Oil prices make biggest single-day leap

Source: Agencies  |   2008-6-7  |     ONLINE EDITION

OIL prices made their biggest single-day leap ever yesterday, dragging the Dow Jones industrials down nearly 400 points and raising the once-unthinkable prospect of US$150 oil by early July.

The meteoric rise of nearly US$11 for the day piled atop an increase of almost US$5.50 the day before, taking oil futures more than 13 percent higher in just two days, easily a record on the New York Mercantile Exchange.

Oil settled at US$138.54, a rise of more than 8 percent. The surged came after Morgan Stanley analyst Ole Slorer predicted strong demand in Asia and tight supplies in the Western Hemisphere could drive prices to US$150 by early July.

That means no end in sight for spiraling gas prices, already above US$4 per gallon in much of the country.

Even longtime market observers were shocked by the magnitude and speed of oil's rally.

"We're into unchartered territory, and somewhat off the map as far as historical precedents are concerned," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates in Galena, Illinois.

On Wall Street, the Dow plunged 394.64 points, more than 3 percent, to close at 12,209.81, the biggest drop in more than 15 months in both percentage and points terms.

Wall Street had managed to shrug off oil's advance on Thursday but succumbed to extreme anxiety yesterday.

The stock market's great concern of late has been whether consumers would curb their spending on non-essentials as they were forced to pay more for gas and other staples.

The previously unthinkable idea of US$150 oil made it clear to investors that consumers would be forced to be even more conservative than they have been in recent months.

Before Thursday, oil had receded nearly US$13 a barrel from its highs, a respite from its nearly record-every-day march. But the end of the week sent it right back up again.