Monday, November 3, 2008

Oil dips as market awaits election

The price of oil was lower Monday, after trading higher overnight, as wary investors pulled back one day before the U.S. presidential election.

Light, sweet crude for December delivery was down $1.34 at $66.47 a barrel. The contract rose $1.85 to settle at $67.81 a barrel Friday.

But Friday's advance did little to offset record losses in October. Crude oil prices fell 32.6% last month, the largest percentage since Nymex trading began in 1983, according to the U.S. Energy Information Administration.

The rally was likely tied to month-end asset allocation, and therefore could take place again early this week, according to Tom Pawlicki, industry analyst at MF Global in Chicago.

"We also wonder how much of the rally was due to positioning prior to the weekend and prior to the presidential election tomorrow," Pawlicki wrote in a note to investors.

Rising stock prices in Asian markets helped drive the price of oil to a high of $69.19 overnight.

South Korea's KOSPI index closed up 1.4% after the government announced a plan to jolt the economy. The Hang Seng index in Hong Kong finished the session up 2.7%. Markets in Tokyo were closed for a holiday.

European markets were also moderately higher in early trading.

U.S. stock futures were slightly higher, although a comparison to fair value pointed to a mixed open for stocks.

Stocks rallied Friday, ending what was also a very brutal month of losses on Wall Street. In the month, the Dow Jones industrial average lost nearly 1,526 points, the Dow's worst month ever, according to Stock Trader's Almanac info going back to 1901. But on a percentage basis, the decline of 14.1% doesn't rank in the top ten.

Oil investors have been using global stock markets as a gauge for the overall health of the economy. Fears that a weak global economy will undermine demand for crude oil have driven its price down more than 50% from July's all-time high above $147 a barrel.

Meanwhile, retail gas prices fell 2 cents overnight, marking the forty-seventh consecutive day of declines.

The national average price for a gallon of regular gasoline dropped to $2.415 from the previous day's price of $2.436, according to a daily survey by the American Automobile Association.

Over the last forty seven days, gas prices have decreased by $1.44, or 37.4%. Gas prices are down more than 41% since the summer's spike above $4 a gallon.

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