Top > Business > 2007 > January > 2007-01-19

Price of Oil: Lowest in Price in over a Year

The price of oil dipped bellow the $55-a-barrel price, on Friday, continuing the trend, which has lowered the price of oil by 9% in the past few days. The current price is the lowest oil has been in the past 18 moths, due to the growth in oil and fuel reserves and the high season temperatures enjoyed in the United States. Peter Beutel of energy consultancy Cameron Hanover described the situation in his daily note as such: "It now seems that we might get some colder weather after January 20th, but some are wondering if that could be too little, too late."

The convenient temperatures in the North-Eastern United States, the world`s largest heating market have drastically reduced the global demand for oil, thus reducing the price of oil in the latter part of December. Information released by the United States government indicates that US reserves are growing processed oil reserves have grown by 2 million barrels, during last week. Fuel reserves have grown by 5.6 million barrels, after the government expected a 1.5 million barrel reserve. On the other hand, US crude oil reserves have shrunk by 1.3 million barrels.

The sharp drop in oil prices has raised speculation in recent days that hedge funds may be sustaining heavy losses due to oil options, similar to the unsuccessful gamble with natural gas, which caused the collapse of the hedge fund Amaranth, in 2006. In recent years, the price of oil has become increasingly important in determining the price of oil, forecasts of higher than normal temperatures drive the price of oil up.