Tags: Oil Prices

Oil Jumps on Report Saudi Police Open Fire at Protest

Thursday, 10 Mar 2011 02:02 PM

 

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Oil prices tumbled nearly 3 percent Thursday before recovering on reports that Saudi police opened fire at a rally in the eastern part of the country. Stocks also fell to their lowest level on the day after the report.

Benchmark West Texas Intermediate for April delivery fell below $101 on weak economic news from the U.S. and China, but rallied back quickly after the report from Saudi Arabia to be down just 67 cents at $103.73 per barrel in trading on the New York Mercantile Exchange.

Oil fell as low as $100.62 Thursday morning, the lowest price in a week.

Meanwhile, the Associated Press reported that Saudi police have opened fire at a rally in the kingdom's east in an apparent escalation of efforts to stop planned protests.

Government officials have warned they will take strong action if activists take to the streets after increasing calls for large protests around the oil-rich kingdom to press for democratic reforms.

A witness in the eastern city of Qatif says gunfire and stun grenades were fired at several hundred protesters marching in the city streets Thursday. The witness, speaking on condition of anonymity because he feared government reprisal, said police in the area opened fire. The witness saw at least one protester injured.

The reaction to the Saudi development shows how sensitive the market is at the moment to news from the Middle East. Oil prices soared above $100 per barrel last week as an uprising in Libya essentially shut down the country's exports.

The Dow Jones Industrial Average was down about 193 points at 12,019. The Dow had been down as many as 238 points just after the report, sending it briefly below 12,000.

Earlier in the day, economists were warning that the recent surge in fuel prices will eventually slow economic growth.

The U.S. is consuming more gasoline than a year ago, even though the price has jumped 50 cents per gallon in just three months. But consultants who track spending on gasoline say Americans may finally be pulling back.

Motorists have started to spend less on gasoline than they were spending at the same time last year, according to SpendingPulse, a research firm that tracks retail spending. Consumers were buying more in February, and that trend was supposed to continue toward the summer.

The rapid increase in gas prices "blew through" everyone's comfort level, SpendingPulse Vice President Michael McNamara said. It's unclear how long this will last, but McNamara called it the first real sign that consumers are rearranging their habits to conserve gas.

Economist Michael Lynch said consumers will cut back on driving even more in coming months if oil remains above $100 per barrel. "We're past the point of, 'Oh, it's only going to be up for a few days,'" Lynch said. "I think people are already starting to change their behavior, and they're modifying their vacation plans as we get closer to the summer."

The economic news Thursday helped fuel the earlier oil sell-off. China, which is expected to drive oil demand for years to come, reported overnight that surging oil and commodity prices produced a surprising trade deficit of $7.3 billion for February. And the U.S. Labor Department reported that the number of people seeking unemployment benefits rose last week.

The U.S. dollar also gained against other major currencies. Oil, which is priced in dollars, tends to fall as the greenback rises and makes barrels more expensive for buyers holding foreign currency.

"When you've risen as quickly as we have, there's always going to be a risk of a big drop when you hear stories that say the world isn't as wonderful as you think," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.

Oil company shares dropped as oil fell. Exxon Mobil Corp., Chevron Corp., BP, Total, ConocoPhillips, Occidental Petroleum Corp., and Royal Dutch Shell all fell at least 2 percent.

The oil industry has tried to ease concerns recently, saying the rise in prices was mostly due to speculation and there's still plenty of crude to meet world demand. But investors continue to worry about future supplies. Although Saudi Arabia and other OPEC members have said they will cover any shortfall from Libya, the wave of unrest in North Africa and the Middle East will make it harder to crank up production if another crisis affects shipments elsewhere, traders said.

At the pump, retail gasoline prices added less than a penny on Thursday, rising to s national average of $3.529 per gallon, according to AAA, Wright Express and Oil Price Information Service. A gallon of regular is 41.2 cents more expensive than last month and 76.1 cents higher than the same time last year.

SpendingPulse said that gasoline consumption has dropped in the past week by 1 percent on the West Coast and 1.6 percent in New England when compared to last year's levels. Consumption fell along the Gulf Coast by 0.3 percent.

In London, Brent crude lost 45 cents at $115.49 per barrel.

Natural gas fell 9.8 cents to $3.832 per 1,000 cubic feet after the government said U.S. supplies are still higher than last year despite a drop in price. U.S. inventories have been growing as new technologies allow companies to tap underground shale deposits.

In other Nymex trading for April contracts, heating oil lost about 1 cent to $3.062 per gallon and gasoline fell less than a penny to $3.0284 per gallon.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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