Oil prices sank more than $2 a barrel for the second straight day on Thursday (May 4), falling below $70 on momentum that started after U.S. government data showed gasoline supplies growing last week, reversing two months of declines.
The Associated Press reported that light, sweet crude for June delivery fell $2.83 to $69.45 a barrel on the New York Mercantile Exchange. Prices had plunged $2.33 Wednesday after the U.S. Energy Department released its weekly report showing a supply rise as refineries boost output and demand flattens.
“It has largely been a technical selloff,” said ABN Amro broker Lee Fader. “Some of the air is coming out of the bubble.”
Gasoline futures tanked by more than 10 cents to $1.985 a gallon, and some analysts say it could be a sign that the highs for gasoline prices in the U.S. are behind us.
“Never underestimate the capability of markets to overreact and shift moods with no stability in between,” said oil analyst Tom Kloza of Oil Price Information Service in Wall, N.J.
While oil is down from its Nymex intraday peak of $75.35 reached April 21, prices remain roughly 40% higher than a year ago and analysts do not expect them to free-fall anytime soon given the high level of geopolitical tensions.
The most pressing source of anxiety in the market stems from the possibility that Iran, a key oil exporter, could cut supplies because of international pressure to modify its nuclear program. Unrest in Nigeria, war in Iraq and rising resource nationalism in South America have added to oil-market worries.
Strong global demand and a limited supply cushion magnify the significance of these events, while a surge of investors betting on oil and other commodities has also lifted prices.