NYMEX crude oil tumbles over $5, price slide into second day

Oil tumbled more than $5 a barrel Tuesday [8 Jul 2008] in its second big drop this week, hurling crude back to levels not seen since June 26. Light, sweet crude oil for August [2008] delivery fell $5.33 on NYMEX to $136.04, after slumping as low as $135.14, bringing oil's two-day drop to more than $9. The market's bearish turn this week erases, for the time being, the effect of a rally that pushed prices to a record of $145.85 last week. Analysts attributed the sell-off to profit-taking and a stronger dollar. Oil disruption concerns subsided and economic slowdown fears moved to the forefront. At the G8 summit, leaders called on petroleum suppliers to boost production, and also called for diversifying sources of energy and energy efficiency improvements.

- Crude oil prices crash and burn, oil tumbles, oil falls off a cliff, oil collapses. All these and more are just suggestions on how to describe the $5 drop in a single trading day, and it's over a $10 drop if we were to measure the difference between the current local maximum ($145.85) and the current local minimum ($135.14). The peakoilers have been having fun on the boards with this one - smallpoxgirl talked about buying an SUV to celebrate, and I talked about getting a HondaJet. Just kidding.

But really. Remember those wild swings that the early peakoilers have been warning us about? They apply both on the upside and downside, but not quite equally. It's the proverbial two steps up, one step down effect. The general direction is still up. I was getting ready to buy another truckload of barrels if it hit the $130 support level, but in hindsight my buy order would have been filled if I had ratcheted it just a tad higher at a little over $135. But that's fine. Support is support, and the subsequent levels after that are $120 and $110. Yeah, sure we might go lower than that - if demand collapses or we find another Ghawar. Rather unlikely. $140 doesn't seem like much of a resistance level. The big resistance level to aim for right now still remains $150, followed by $180, $200 and way beyond.

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