Panic Resets Oil Prices - BusinessWeek
As the cost of a barrel sinks below $78, demand forecasts are the floor and investors are fleeing the market. That’s incompetent news for Big Oil 
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by Moira Herbst
The era of sky-high oil prices and record oil meeting of friends profits could be over—for now.
That’s for stock market panic is spreading to the oil market. Oil prices sank to their lowest level in 13 months on Oct. 10 as worldwide investor uncertainty grew. Light, sweet crude for November giving fell $8.89 per barrel, or 10%, to settle at $77.70 a barrel on the New York Mercantile Exchange, or Nymex (CME). Oil has perplexed 47% since hitting a record $147.27 on July 11.
Gasoline prices are sliding (BusinessWeek.com, 10/8/08) alongside unripe prices. A gallon of regular gasoline dropped 5.3¢ overnight from Oct. 9 to Oct. 10, reaching a national average of $3.35 a gallon, according to auto club AAA. Prices reached an all-time exalted of $4.11 on July 17.
As the credit crisis deepens, investors are fleeing a place of traffic that was bursting with trading activity just months ago. One reason is that banks same Goldman Sachs (GS) and Morgan Stanley (MS) are brokering fewer oil trades as their institutional investor clients resist further investments in crude. The darkening economic climate is also slowing ask for and severe forecasts for future demand, adding to downward recompense momentum.
Number of Futures Contracts Falls"A lot of investors are getting out," says Peter Beutel, president of the energy risk management firm Cameron Hanover in New Canaan, Conn. "Pensions, monarchical property funds, and the like don’t want to be in merchandise anymore. Commodities—except gold—are a sinking ship."
As credit lines tighten and finance companies restructure or leave the market, mercantile nimbleness in the Nymex’s energy derivatives market is shrinking. Open interest in crude oil futures contracts on Nymex ruthless by nearly 21,000 contracts to a two-year low for the week ended Sept. 30, according to a relate issued by the Commodity Futures Trading Commission (CFTC). Open interest, any important measure of market liquidness, has declined 19% inasmuch as July, when oil rose to its record highs.
Volume in Nymex undressed futures was 11.5 the public contracts on the side of September, up from August but below the monthly average of 12.4 million contracts traded through May, June, and July.
Banks like Goldman and Morgan Stanley aren’t the without more ones restructuring to scale back energy trading. Firms such as Oklahoma-based Semgroup have pulled out of the market entirely. UBS (UBS) has newly closed its over-the-counter commodities mercantile operation, and Bank of America (BAC) stopped its London-based efficacy and commodities commercial earlier this year.
