WASHINGTON -- The price of oil sank by more than $2 a barrel yesterday, settling at its lowest level in a year as traders focused on the bearish aspects of conflicting market trends. OPEC is cutting output, but the U S economy is slowing; winter is near, but the country has an abundance of home heating fuels.
These mixed signals help explain why crude futures have settled in a range roughly between $57 and $61 since the beginning of October.
The retail price of gasoline, which fell sharply at the end of summer, has also stabilized in recent weeks. Nationwide, pump prices average $2.23 a gallon, or six cents below year-ago levels.
Even as oil prices fell through the low end of that range yesterday, many analysts remain bullish in their outlooks, citing concerns about instability in Nigeria and Iraq, a recent drop in U S refinery output, and trading patterns that suggest the market is preparing for a late-year upswing.
But Michael Guido, Societe Generale's director of commodity strategy, said traders are no longer responding to the kind of geopolitical news that once reliably sparked buying, including frequent kidnappings of oil workers in Nigeria and threats by Iran to pursue its nuclear program .
"Too much money has been lost on what-if scenarios," Guido said, and that has pushed many institutional investors to the sidelines of the energy market.
Light sweet crude for December delivery fell $2.50 to settle at $56.26 a barrel on the New York Mercantile Exchange -- the lowest settlement since Nov. 18, 2005.