Biggest Fall in Oil Since 2004

by BigT | August 22, 2008 at 06:47 pm

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After worries that growing tensions between Russia and the US over Georgia could degenerate into a war led to higher prices this week there has been a big reversal, a fall in the price of oil of 5.4%. Conversely, the dollar is up.

Crude oil prices fell more than 5.4 percent on Friday in the biggest one-day slide since 2004 as dealers turned their focus to rising supply levels and weakening global demand.
A rebound in the U.S. dollar encouraged the sell-off, applying downward pressure across the commodities markets by weakening the purchasing power of buyers using other currencies, dealers said.

What caused this dropoff?

The declines Friday were encouraged by two reports -- one showing an uptick in OPEC crude oil output and another showing an expected decline in U.S. travel over the September 1 Labor Day holiday weekend as high fuel prices hit consumers.

More supplie coupled with less demand means prices will go down. That's just economics 101 right there. And the threat of war must be perceived as not so great anymore because a war between the US and Russia would be a disaster for the world's economy.