Oil prices ease by more than $10/bbl

NEW YORK (AP) — Oil prices settled sharply lower for the second time in a row Wednesday, leaving crude more than $10 cheaper in just two days of frenzied trading and prompting speculation that the hard-charging market may be running out of steam.

Light, sweet crude for August delivery fell $4.14 to settle at $134.60 a barrel on the New York Mercantile Exchange, after earlier sinking as low as $132. The drop follows a $6.44 sell-off Tuesday.

In London, August Brent crude fell $2.56 to settle at $136.19 a barrel on the ICE Futures exchange.

The two-day slide of $10.58 a barrel marks a dramatic turnaround in crude prices, which as recently as Friday traded at record highs above $147 a barrel. But even with this week’s sell-off, prices remain about 80 percent above where they were a year ago and up about 40 percent from the start of the year.

Analysts are unsure whether the drop represents a long-term shift in sentiment or simply a brief correction to crude’s monthslong bull run. But the dizzying decline is prompting market veterans to ask how much support remains for such high prices.

“It’s a sign that maybe the bull market is losing strength,” said Michael Lynch, president of Strategic Energy & Economic Research Inc.

Perhaps just as significant as the declines was the sudden increase in volatility. Prices whipsawed by more than $10 Tuesday and $7 Wednesday ahead of the expiration of options contracts this week.

“I think anyone you talk to would have to be surprised by the magnitude of these huge price swings. This is extreme price volatility that no one can predict,” said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. Such large up-and-down swings, he added, can indicate the market is nearing its top.

Sharply increased crude and gasoline supplies were the immediate cause of Wednesday’s decline.

The Energy Information Administration reported that U.S. crude oil stocks rose by three million barrels, or  one percent, last week. That is the opposite of the  three million barrel draw analysts surveyed by energy research firm Platts expected. Gasoline supplies also leapt unexpectedly.

“The numbers were decidedly bearish on just about all fronts,” Ritterbusch said.