100, economists warned that high fuel prices were taking a toll on the U.S. economy. Gasoline demand starting falling in March as motorists paid more at the pump; that trend was reinforced by industry and government studies released this week. On Thursday, worries about the job market ahead of Friday's key employment report added to concerns about fuel demand.

"More and more people were saying that oil was just too high," said Michael Lynch, president of Strategic Energy & Economic Research. "That got a lot of investors ready to run for the door. That's what they're doing now."

A higher dollar also contributed to Thursday's sell-off. Benchmark West Texas Intermediate crude for June settled at $99.80 per barrel on the New York Mercantile Exchange. That's the lowest settlement since March 16. Oil last had a one-day percentage decline this big on April 20, 2009. Back then a barrel of oil cost less than half as much as it does now.

Analysts also said the lack of any terrorist retaliation of the killing of Osama bin Laden eased concerns about the safety of the world's oil fields.

Oil and other commodities have been on a roll since around Labor Day, when the Federal Reserve indicated it would take more steps to boost the U.S. economy. The result: lower interest rates and a weaker dollar combined with increased global demand to boost prices for oil, precious and base metals and grains.

This year, uprisings in Libya and the Middle East gave a further lift to energy markets.

This week investors have reversed those bets on commodities and locked in profits.

The plunge in oil may be enough to keep pump prices from reaching a national average of $4 per gallon. Retail gasoline has surged 30 percent this year. It's risen for 44 consecutive days to $3.985 per gallon.

Fred Rozell, retail pricing director at Oil Price Information Service, a private research and consulting firm, said the national average probably won't get to $4 per gallon.

"I wouldn't be surprised if we dropped to about $3.50 by the middle of June," Rozell said.

Expensive fuel bills can crimp customers' spending habits. Earlier in the week, reports from MasterCard SpendingPulse and the Energy Department showed that Americans bought less gas in the final week of April.

On Thursday, some retailers warned that soaring gasoline prices are starting to cut into the spending power of lower-income customers who were already on tight budgets. Also, the government said that the number of people applying for unemployment benefits reached an eight-month high. Distress in the job market depresses gasoline demand, analysts say, because large numbers of Americans drive to work.

"Commuters are the bedrock of gasoline demand," Cameron Hanover analyst Peter Beutel said. When people lose jobs, "you're killing the best part of that demand — the part that will always be there as long as someone has a job."

Companies feel the squeeze of high oil prices as well. Four of the nation's top airlines combined to lose $1 billion in the first quarter, largely because of the high price of jet fuel.

Other energy futures fell sharply as well. Heating oil fell 25.61 cents to settle at $2.8869 per gallon and gasoline futures lost 22.71 cents to settle at $3.0954 per gallon. Natural gas gave up 31.3 cents to settle at $4.331 per 1,000 cubic feet.

In London, Brent crude lost $10.39 to settle at $110.80 per barrel on the ICE Futures exchange.

The U.S. dollar rose strongly against the euro Thursday after the European Central Bank's president declined to signal that interest rates would rise again next month. Oil, which is traded in dollars, tends to fall as the greenback rises and makes crude barrels more expensive for investors holding foreign money.

