Crude in Free-Fall as Lehman File For Chapter 11

Oil continued to tumble on the London and NY Mercantile exchanges into the low $90′s. This represents the lowest crude has been in the past seven months.

Lehman Brothers

Brokerage giant, Lehman Brothers slid into insolvency as attempts to rescue the nearly 160 year-old institution failed this weekend. With the fear that Merrill Lynch would be the next to fall, Bank of America, fresh of passing on the Lehman talks, swooped in and bought up Merrill for $50 billion.

Treasury head Henry Paulson stated that the US would not step in to save Lehman. Markets reacted, with the Dow Industrials off 300 points at midday training.

With Saudi Arabia’s insistence that they would keep production level – against the wishes of OPEC – they emerge as the leading ‘forward thinkers’ as providing energy liquidity to a tight capital market. This, in itself may prove to be a huge leg up for the beleaguered kingdom.

As the cleanup of the Gulf refinery region continues in these next few days, production may be up to 90% of capacity by week’s end.

Oil Falls More Than $7 as Lehman Fails, Ike Spares Refineries – Bloomberg.com