Global markets drop after U.S. plunge

[spice756]

I don't understand why oil and gas is going down so much? The world stock is going down and in the US the stock is going down.

But what this has to so with oil and gas I do not know.

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LONDON (CNNMoney.com) -- Global stock indexes fell Tuesday, led by sharp declines in Asia, a day after Wall Street swooned upon confirmation that the U.S. is in a recession.

U.S. futures (http://money.cnn.com/data/premarket/index.html), which offer an indication of how markets will open when trading begins in New York, were slightly higher.
In Europe, major indexes pared losses. Britain's FTSE was down 1.4% in morning trading.

The CAC-40 in France was down 1.2% and Germany's DAX was off about 0.5%
The mood was glum Tuesday after a sharp drop on Wall Street overnight and another fall in commodity prices.

Japan's benchmark Nikkei index sank 6.4%, while the Hang Seng index in Hong Kong tumbled 5.1%. In South Korea, Seoul's KOSPI lost 3.5%.
Australia's All Ordinaries shed 5% after the country's central bank announced it would cut its benchmark interest rate by a full percentage point to 4.25%.

Oil futures fell to their lowest level in three years Tuesday as investors bet the dismal global economic outlook would cut into demand.

U.S. crude for January delivery was down $1.50 to $47.78 a barrel, the lowest since 2005, in electronic trading on the New York Mercantile Exchange.

Wall Street tanked Monday after the National Bureau of Economic Research (NBER) confirmed what many have long believed -- that the U.S. economy is in a recession.

According to the NBER, the official body that calls economic cycles, the U.S. has been in a recession since December 2007 (http://money.cnn.com/2008/12/01/news/economy/recession/index.htm?postversion=2008120117).

The Dow Jones Industrial Average lost 680 points, its fourth-biggest single-session decline on a point basis ever. The decline was 7.7% in percentage terms -- the 12th worst percentage one-day decline ever. It ended at 8,149.

The Standard & Poor's 500 index fell 8.9% Monday, and the Nasdaq composite plunged 9%.

Year-to-date, the Dow is down 38.6% and has lost 42.5% from its record close of 14,164.53 on October 9, 2007.

http://money.cnn.com/2008/12/02/markets/world_markets/?postversion=2008120204

[ckaihatsu]

I don't understand why oil and gas is going down so much? The world stock is going down and in the US the stock is going down.

But what this has to so with oil and gas I do not know.


Please see:


The rolling bubble of speculation most recently made its way through the commodities markets which included supplies of oil. Countries like Venezuela, Russia, and Australia saw windfall revenues as a result, but that period is now over. Oil prices, while still inflated, are returning to more modest levels, which also indicates that the rise in prices was indeed based on speculative movements, and not on a true ballooning in demand, as the article makes out.


Also:


Capitalism is a system that is geared towards conquest -- it pools investments together in order to seek out new territory (markets) to pillage and exploit. Now that the entire world has been pulled into the market system, and most places have industrialized, there's nothing left to do.

At this point all that businesses *can* do is merge -- an intramural activity -- or else sit on their hands. All else is bluster and propaganda...!

All of the money in the world doesn't matter if there are no *markets* left -- because workers' wages have been gutted -- so then there are no *profits* to be made. *Anyone* can find a suit and wear it....

[spice756]

The rolling bubble of speculation most recently made its way through the commodities markets which included supplies of oil. Countries like Venezuela, Russia, and Australia saw windfall revenues as a result, but that period is now over. Oil prices, while still inflated, are returning to more modest levels, which also indicates that the rise in prices was indeed based on speculative movements, and not on a true ballooning in demand, as the article makes out.



What he is saying the oil bubble like the housing bubble was higher than the demad for it.People thought wow there is such a demand for homes and oil they overproduce.The supply was higher than the demad.

The banks for the houing loan thought there was such a demand and price of homes going up so much the banks did not check to see if people can pay off their loan.Now the price homes and oil is going down do to supply is higher than the demand.

[fabiansocialist]

What he is saying the oil bubble like the housing bubble was higher than the demad for it.People thought wow there is such a demand for homes and oil they overproduce.The supply was higher than the demad.

Not only that, but demand itself is falling as factories close down and cash-strapped people use their vehicles less. And every increasingly gloomy prognosis adds to the feeling that demand wil be yet weaker in the months ahead, thus leading to a further drop in both the spot and futures prices.

Incidentally, what you mean to say is that some of the supply was being bought by speculators who were squirrelling it away in the anticipation of higher prices in the future. And this became a self-fulfilling prophecy. That's where the speculative bubble came from.

[Lynx]

Continued growth of China and India and their movement towards a higher energy lifestyle are expected to drive the consumption of oil close to maximum production levels. It is better to follow actual production and consumption levels of oil and other commodities. Price is not always an accurate measure.

[spice756]

It is better to follow actual production and consumption levels of oil and other commodities. Price is not always an accurate measure.

What do you mean here?



Continued growth of China and India and their movement towards a higher energy lifestyle are expected to drive the consumption of oil close to maximum production levels

So it is matter of time than that oil price go back up?

[cyu]

So it is matter of time than that oil price go back up?

If no good replacements are found, then prices will go up until all the oil has basically been used up.

If replacement energy is found, then it's possible that oil will be abandoned altogether, left in the ground (until the next emergency), and prices will go down.




It is better to follow actual production and consumption levels of oil and other commodities. Price is not always an accurate measure.
What do you mean here?

I think what he means is that you have to try to ignore the effect of speculators when making your long-term plans for oil. The herd mentality is strong among speculators, and they (especially the wealthy ones) can drive prices way up or down, far beyond the bounds of rationality. The recent housing bubble is another example of such herd mentality, not to mention the tech-stock bubble a few years back... then there was the famous Tulip bulb bubble - completely ridiculous. Just goes to show that greed makes people stoopid :D

[spice756]

If no good replacements are found, then prices will go up until all the oil has basically been used up.

If replacement energy is found, then it's possible that oil will be abandoned altogether, left in the ground (until the next emergency), and prices will go down.



I think what he means is that you have to try to ignore the effect of speculators when making your long-term plans for oil. The herd mentality is strong among speculators, and they (especially the wealthy ones) can drive prices way up or down, far beyond the bounds of rationality. The recent housing bubble is another example of such herd mentality, not to mention the tech-stock bubble a few years back... then there was the famous Tulip bulb bubble - completely ridiculous. Just goes to show that greed makes people stoopid :D


I was reading that OPEC will like the price of oil to go up.My views they will cut oil production so the price goes up.

[cyu]

I was reading that OPEC will like the price of oil to go up.My views they will cut oil production so the price goes up.

More money going to the OPEC countries is good for the OPEC countries, at least in the short term. However, one danger of high prices for oil is that their customers will start researching alternative energy. Once OPEC sees this as a threat, they will increase oil production again to lower oil prices. This will result in less motivation by others to find alternative energy - and even if they did develop it, oil prices may be so low that it's not cost effective to go into mass production.

Once the alternatives fail, OPEC can start to raise prices again.

In the long run, of course, the oil will run out, and the world may be stuck in a crisis where it was too stupid to plan ahead and develop alternatives. But hey, by then, the people running OPEC and the major oil companies will have already retired with fat wallets (or be dead), so they have little to worry about.