In general stocks were down today on Wall Street, as soaring oil prices have investors worried about how the skyrocketing costs will affect the beleaguered consumer. Oil went over $119 per barrel, and has showed no real signs of a slowdown as the summer driving season has arrived.
“We’ve melted here, but it isn’t a plunge,” chief market analyst at Jefferies & Co. Art Hogan said, “We’re in a day-to-day assessment of how good earnings season is, and right now there’s more bad news than good news — the parade has been less positive than we’ve anticipated.”
Investors are looking closely at every sign from companies about profit, and even the news of several companies coming in around expectations did nothing to inject enthusiasm into the market.
Higher prices seem to indicate that inflation is setting in in earnest, and this leaves a great doubt as to how the Fed will react. With inflation kicking in, it’s very possible that the Fed will not cut interest rates any lower in 2008. Whether that will spell continued doom for the credit market is on everyone’s mind.
More earnings news is expected this week, and all of it will be watched closely by interested parties.
International Energy Agency Cuts Forecast For Oil Demand
Oil just keeps on going up in price, which should cause consumers to buy less. But with something as important as transportation fuel, even a lessening in demand won’t automatically create a price cut. At least that’s what the International Energy Agency seems to be saying.
“Supply growth so far this year has been poor and higher prices are needed to choke off demand to balance the market,” they wrote in their Annual report.
Right now, global demand for oil is 86.8 million barrels barrels per day. But the IEA thinks there will be a contraction in 2008 of 2.5 percent this year to 20.3 million barrels a day.
The Airline Industry has already announced that they would be offering fewer flights, which will reduce oil consumption. Statements from consumer groups and business owners indicate demand for oil could drop even further than expected.
It’s up to investors to decide if the “oil bubble” is about to burst, of if increased demand from India and China for petroleum will continue to push oil prices to unthinkable highs. Energy stocks and funds promise to be very active in the last half of 2008.