July 19, 2008 in Business

Oil prices take big tumble

Analysts unsure whether energy bubble has burst
By ADAM SCHRECK Associated Press
 

NEW YORK – A stunning sell-off dragged oil prices to their biggest weekly drop ever and gas at the pump slipped by more than it has in months, giving consumers a rare breather in a year of record fuel prices.

The national average for a gallon of regular fell by the most since February, AAA data show, and could ease further in the days to come.

So is it time to declare the energy bubble popped?

Experts won’t go that far just yet.

“It’s too early to say we’ve seen the worst of it,” said Tom Kloza, publisher and chief oil analyst of the Oil Price Information Service in Wall, N.J. “We would be Pollyannaish if we believe one week represents a trend.”

Still, industry experts, who just days ago thought there was more juice left in oil’s meteoric run, are reconsidering.

“If this is not the bubble’s implosion, then it’s a reasonable facsimile,” analyst and trader Stephen Schork said in his daily market commentary. “Time will tell. Nevertheless, for the time being we no longer care to hold a bullish view.”

Some analysts said a nationwide average of $4 or even lower could be in the offing – almost unthinkable in a summer when there has seemed to be no relief at the pump – although they cautioned that there is no guarantee prices will stay low.

“We’re going to see some relief from that relentless march higher,” Kloza said.

Some bold traders used the week’s pullback in oil prices as a chance to buy barrels that suddenly seemed to be on sale. But oil analysts were advising investors to beware.

“Buying here is an opportunity if you are a deep believer in $200 (a barrel), otherwise we think that caution would be better applied,” analyst Olivier Jakob of Petromatrix in Switzerland said in a research note.

If oil buyers sense that the slide was overdone, you’ll probably notice at the pump quickly.

“If (oil prices) rebound, you’re going to see a quick reaction at the gas station, because their profit margins are so stretched,” AAA spokesman Geoff Sundstrom said. “They may be very fast bringing prices back up.”

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