More stock market carnage on Wednesday, with the Dow Jones industrial average dropping 390 points or 3.5 per cent in mid-morning trading – wiping out much of Tuesday's afternoon rally. But crude oil continues to show some strength.
Oil futures were recently spotted at $81.18 (U.S.) a barrel, up $1.88. That, admittedly, is a modest bounce following a 30.5 per cent slide since the beginning of May, taking it to a 10-month low and putting it firmly within a bear market. The reason for the long slide relates to serious concerns about the global economy, while the modest bounce seems related to one blip of upbeat news: The U.S. Energy Department reported on Wednesday that inventories fell in the period ended last week, versus a forecast for a gain.
Still, there's a lot of grim news bearing down on oil these days. According to Bloomberg News, the International Energy Agency said that threats to the global economic recovery could lead it to cut its forecast for oil demand next year. Right now, the IEA believes that global oil consumption will rise by 1.6 million barrels a day, or 1.8 per cent, in 2012. But if growth stumbles, expect less than half that growth.
However, oil prices might not be reflecting a recession at this point, with Bank of America analysts arguing that $80-a-barrel Brent crude oil represents the recession-threshold. Brent crude is currently trading for about $106 a barrel.
Meanwhile, oil producers have turned down after showing some strength earlier in the day. Suncor Energy Inc. was down 1.6 per cent recently, while Exxon Mobil Corp. fell 3.9 per cent.