Crude oil fell as low as $66.20 intraday before closing down almost $4 on what reporters said were demand worries. As you know from reading my prior commentary this is simply fund liquidations of anything with value. The entire commodity complex was down sharply not just oil. The futures are getting hit with constant selling pressure with no commodity avoiding the losses.
Crude prices should be up with OPEC meeting tomorrow to drastically cut production. If it were just an oil story the OPEC meeting and daily comments from members would have provided support. Current production cut numbers making the news call for as much as three million barrels to be taken offline.
Demand is dropping but not at the same rate as oil prices. U.S. drivers used 8.845 million barrels of gasoline per day on average for the four weeks ended Oct-17th according to the EIA. This was a -4.2% drop from the same period in 2007. There is no way in the world that a 387,776 barrel per day drop in U.S. consumption should cause an oil glut that would require another three million barrels of production to be cut by OPEC. Just like the actual oil fundamentals of supply and demand did not produce the spike to $147 the fundamentals are not responsible for the drop to $66 today.
The financial system is undergoing a systemic meltdown. The constant negativity in the news is scaring investors of every kind out of the market. There are no safe havens other than cash. Warren Buffett was in the news today for having lost $9 billion in the market collapse. That kind of news about the most popular investor of our time causes normal investors to withdraw funds from the market and stuff it in their mattress.
Until the funds quit hemorrhaging cash the markets and the commodity sector will continue to move lower. Panics like this typically are overdone and provide excellent buying opportunities. The key is to wait for a bottom to form NOT to try and pick a bottom. Be patient there will be plenty of time to profit when the smoke clears.