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ONE year ago Friday, crude prices eclipsed $100 a barrel for the first time, a day largely lost to history because of the year that followed.
ONE year ago Friday, crude prices eclipsed $100 a barrel for the first time, a day largely lost to history because of the year that followed.
In the first trading day of the new year, crude rebounded to around $46 a barrel. A variety of factors were likely at work, including a weaker dollar and expectations of OPEC embarking on its largest production cut ever to stem the historic price decline. Investors tend to buy commodities like oil to defend against dollar weakness and as a hedge against inflation.
Oil market activity also was light, as many traders took a long holiday weekend, and that can lead to price swings.
"I have a feeling, more than anything, it's the thin trading conditions pushing the price higher," said Peter Beutel of energy consultancy Cameron Hanover.
Light, sweet crude for February delivery rose $1.44 to $46.04 a barrel on the New York Mercantile Exchange.
Oil's surge into triple digits for the first time one year ago was the start of a climb that would peak above $147 a barrel by July. Since then, amid fears of a prolonged global recession and crumbling worldwide demand, crude prices have plunged more than 70 percent.
Gasoline prices ticked up a bit overnight, but the average price for a gallon of unleaded is still more than $1.40 cheaper than a year ago.
"Thank goodness that's over!" Raymond James & Associates said in a note to clients Friday, summing up what many traders feel after the most volatile year since crude futures were first offered on Nymex in 1983.
The same gloomy economic data that drove prices into the mid-$30s in the final month of the year continued into 2009.
A private group's measure of manufacturing activity fell more than expected in December, hitting the lowest reading in 28 years as new orders and employment continue to decline. The Institute for Supply Management, a trade group of purchasing executives, said Friday its manufacturing index fell to 32.4 in December from 36.2 in November. Wall Street economists surveyed by Thomson Reuters had expected the reading to fall to 35.5.
Any reading above 50 signals growth, while a reading below 50 indicates contraction. The index has fallen steadily for the last five months.
A weakened manufacturing sector suggests demand for energy will not rebound any time soon.
The February contract for crude rose $5.57 on Wednesday, the last trading day of 2008, to settle at $44.60 after Russia threatened to cut off natural gas supplies to Ukraine. Russia followed through with that threat Thursday, though both countries pledged they would keep supplies to the rest of Europe flowing.
As of late Friday afternoon, no interruptions outside Ukraine were reported.