Is The Oil Bubble Popping? Oil Down $8 Per Barrel In The Past Two Days

From AP:

Oil prices fell as much as $6 a barrel Tuesday, bringing crude down $10 this week and hurling prices back to levels not seen since June 26. Traders, keeping a wary eye on the global economy, cashed in gains from oil's recent rally. A barrel of light, sweet crude for August delivery fell $6.23 in morning trading on the New York Mercantile Exchange, following a $3.92 slide on Monday, and later traded down $5.79 at $135.58.

The market's bearish turn this week erases, at least for the time being, the effect of a rally that pushed prices past $145 in a string of record-setting sessions before the Fourth of July. Analysts attributed much of the recent sell-off to profit-taking, saying traders were cashing in on the previous week's gains. At the same time, concerns about supply disruptions subsided and fears that the economic slowdown is spreading moved to the forefront.

"Sagging global equities, which are tipping a lack of confidence in economic growth in both developed and emerging economies, helped trigger the retreat in the energy markets," Addison Armstrong, director of market research at Tradition Energy, said in a research note. Still, analysts warned the pullback could be fleeting, saying it is a correction that could quickly shift and send prices bolting higher. Trader and analyst Stephen Schork said the expectation just a few days ago that crude prices would touch $150 this week now "does not look like the proverbial done deal."

UPDATE: RELIAPUNDIT ADDS: NYTIMES:

Crude prices tumbled, falling $5.33 to settle at $136.04 a barrel on the New York Mercantile Exchange, bringing oil's two-day drop to more than $9.

THIS IS THE BEGINNING OF THE END FOR OVER-PRICED OIL.

REMEMBER: MARKETS ARE THE MOST EFFICIENT WAY TO PRICE THINGS, BUT THEY ARE NOT ALWAYS RIGHT ALL THE TIME.

• THE COMMODITIES MARKETS ARE SKEWED AND GROSSLY OVERVALUING AND GROSSLY INFLATING THE PRICE OF OIL BECAUSE THERE IS TOO MUCH MONEY CHASING A RELATIVELY STABLE TO SLIGHTLY GROWING AMOUNT OF OIL.

• FACT: IN 2003, THERE WAS $13BILLION OF FUND MONEY IN COMMODITIES; NOW: $250BILLION. THIS HAS DRIVEN THE PRICE UP, AND NOT INDUSTRIAL USAGE OR "PEAK OIL".
  
• VIA GLENN REYNOLDS:

  Since 2003, worldwide oil prices have quadrupled. According to a new study, the price of oil is rising at a faster-than-exponential rate, and cannot be sustained. In other words, we’re in the midst of an oil bubble, say researchers Didier Sornette and Ryan Woodard of ETH Zurich in Switzerland and Wei-Xing Zhou of the East China University of Science and Technology in Shanghai, China.

  PRICES HAVE SKY-ROCKETED SINCE 2003 BECAUSE OF THIS INFLUX.
  

• It is wrong/misleading to call this influx "speculators"; they are investors - many: pension funds. The effect of this inflow is not good for the energy markets or the economy. That's why it needs to be regulated more effectively.
  

• WHEN THE OIL/COMMODITY BASKET STARTS TO DECLINE - AS IT IS NOW - THESE PROGRAMS WILL GO INTO "SELL" MODE, AND THE DOWNWARD SPIRAL WILL BE FAST AND STEEP.