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Crude Oil Follows Euro Lower

Commodities / Crude Oil May 07, 2010 - 06:37 PM GMT

By: LiveCharts


Crude oil prices have been sinking this week with the plunge in the Euro resulting from serious concerns over the credit worthiness of major European economies including Greece, Spain, and most recently, Portugal.

One barrel of crude oil fell $1.88 to $75.23 in mid-day New York Mercantile Exchange trade Friday (May 7).  This is quite remarkable considering just Monday oil prices were at an 18 month high near $87 per barrel.

There have been a number of catalysts affecting oil this week.  Despite a huge British Petroleum spill, the pressure on oil has been overwhelming with the fall of the Euro and Pound against the greenback.

Just today, Germany elected to offer support for Greece which is in extremely poor economic condition.  Spain has had troubles and just this week, Moody’s has announced it plans to review the debt rating of Portugal for a possible one to two notch reduction on its bond rating.

It has been a peculiar week for the global marketplace, which makes a $12 drop in oil prices pale by comparison.  The Dow Jones Industrial Average saw its largest single intraday loss ever Thursday when it fell nearly 1,000 points in late day trade. 

While various reasons have been discussed, it appears as though fear about the spread of the European credit crisis and an overwhelming number of stop orders triggered the sharp fell.  A quick replacement left the Dow deficit at a more modest 335 points by the day’s end.

The Euro is headed for a major test of support at $1.25.  Many analysts have said that oil prices have been inflated for months and there is no justification for $80-plus prices.  A break of $1.25 in the Euro could lead to a steeper drop, likely to coincide with a sharper fall in oil prices.

The good news for American consumers is that gas prices are being held in check as the normally busy summer driving season approaches.  The national average price for a gallon of unleaded gas was $2.92 Friday.  This is still much higher than at the same time last year.  But, a drop below $2.70 would put gasoline below its same price from June 2009.

Neil Kokemuller

Neil Kokemuller is an Associate Professor of Marketing at Des Moines Area Community College in Des Moines, Iowa, USA. He has a MBA from Iowa State University. He is also in house stock market commentator at Live Charts UK, where you can find real time charts and share prices .

Copyright © 2010 Live Charts

Please note: The information provided in this article is intended for informational and entertainment purposes, and not as advice for financial decisions or investments. Actions taken on the basis of the information shared is at the sole risk and discretion of the individual. Currency investment poses significant risk of loss.

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