The recent ongoing rollercoaster ride of the price of crude oil continued as it dropped on its newest big dipper on Friday, down by more than $6.59, (5.4%), to $114.59 - the biggest one-day slide in the price of a barrel since December 2004.
The drop was a result of a renaissance in the strength of the US dollar, which encourage the sell-off; applying direct pressure across the commodities market by weakening the purchasing power of buyers using other currencies.
Concerns over Russia’s conflict with Georgia also eased on Friday, after reports that Russia said its remaining pullback from Georgian territories was as good as complete, helping quash fears of a potential supply crisis.
Rick Mueller, the director of oil markets at Energy Security Analysis, in Wakefield, Massachusetts, said: “It is harder to tell whether the dollar is shifting oil or the opposite.
“It's obvious that there is a relationship and that they intensify the moves of each other,” he added.
The cut has seen the weekly commodities price finish at a mere gain of 0.6%, after appearing to finishing at a substantial gain, just a few days before. London Brent crude also fell $6.24 to $113.92 a barrel.
The decline for the session was, according to Neal Ryan, a managing partner and owner at Ryan Oil & Gas Partners: “A surprise, but not unbelievable.”
It adds to a more than 20% fall in the price of crude sine mid-July, which will surely help feed speculation that OPEC will cut production official limits after the group meets at their Vienna base on September 9.
“As long as we hold $110, it doesn't mean much in the grand scheme,” added Mr Ryan.
Friday’s declines were encouraged by two reports: one showing an increase in OPEC crude oil output, and another showing an expected decline in US travel over the September 1 Labor Day holiday weekend as consumers remain hesitant of digging into their coffers to meet high fuel prices.
The strength in the dollar also pressured other commodities. Gold lost 0.7%. Silver fell 1.8%. Corn prices shed 1.8%.
The Reuters/Jefferies CRB Index, a benchmark gauging the prices of the major commodities, lost 2.5%. But, the index had already climbed by nearly 4% on Thursday, and traded an overall 3.6% higher for the week, prompting many traders to question whether commodity prices have bottomed.
Phil Flynn, a vice president of Alaron Trading: “It is all about oil-perceived value against a backdrop of uncertainty and a world and economic system gone wild.”
