Suddenly, oil market bears are everywhere

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From Times staff writer Walter Hamilton:

A month ago, almost nobody on Wall Street would have been willing to declare that ‘oil prices have peaked for the next few years.’

But after another sharp retreat in crude prices, Lehman Bros. analysts said exactly that in a report to clients Friday. They concluded that oil’s dive over the last five weeks foreshadows persistent softness in prices for at least the next year.

‘Is the bubble now over?’ wrote Edward Morse, Lehman’s lead analyst. ‘We believe almost certainly.’

Oil prices traditionally have reached their zenith after the U.S. summer travel season, Morse wrote. But U.S. gasoline demand peaked around Memorial Day this year. And another major consumer -- China -- will feel less of a need to stockpile oil now that the Olympic Games have started, according to Morse.

There are plenty of analysts who view the pullback in crude as nothing more than a needed, temporary correction after the frenzied spike up in spring.

Still, there’s no doubt that the global economic slowdown has caught up to commodities markets in general, as demand for raw materials weakens.

Even news of a supply disruption to a major Turkish pipeline carrying oil from Azerbaijan couldn’t halt the sell-off in crude on Friday. Near-term oil futures in New York finished the day down $4.82, or 4%, to $115.20 a barrel. The price has plunged more than $30 a barrel, or 20.7%, since it peaked at $145.29 on July 3.

That would qualify as an official bear in the stock market.

Many analysts lately have expected oil to bottom out around $110 a barrel, but some now say it could sink a bit lower as speculators flee what had been one of the year’s hottest trades.

Stephen Platt, a commodities analyst at Archer Financial Services, projects that oil will decline to around $110, but said he wouldn’t be surprised to see it drop lower given the ‘overshot on the upside.’

Commodities, it appears, are acting like commodities again -- with all the volatility, in both directions, that that implies.