Traders today have banked on crude oil’s 8-week rally leaving oil prices too high. The crude price sank to nearly $81 a barrel as a result.
Manufacturing slowdowns in the US are a big factor in the drop in crude prices, with many betting the US recovery is slowing, especially amid the reports that the US, the world’s largest consumer of oil, is slumping in manufacturing.
The investment appeal of commodities also took a tarnish as the dollar advanced against the euro today. Many fear that the oil price hike, which reached its highest since April, is indicative that prices rose too far, too fast without enough substance to hold them high.
Crude fell 1 percent for November delivery to hit $80.77 a barrel on the New York Mercantile Exchange on Monday.
The price fall was also helped by the dollar’s advance over the euro, which slipped to $1.3697, a fall of 0.7 percent.
Earlier in the year crude prices rose over speculation that oil demand would increase as China and the US, the world’s two largest consumers, seemed to rally their economies and boost production.
Despite the drop in prices today, oil is expected to rise significantly next year, pushed up by demand from growing economies China, India and Brazil. Analysts expect that crude may average as much as $85 per barrel, compared to this year’s average of $77.70. The forecasts are higher than any year has ever seen, except in 2008 when the median price per barrel was a staggering $99.75.
