Crude Oil Price Update-Bin Laden’s Death and Cooling of US Manufacturing Sector Lead to Price Fall

Oil dropped yesterday, on account of news about Osama bin Laden’s death and data showing that manufacturing had cooled in the US in April. At the market closure, WTI crude future was at USD $ 112.89 a barrel, registering a decline of 0.55 percent. Brent crude future declined by 0.44 percent to be at USD $ 124.57 a barrel.

The initial emotional response in the market after hearing about bin Laden’s death led to crude oil falling by 2.7 percent, before fears started creeping in that his death would mark a spike in retaliation attacks which took crude oil to its highest price level since September 22,2008. Ultimately, however, market fundamental reasons overtook the emotional response to determine the price.

The Institute for Supply Management(ISM)’s manufacturing index fell to 60.4 in April from 61.2 in March.The manufacturing sector in the US is one sector which has been growing at a reasonable rate. Therefore, a decline in manufacturing signals a weak economic outlook and caused a revision of economic growth expectations, leading to low expected demand for oil and hence the fall in oil price.