WEEKLY ENERGY REVIEW: Surprise Draw in Crude Stocks Sends Prices Sharply Higher
Oil trades how supply and demand are becoming balanced.
Bryce Knorr
Published: Feb 19, 2009
Soaring energy prices last year caused plenty of hand-wringing, as $4 gasoline caused drivers to finally park their cars and walk. How times have changed. Energy prices soared on Thursday, and there was even a whiff or two of inflation in the air. But that was taken as a good thing.
While investors fear inflation, they fear deflation even more, especially in the midst of severe economic downturns like the current crisis. So markets actually rallied for much of the day after a couple of key government reports. The government said producer prices rose .8% in January, due mostly to increases in energy costs. The jump in the PPI was more than expected, and it was followed by the Weekly Petroleum Inventory report, which showed an unexpected decline. The drawdown was enough to spark a 14% rally in crude oil prices.
Some think rising energy prices — at least a little — are a good thing, because it shows consumers and businesses are venturing back to their normal patterns. Oil traders, meanwhile, hope supply and demand in the sector are finally becoming balanced, after OPEC turned off its free-flowing spigot in recent months.
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