Prices of crude oil dropped about 10% yesterday on the NYMEX after the US House of Representatives rejected the Bush administration’s bid for a US$700 billion bailout of the American financial sector called the Emergency Economic Stabilization Act of 2008.
November delivery light sweet crude dropped as much as US$11.85 at one point, finally settling down at US$96.37 a barrel, down US$10.52. In London, Brent North Sea crude for November dropped US$9.56 to settle at US$93.98 per barrel.
It previously spiked 16% (up to US$120.92) partly in anticipation of a positive outcome to the very same bailout bid, and a few other reasons such as the expiry of front-month futures contracts and weakening of the US dollar. At the time of that spike November contract delivery prices were US$109.37. December and January contract prices are now roughly the same as November’s price at US$96.09 and US$96.37 respectively.
“Oil prices should remain under downward pressure. Oil traded for the last five years on fear of supply interruptions. It is now trading on fear of economic collapse,” said WTRG Economics analyst James Williams.
With this new news, are the government going to reduce petrol and diesel prices again? Or will they say it not make a difference to their coffers because of other reasons such as the ringgit weakening against the US dollar?