Oil prices on Thursday dropped to levels not seen since February, as the stock market plummeted.
Benchmark crude lost $2.86 to settle at $77.11 a barrel on the New York Mercantile Exchange. Oil hit $73.71 on Feb. 16 and has lost almost $10 a barrel since Monday.
Crude was lower at midday and the price slide picked up speed as the stock market tanked. Investors flew to safer havens in gold and bonds. The Dow Jones Industrial Average plunged almost a thousand points, about 9 percent, before recovering some ground. The Dow was down almost 500 points half an hour before the close.
"We're talking a major move, the same kind of drops we saw when the credit crisis started to unravel a little bit. It is that type of same feeling in the marketplace," said Phil Flynn, analyst at PFGBest in Chicago.
Europe's debt problems got much of the blame for the drop in stocks and commodities. The ongoing crisis also has undermined the euro and strengthened the dollar. Commodities priced in dollars, like oil, become more expensive for investors holding euros as the dollar rises.
"The market had some false expectations about how safe things were or how easy the problem was going to be solved," said Flynn. "When they started to realize it wasn't, we're seeing the reverse of that trade."
Efforts continued to stop the oil spewing from a blown-out well at the bottom of the Gulf of Mexico. Crews planned to lower a 100-ton concrete-and-steel box a mile below the Gulf to cap the well.
It is hoped that the cap will collect as much as 85 percent of the oil gushing from broken wells after the Deepwater Horizon rig exploded April 20 and sank.
The oil slick from the well has so far not interfered with tankers delivering crude along the Gulf Coast.
Natural gas prices fell as supplies continued to grow. The Energy Information Administration said that natural gas inventories rose by 83 billion cubic feet to about 2 trillion cubic feet last week. That's almost 19 percent above the 5-year average. On the Nymex, natural gas lost 6.2 cents at settle at $3.929 per 1,000 cubic feet.
"Once again the market has outpaced the calendar," MF Global wrote in a note to investors. "High summer brings not only the possibility of tropical activity but a surge in cooling demand. If the economy cooperates, a powerful rally might begin."
Gasoline futures continued to slide, however. In Thursday trading, gasoline fell 6.41 cents to settle at $2.1563 per gallon after losing more than 10 cents on Wednesday and about 11 cents on Tuesday.
Energy consultancy Cameron Hanover said it has not seen a drop in gasoline prices like this since the last half of 2008. "Gasoline prices reached levels that were eating into the consumer's ability to pay rents or mortgages, and the higher price was acting as a massive tax on the economy. How prices act on the next rally will tell us more about how large a sell-off we may have coming."
Lower futures prices have not filtered down to retail gasoline yet. Pump prices rose a tenth of a cent overnight to a national average of $2.93 a gallon, according to AAA, Wright express and Oil Price Information Service. That's five cents higher than a week ago and 82 cents higher than a year ago.
In other Nymex trading in June contracts, heating oil fell 7.08 cents to settle at $2.1137 a gallon.
In London, Brent crude gave up $2.78 to settle at $79.83 on the ICE futures exchange.
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