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| Oil plunges below $US34 |
| 2008-12-19 |
| THE price of New York oil sank under $US34 per barrel yesterday for the first time for more than four and a half years, as weak global demand overshadowed a record OPEC output cut. The fresh falls prompted OPEC President Chakib Khelil to stress that the cartel would continue cutting output until prices stabilise. In morning trading, New York's light sweet crude for delivery in January dived as low as $US33.44 a barrel, which was the lowest point since April 2, 2004. The January contract, which was also driven lower in technical trading owing to its expiry on Friday, later pulled back to $US34.18, down $US2.04 from the close on Thursday. New York prices have now plunged by about 77 per cent since striking a record high above $US147 in July as the market has been slammed by concerns that a sharp global economic slowdown will slash energy demand. Meanwhile on Friday, London's Brent North Sea oil for February delivery edged up 11 cents to $US43.47 a barrel, after dipping as low as $US43.03. The Organisation of Petroleum Exporting Countries (OPEC), which produces about 40 per cent of the world's crude, agreed on Wednesday to cut output by 2.2 million barrels a day in a bid to shore up the market and protect its members' revenues. "We will continue this reduction until the price will stabilise," Khelil said in London at a key gathering of oil producing and consuming nations. This week's OPEC's output reduction, agreed at a ministerial meeting in Oran, Algeria, has failed to prevent oil diving to multi-year lows on stubborn demand fears. Many traders have also questioned whether all members of the 13-nation OPEC cartel would fully enforce the reduction. "The global recession continues to sap demand," said BetOnMarkets analyst David Evans. "Even after OPEC cut production by more then two million barrels, oil prices have fallen below the $40 per barrel level. Prices are likely to stabilise between the $35 and $40 levels." |
| Posted by:tipper |
| #7 World Bank: Russia may need help if oil falls more. Drill, Baby, Drill! |
| Posted by: William Marcy Tweed 2008-12-19 19:52 |
| #6 You do NOT want sustained $34 oil prices, trust me on this one. I don't think it's a question of what anyone wants. Prices will probably go into the teens this time around. We are going into a recession much worse than what we had in the 80's. Back then, US oil consumption dropped 4m barrels per day. This time around, we may be looking at a bigger drop domestically, coupled with similar drops around the world. China, OPEC's great hope for higher demand, is faltering. From a news article: Paul Ting, an oil analyst who tracks oil trends in China, said in a recent report that demand in China is now declining more swiftly than in the U.S., where oil use is falling at a pace not seen since the 1980s. |
| Posted by: Zhang Fei 2008-12-19 17:12 |
| #5 You do NOT want sustained $34 oil prices, trust me on this one. For that to happen the global economy has to continue to shrink. Almost all the 'new' oil we are exploring for costs more than that to find and develop, and a lot of the oil recently put onto production costs more than that to produce (tar sands etc.) Already the oil companies are cutting back investments so as to stay solvent (we know better than to expect a bail-out if we screw up) so production WILL decline. For prices to stay flat as production declines demand MUST decline, meaning economic activity would decline - along with all that it entails. Increased unemployment, increased taxes (yep - when the activity to be taxed declines the governments raise the tax RATE on what's left cuz they're the last ones to cut spending.) I'd say $40 is about as low as you want to see for now. |
| Posted by: Glenmore 2008-12-19 16:44 |
| #4 I hope all those wall street types that bet everything on oil prices going up... Do you see stories about them? I haven't. It's not like it wouldn't be particularly information the masses would avoid, more like enjoy. So, where are they all? Wonder how many had 'escape clauses' by practice or wink? More so, those on the street should be the entire federal and private regulatory agents who allowed this to manifest. They had the power to call margin at any time and absolutely failed their duties. Instead, the borrowing freeze initiated by the Fannie Mae debacle created a natural market call and you see the result. So much could have been avoided but the system failed and failed because of the people entrusted with it. They don't deserve the trust. |
| Posted by: P2k on holiday 2008-12-19 15:17 |
| #3 The "production cut policy" is only an announcement and there is still plenty in the "pipeline". Lets wait until the quantity available decreases before we start cheering. Supply and demand do work. |
| Posted by: tipover 2008-12-19 14:57 |
| #2 They cut production and prices still dropped. I hope all those wall street types that bet everything on oil prices going up, while we suffered 5 buck a gallon gas, are broke and homeless. Let that be a lesson for screwing the US consumer. |
| Posted by: 49 Pan 2008-12-19 13:12 |
| #1 Probably to early to celebrate. |
| Posted by: g(r)omgoru 2008-12-19 13:01 |