After spiking near $115 per barrel earlier this year, oil prices dropped under $100 yesterday in a sell-off that cut nearly $10 per barrel from the price. Friday’s market dropped another 1 percent, closing at $98.80 per barrel. For the week, oil is 10 percent lower.
Traders thought commodities would rebound Friday after the government reported a stronger-than-expected increase of 244,000 jobs to the U.S. economy during April. The report helped the stock market rally Friday, but commodities couldn’t sustain a rally throughout the session.
Analysts continue to believe oil prices will be volatile in the coming months, but most now believe the market has established a near-term top. Traders now think oil will trade in a range from $80 to $104 per barrel throughout 2011.
The stronger U.S. dollar this week also put pressure on oil prices. The dollar gained nearly 2 percent on Thursday after the European Central Bank left interest rates unchanged. Because crude oil prices are priced in dollars, a stronger U.S. currency tends to pressure commodities. The dollare gained another 1 percent against the euro on Friday.
Gasoline prices also declined on Friday for the first time in 44 days. During that time gasoline surged 12 percent. The national average price of gasoline on Friday was quoted at $3.984.
Industry analysts say there is a two-week lag between a drop in oil prices and a drop in gasoline prices at the pump. One analyst estimates that every $1 decline in the price of oil translates into a 2.2 cent crop in gas prices.
One concern about near-term gasoline prices is the fact that many refineries shut down this time of year for maintenance, and begin making cleaner blends of gasoline during the summer. This seasonal maintenance tends to push prices higher.