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  • by Anonymous on May 8, 2011 at 10:18 AM
    From $1.60 to $4.00 a gallon. A Change We Can Believe in!...Sound Familiar?
  • by Larry Location: Chocowinity on May 6, 2011 at 07:58 PM
    Why won't Obama let us drill for our own oil off the east & west coast? It is crazy not too! It is just stupid.
    • reply
      by voter on May 7, 2011 at 06:59 AM in reply to Larry
      larry, you answered your own question. also, why is there a dept of energy? created under carter, in the 70's, to find solutions to prevent a recurrence of the oil shortage scam. another pointless big govt. entity.
  • by Solution? Location: enc on May 6, 2011 at 04:33 PM
    What solution to the energy problem was given in the outstanding GOP debate last night? LOL!!!
    • reply
      by Anonymous on May 7, 2011 at 09:39 AM in reply to Solution?
      obviously you didn't watch the debate. Solutions were given bozo
  • by pete Location: grifton on May 6, 2011 at 03:00 PM
    Shell oil spent over 4.5 billion to start drilling at prudhome bay Alaska and was shut down by the EPA because an eskimo tribe lived near by(70 miles away,200 strong in a one square mile area)now it's time to disband the EPA and the rest of those anti-drill loonie's.we have more oil in south dakoda(black hill's,guess where the name comes from?)north dakoda and minn than the whole middle east.OH! and none of it is in the ocean's.OH! Joe Biden is the only living senator who voted agains't the Alaska pipeline.
  • by Obama Snake Oil Co Location: Washington on May 6, 2011 at 01:28 PM
    Grumpy, funny, the date was 12/19/08 when it was $1.61 at the end of the Bush term. In April he announced drilling in Anwar; http://uk.reuters.com/article/2008/04/29/us-bush-oil-anwr-idUKN2934033020080429 Note, the article says it wouldn't do any good as it would take years but look at what happened. The hedgerow fund speculators lost their....hmm..hmmm..prices fell back down and were handed to Obama...then the slow rise...going up and up till now. We will see them come down eventually if we propose drilling again, for now, we are at the mercy of Obamas moritorium.
    • reply
      by Anonymous on May 6, 2011 at 04:20 PM in reply to Obama Snake Oil Co
      GOP votes to Maintain Big Oil Subsidies.... http://www.americanprogressaction.org/issues/2011/05/pdf/oil_subsidies.pdf
      • reply
        by agree with anonymous on May 6, 2011 at 09:16 PM in reply to
        Why not? They are also trying to weaken the Consumer Protection Bureau! Let the banks do it again!
      • reply
        by Anonymous on May 7, 2011 at 09:41 AM in reply to
        you can't believe anything from that left wing liberal web site. get a life and research some independent sources.
        • reply
          by Anonymous on May 7, 2011 at 05:49 PM in reply to
          FYI. Multiple sources have confirmed this to be factual.
    • reply
      by W hat ? on May 7, 2011 at 05:51 PM in reply to Obama Snake Oil Co
      There are no free market forces in the OPEC controlled price of foreign oil... it's a cartel... it's price fixing. The fluctuation of oil prices is purely caused by the commodities market where the speculators jack the price of oil. There is no oil shortage, the price is rising due to oil speculation. I can't believe you would credit Bush for the drop in Oil prices in 2008, it's absolutely ridiculous.
    • reply
      by osoc lies again on May 7, 2011 at 05:58 PM in reply to Obama Snake Oil Co
      Nice try Obama Sneeky Oil, however as usual you are wrong again. The price of Oil (gasoline) came tumbling down because the demand for Oil came tumbling down. Why! Oh yeah, the World economy came tumbling down combined with the draw down of America's forces in Iraq. It was conservation which brought down the price of oil, all be it force conservation, because of a collapsing economy; but conservation none the less. Why is the the price of Oil on the rise, because OPEC cut back on Oil production to increase the price, combined with turmoil in the Middle East, and lets not forget the improving economy. Simply put supply and demand. If the United States increasing the world Oil supply, by drill baby drill, then OPEC will just lower their Oil productions. Unless you think Big Government should force U.S. Oil companies to sell all their Oil production to the United States at a fix price having the United States increase Oil production won't change a thing.
  • by Grumpy Location: Outerbanks on May 6, 2011 at 11:31 AM
    This link is a chart that shows the average gas price for the past six years compliments of Gasbuddy.com. http://gasbuddy.com/gb_retail_price_chart.aspx The highest price was $4.12 a gallon in July 2008. The amazing thing is the drop that followed. Down to $1.61 in just 6 months. Also kind of odd is the patterns- very up and down on the upward trend during Bush, more smoothly up during Obama. Both Up and Up and Up.
    • reply
      by JMM on May 6, 2011 at 01:53 PM in reply to Grumpy
      Grumpy, dont be so disillusioned. Right now, the speculators control the prices and drive the cost. Remember back in 2001, gas was under $1? Now, with global threats, economic uncertainty, as well as the attitudes of Americans when it come to consumption, the manipulators (speculators) prey on the fact that Pres. Obama will bring integrity to these organizations. So, they grab all they can, while they can. When the Democrats push the issue of regulation, or eliminating the tax exemption these organizations currently have, that is when the market panics, and "suddenly" the barrel price drops. We are being played for fools. They know that the average American will not resort to alternative energy, alternative travel, or public transportation. Why should we. We celebrate out freedom to come and go as we please. However, because they know that the majority will say "Well, I need to get to work. I need to drive everywhere, etc..." But we will not significantly alter our lifestyles to adjust. That is why prices in Europe are even higher. They will alter their lifestyles to refuse to purchase "petrol." They have other options as well. Win the lightbulb goes off for Americans, we will then see the difference. I hate that its this way, but we spoiled those a-holes. The President cant change the conditions placed on gas, but they can influence the BS politics that go along with speculation.
