NEW YORK — Crude oil futures closed below $130 a barrel for a second day Friday, marking their biggest weekly drop ever, as traders started to wonder if the oil bubble has burst. Even news of an output cut in Nigeria failed to halt the week's sharp decline in prices.
Given the market's inability to spark a rally Friday, following the week's big sell-off, is it time to declare the energy bubble over?
Experts aren't ready to go that far yet. Oil has bounced back from big drops more than once in its march to fresh records the past year.
But sentiments are shifting. Experts who just days ago thought the market's meteoric run still had legs are growing cautious. Some say last Friday's high above $147 a barrel may be the last record the market sees — for now.
"If this is not the bubble's implosion, than it's a reasonable facsimile," analyst and trader Stephen Schork said in his daily market commentary. "Perhaps all we have witnessed was a replay of last August's subprime induced sell-off. Time will tell. Nevertheless, for the time being we no longer care to hold a bullish view."
Light, sweet crude for August delivery fell 41 cents to settle at $128.88 a barrel on the New York Mercantile Exchange Friday. In London, Brent crude futures for September delivery dropped 88 cents to $130.19 a barrel on the ICE Futures Exchange.
An explosion that destroyed an Eni oil pipeline in Nigeria's restive southern oil region was caused by aggrieved youths from a nearby community, a military official said.
Thursday's explosion caused a sudden drop in pressure, halting production on pipelines carrying 47,000 barrels of oil a day. The pipes are owned by Agip, a subsidiary of Italian energy company Eni.
Attacks on oil industry infrastructure the past two years have slashed oil output by almost a quarter in Nigeria, Africa's top crude producer. That instability has helped push crude prices to historic highs.
The Nymex crude price drop Friday, albeit modest, follows a three-day swoon in which oil prices tumbled nearly $16 a barrel. Just last week, oil hit an all-time high above $147 a barrel.
Many oil traders buy and sell energy futures based on technical indicators that attempt to determine whether prices have support at various value levels. From that point of view, Nymex futures are "getting into deeper trouble," said analyst Olivier Jakob of Petromatrix in Switzerland.
"Buying here is an opportunity if you are a deep believer in $200 (a barrel), otherwise we think that caution would be better applied," Jakob said in a research note.
If oil buyers sense the price slide was overdone, the impact will be felt almost immediately by everyone.
"If (oil prices) rebound, you're going to see a quick reaction at the gas station, because their profit margins are so stretched," said AAA spokesman Geoff Sundstrom. "They may be very fast bringing prices back up."
In other Nymex trading, heating oil futures fell 5.23 cents to settle at $3.6915 a gallon while gasoline futures edged up 0.73 cent to $3.1709 a gallon. Natural gas futures rose 3.3 cents to $10.57 per 1,000 cubic feet.
