(EnergyAsia, July 26 2010, Monday) — Oil market summary for week of July 19 to 23, by Darrell Delamaide for OilPrice.com.
Prices of crude oil futures slumped below $79 a barrel on Friday July 23 despite a stock market rally and the rise of Tropical Storm Bonnie in the Gulf of Mexico.
The downward turn followed a sharp gain Thursday amid positive corporate earnings reports that some saw as a signal of economic recovery and the brewing tropical storm.
Technical analysts noted that oil prices have encountered resistance as they approach the $80 a barrel threshold. There appears to be little momentum for breaking through that barrier, they said. Other analysts said that market fundamentals were failing to provide any “guidance” for prices.
The reaction of markets Friday to the report from European regulators that only seven out of 91 banks subjected to a “stress test” would need to add capital, and only a modest amount slightly under $5 billion, was mixed. Some participants expressed relief that the exercise was over while others were skeptical that the tests had been stressful enough to be meaningful.
The euro regained ground against the dollar after a slight dip when the stress test results came out.
The benchmark West Texas Intermediate contract settled at $78.98 a barrel on Friday, after surging to $79.30 on Thursday. It finished last week at $76.01 a barrel.
Oil prices had been tracking the stock market fairly consistently the past few weeks, so analysts were surprised that oil futures parted ways with stocks. The Dow Jones Industrial Average closed up 102 points Friday, at 10,424.62 points, gaining 3.2% on the week.
The threat of disruption of production in the Gulf of Mexico from the advent of a new tropical storm, which should have been bullish for oil prices, also failed to halt the decline on Friday. Weather forecasters predicted Bonnie would not reach hurricane force before making landfall on Sunday.
Earlier in the week, an unexpected increase in oil inventories and a gloomy economic forecast from Federal Reserve chairman Ben Bernanke cut short an incipient rally, with prices surging above $78 a barrel on Wednesday before closing below $77.
“The economic outlook remains unusually uncertain,” Bernanke said in congressional testimony. The Fed is ready to jump either way, he indicated, depending on whether the economy shows signs of a more robust recovery or a renewed slide into negative growth.