      • reply
        by clint on May 6, 2011 at 04:33 PM in reply to JMM
        Disillusioned you are sir. Gas under $1 in 2001? Gas hasn't been under a dollar since I was in High School."in my 50s now" We have no viable alternative at present. Drill here and drill now! It will reduce prices and create many good jobs. Build some dang refineries too! Will also reduce prices and create jobs. When the new stuff becomes feasible put it online. There is no currently feasible alternative to gasoline. Obama needs to get off his no oil kick. "One and Done" I say!!! Quit gloating on the Osama kill and get to the economy stupid!! I fully agree with your last sentence. Obama can quit politickin with it and turn the oil companies loose in Alaska, the Gulf, off NC coast etc. It would make a huge difference. Just do it!!!
        • reply
          by Anonymous on May 6, 2011 at 05:49 PM in reply to clint
          OPEC controls the flow of oil, if the US drills, OPEC will simply cut back of their supply.
        • reply
          by JMM on May 6, 2011 at 07:04 PM in reply to clint
          Clint, sorry sir, but Im not disillusioned. I distinctively remember paying less than $1 per gallon, because I bought my Ford Expedition in January 2002...oh wait, youre right, it was like $1 and some change. Sorry, youre right sir. I remember whining about paying $60 to fill my truck up, at $2 per gallon. I certainly apologize. But, I dont agree with the whole "Drill Baby Drill" crap. Offshore drilling and drilling in the states will make good use, but we will not see the benefit of it for another 10-15 years. You guys are disillusioned if you think it will make an impact in the next few years.
        • reply
          by To Clint on May 6, 2011 at 09:18 PM in reply to clint
          I see your reasoning, but we can't do both and this has been the arguement for decades and we are still in the same mess. Sooner or later, we have to stop and change! That time is now!
        • reply
          by clint on May 7, 2011 at 03:00 AM in reply to clint
          Without a growing economy we can't develop anything new. Drill now to grow the economy and develop the new stuff. When it becomes feasible then use it. It ain't that hard. It's the economy, get it!
        • reply
          by Anonymous on May 7, 2011 at 09:43 AM in reply to clint
          if America was self sufficent using our OWN OIL, OPEC wouldn't mean anything. They are the Arab moffia. We have oil reserves on our own soil, more than the Arabs have. Drill our own oil !
  • by boxer on May 6, 2011 at 07:59 AM
    Bet the price don't drop at the pump.
    • reply
      by Grumpy on May 6, 2011 at 11:13 AM in reply to boxer
      I heard a report today that said the lag time for a drop at the pumps was normally 3-4 weeks. I could be wrong, but didn't the price of gas during GW Bush drop only after there were threats of investigations on the distribution chain and speculators? Can't remember if they did it or just talked about it-
  • by Barlow Location: Winterville on May 6, 2011 at 07:55 AM
    Gas was over $4 a gallon when Bush was in office. Everyone remembers that. The problem is that the REAL cost of oil is around $60 a barrel. The rest is from what this article demonstrates, traders driving up the price by trading small blocks and then when they have gotten it where they want it, they sell off. And then? It starts all over again. This is why we need regulation.
    • reply
      by factoid on May 6, 2011 at 10:30 AM in reply to Barlow
      When President Obama took office the price of gasoline was $1.80 per gallon.
      • reply
        by Lyman Hill on May 6, 2011 at 12:03 PM in reply to factoid
        Thanks for pointing that out, factiod. In parts of Greenville, it was about $1.55 around November 2008. And now it's at $3.90? You do the math. I heard on the radio the price may drop to around $3.50 around Memorial Day weekend. (Whoop-tee-doo!) And that's a BIG maybe; but I'm from Missouri when it comes to this administration and its promises.
      • reply
        by Tp factoid on May 6, 2011 at 03:52 PM in reply to factoid
        And your point is? It reached $4.00 during the Bush administration too. So, Bush gets credit for the $1.80, but not the blame for the $4.00? The truth is NEITHER president has control over gas prices!! If the government doesn't even have control over safety measures, how can you possibly think they can control price or profit? Why don't you people get with the real solutions and support those in Washington who are trying to do something about this other than just spread lies?
    • reply
      by Anonymous on May 7, 2011 at 09:45 AM in reply to Barlow
      Barlow, if they "sold off" all their holdings the prices would drop back down. Your hypothesis is flawed (as everything you spew) In order for the traders to buy it back, the price has to be lower... you know buy low, sell high ? Keep watching MSNBC my friend.
  • by Mike Location: Edenton on May 6, 2011 at 07:42 AM
    Keep up the pressure! Don't joy ride. Make only 1 trip to the grocery store a week. Carpool. Vacation closer to home. Buy a scooter or electric vehicle for short trips.
    • reply
      by Anonymous on May 6, 2011 at 08:16 AM in reply to Mike
      but I like my Tahoe
    • reply
      by Boats on May 6, 2011 at 09:53 AM in reply to Mike
  • by Why drop? Location: enc on May 6, 2011 at 07:17 AM
    Part of the reason it dropped is because the Democrats have reintroduced a bill to reduce subsidies to these "profit hogs". The traders knew the profits were going to be reported and this bill was coming out. They at least gave the public some credit for realizing who is gauging this country-and it is NOT the teachers, firefighters, and nurses! Get behind this bill!!!
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