The price of oil dropped to 126 dollars per barrel because of worries that the high prices are reducing the demands from the consumers. In addition, news of a probe being made into the futures trading by the U.S also contributed to the reduction in the price of oil.
Within a week the New York crude fell by five dollars, while the London Brent dropped around four dollars, Oil futures are running low and the after effects of last week's heavy losses can still be felt in the market. Altogether at least eight dollars have been reduced from the peak 135.14 dollars of oil in London and 135.09 dollars of oil in New York.
The anxiety over the record high fuel and energy prices, mainly in the U.S, has helped to pull oil down from the record $135.09 a barrel hit on May 22. The summer driving season has just started in the U.S and the data from several agencies including the U.S. Energy Department and Federal Highway Administration suggest that American consumers are driving less. Additionally, the decisions made by Asian countries like Indonesia and Taiwan, to lower the subsidies on crude oil products, also gave bearish impressions on the market.
Increasing selling pressure occurred when the Commodity Futures Trading Commission made the declaration of conducting an investigation into the possibility of price manipulation in oil futures markets. Along with the declaration the commission also announced the new rules that are designed to encourage transparency in energy futures markets in the U.S. and internationally.
The recent fluctuations in the markets indicate that the market may have peaked. But on the other hand, even with the crude oil peaked off at $135 there are still factors that affect the supply of crude oil to the consumers. The Hurricane season is once of the main factors that can affect the supply of oil.
Tropical Storm Arthur arrived one day before the Atlantic Hurricane season was to start. Even though the storm was weak, it caused Mexico to close two oil exports port. Tropical Storm Arthur was not expected to cause much damage but it can be clearly seen how hurricanes and storms can disrupt oil supply.
Meanwhile investors have various reasons to worry about the supply. Henry Paulson, the U.S. Treasury Secretary, on a trip to the Mideast said that said there is "no quick fix" to the high oil prices as it is a problem of supply and demand. The demand for oil is strong globally but the production capacity has not seen any new growth for some time. At the same time the president of the Organization of Petroleum Exporting Countries again held the weak U.S. dollar, the subprime crisis and market speculation responsible for the escalation in the price of oil.
