Commodity Daily News

Price of Oil Still Dropping as Ike Damages are Assessed

America awoke Sunday morning to a new week after Hurricane Ike passed the Gulf of Mexico as a Category 2 hurricane and slammed into the Texas coastline. Oil prices dropped dramatically during the weekend even though expectations were for the worst. It seems that damage to the area's oil refineries was limited. However, it's too early to estimate the exact damage and how much these oil companies will continue to produce in the short term. It has been nearly three weeks since the refineries shut down, delaying Crude Oil production by nearly 4.8 million barrels a day. After speculation and demand stabilize themselves in the wake of Hurricane Ike, prices continue to drop steadily and are now being traded for less than 100$ as of this morning.

As many analysts expected Crude Oil prices to rise, given the ongoing debate about market supply, the opposite still seems to be occurring. Of the many possible reasons for this laid out in Friday's analysis, another potential reason could be the U.S. Energy Department's announcement yesterday that they are willing to loan 200,000 barrels of oil from the Strategic Petroleum Reserve (SPR). The SPR is a government-controlled reservoir organization for Crude Oil as they are holding nearly 700 million barrels. In addition, demand for Crude Oil has weakened by the help of the sluggish global economy. It seems that more and more oil users fear rising prices and job security, causing them to cut expenses on gasoline. However, prices will fluctuate within the next few days as traders will try to estimate the damage to the oil refineries, and price might go volatile with the release of that information later this week.