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United States Oil Fund, LP (USO) is a commodity pool that issues limited partnership interests or units that may be purchased and sold on the American Stock Exchange (the AMEX). The Company invests in futures contracts for light, sweet crude oil and other types of crude oil, heating oil, gasoline, natural gas and other petroleum-based fuels that are traded on the New York Mercantile Exchange (NYMEX), International Currency Exchange (ICE) Futures or other United States and foreign exchanges (collectively, Oil Futures Contracts).

Oil is trading around 109$/bbl and recently breached its 200 day moving average on the downside. Oil has corrected multiple times on its way up but has never dropped below the magically 200 dma. Does this mean end of rally for oil ?? It will be an interesting few days to watch the movement. Lower oil means green days for the market.

Lower oil means happy days for airline stocks…..

Additionally oil refiners love to see lower oil prices.

Lower oil price means depressing profits for oil exploration companies…..

Similarly solar stocks becomes less valuable as an alternative source of energy when oil becomes cheaper…

Bloomberg has latest story about falling crude oil prices and stronger dollar: Crude Oil Falls on Minimal U.S. Storm Damage, Stronger Dollar

Crude oil fell for a fourth day as Hurricane Gustav caused minimal damage to refineries and rigs in the Gulf of Mexico and a strengthening dollar curbed the appeal of commodities as an inflation hedge.

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The dollar’s gain is also prompting funds to lower their exposure to commodities, and another concern is demand as U.S. refiners are due to shut for maintenance soon.

Crude oil for October delivery fell as much as $1.20 to $108.51 a barrel. Prices are up 48 percent from a year ago. Yesterday, futures lost $5.75, or 5 percent, to settle at $109.71 a barrel, the lowest close since April 8. Oil, down more than $37 from its July record, dropped because Gustav inflicted less damage to states along the Gulf than occurred in 2005 when Hurricanes Katrina and Rita struck.

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Royal Dutch Shell Plc, Total SA, ConocoPhillips and Valero Energy Corp. are among oil and gas producers, and refiners that have started initial inspections of facilities.

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Oil’s 26 percent slide from its July 11 record of $147.27 a barrel is a symptom of an economic slowdown in the U.S. and Europe and may continue over the next six months, investor Marc Faber said yesterday in a Bloomberg Television interview.

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New York crude oil yesterday breached the 200-day average as slowing economic growth and unprecedented fuel costs slash U.S. demand for oil products.

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Oil prices are unlikely to drop below $100 a barrel because OPEC will cut production to support the price, billionaire hedge-fund manager Boone Pickens told CNBC yesterday.

Lower oil prices means up days for the stock market. Transport and retail sectors are benefiting from the drop in oil prices. Airline stocks have been bouncing higher for this reason. JBLU, LCC, NWA have such a surge in their stock prices. How long will the that last ? Its a guessing game.

CNBC has a story about UPS cutting their outlook : UPS Cuts Outlook on Lower Volume and Fuel Costs

United Parcel Service, the world’s largest shipping carrier, cut its first-quarter profit guidance Tuesday, citing lower volume and higher fuel costs.

The company said it now expects earnings per share of 86 cents or 87 cents. Previously, the company said it expected first quarter profit between 94 cents and 98 cents per share.Analysts polled by Thomson Financial were expecting earnings of 93 cents per share. UPS shares fell about 4 percent in electronic after-hours trading.

The company said lower volume trends from February continued through March, making it impossible to meet its prior guidance.

Atlanta-based UPS said a shift away from premium products and higher fuel costs also contributed to the guidance cut.

Weaker dollar has lead to higher inflation affecting oil prices. The Federal Reserve faces a dilemma now as to low interest rates to save banks from imploding and stimulating the economy or to focus on weaker dollar and control inflation. Right now lower interest rates is winning the battle, hurting profit margins of companies like UPS and Fedex.