Price of crude oil drops below US$100
Published: Sep 16, 2008
Global - The price for crude oil plunged to US$95.71 in New York, after Wall Street investment firm Lehman Brothers filed for bankruptcy protection and Bank of America agreed to buy Merrill Lynch, sending shockwaves and rising concerns about the US economy.
New York's light sweet crude ready for delivery in October plummeted a hefty US$5.47 to close at US$95.71 a barrel. Similarly, London's Brent North Sea crude for October delivery tumbled US$5.20 to settle at US$92.38 a barrel.
Financial markets worldwide were left in jitters after Lehman Brothers filed for bankruptcy protection amidst failure to find a buyer. The 158-year-old US investment bank collapsed under losses related to the US sub-prime housing loan crisis and housing market slump.
In conjunction to the Lehman Brother's case, media sources reported that Bank of America has announced the shotgun takeover of Merrill Lynch for US$50 billion in stock options. This is another sign of the deepening housing-related credit crunch as the US economy faces a crisis.
Media sources quoting John Kilduff, analyst at MF Global said, "The filing by Lehman Brothers for bankruptcy protection when no help was forthcoming from the federal government and the takeover of Merrill Lynch by Bank of America are deepening concerns about the global economy and its effect on energy demand".
"The storm surrounding the demise of Lehman Brothers has apparently affected the oil markets much more than Hurricane Ike," said Kilduff.
Previously, US officials said Hurricane Ike damaged about 10 oil platforms in the Gulf of Mexico, as it displaced thousands of people and caused billions of dollars in damages. There were raising concerns that the storm could hurt oil production and lead to a spike in prices at US gas stations.
Eileen Angelico, a spokeswoman with the US Mineral Management Service (MMS) told media sources that officials were only able to make a rough estimate as to the number of damaged platforms.
Since the natural disaster, the price of gasoline has jumped 13.46 cents to US$2.63 a gallon, while prices at petrol kiosks have risen by about a dollar.
Oil refineries in the storm-hit Houston area could be down for eight to nine days due to Ike, which could create possible gas shortages in the region, says Kay Bailey Hutchison, US Senator of Texas.
George W. Bush President of the United Sates has announced that in order to help meet with demand, restrictions on imported gasoline had been suspended.
The government suspended Environmental Protection Agency waivers "on certain reformulated gasoline, which will make it easier for imports from abroad to make it into our markets," said Bush.
Bush continues, "[Officials] will be monitoring the gasoline prices to make sure consumers are not being gouged, to make sure consumers are being treated fairly ".
During intra-day trade on 15 September, prices had fallen as low as US$94.13 in New York and US$91.17 in London, their lowest levels since February. The oil market continues to slide in anticipation of weaker energy demand after crude hit peaks around US$147 a barrel.
- Bank of America
- Lehman Brothers
- Merrill Lynch