Yesterday’s plummeting oil prices were stunning — according to Bloomberg Energy News, light sweet crude on NYMEX fell $3.26!!! That’s approximately a 10% drop, in a commodity market where a 3% change is viewed as pretty extreme. Is this the result of uncertainty resolution? Or do traders think that Iraqis will listen to President Bush and not torch the oilfields?
This Houston Chronicle article argues that the price decrease is the result of stripping the war premium out of the market. I recommend reading the entire article, which puts the price increase in a nice historical context, and also points out how much more competitive and better integrated oil markets are than they were 10 years ago. A story on the Marketplace radio show last night made the same point, and I’ll link to the file when it comes online.
But this Forbes article from this morning suggests that there’s still some volatility, with prices in world markets edging up in advance of the New York open.