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Brian Baskin October 28, 2008
CRUDE oil futures settled near a 17-month low as concerns about falling demand outweighed talk of a second OPEC production cut.Light, sweet crude for December delivery settled down US93 cents, or 1.5 per cent, at $US63.22 a barrel on the New York Mercantile Exchange, the lowest settlement price since May 29, 2007. December Brent crude on the ICE futures exchange settled down US64c, or 1 per cent, at $US61.41 a barrel. Oil prices remain locked in a downward spiral based on expectations that global demand growth will be drastically lower in 2009 as economies cool worldwide. While little new happened to deepen demand worries, the market failed to receive any sign that it had hit bottom, either. Futures rallied briefly on comments by Organisation of Petroleum Exporting Countries secretary general Abdalla Salem el-Badri that the group could hold a second emergency meeting before its regular session in December. Mr El-Badri raised the prospect of another production cut, on top of the 1.5 million-barrels-a-day reduction announced last Friday, at OPEC's first emergency meeting. "OPEC is just going to address the supply side," said Darin Newsom, senior analyst with DTN, a market information service. "Adjustments to supply are not having the desired effect on the market, and they probably won't." Market participants have also raised doubts that OPEC members will fully comply with cuts. The US is moving toward an oversupply of crude, with analysts anticipating a 1.6-million-barrel build in crude stocks in weekly data due later this week from the US Energy Information Administration. Oil inventories are already above the five-year average, as refiners hold down runs in response to weak demand. "Refiners aren't in a real hurry to start making a lot of product that they're not selling much of," said Phil Flynn, an analyst with Alaron Trading. "Crude should continue to build for a while." Analysts surveyed by Dow Jones also gave an average forecast of a 1.8-million-barrel build in petrol inventories and a 500,000-barrel build in distillate stocks, which include heating oil and diesel.
CRUDE oil futures settled near a 17-month low as concerns about falling demand outweighed talk of a second OPEC production cut.Light, sweet crude for December delivery settled down US93 cents, or 1.5 per cent, at $US63.22 a barrel on the New York Mercantile Exchange, the lowest settlement price since May 29, 2007. December Brent crude on the ICE futures exchange settled down US64c, or 1 per cent, at $US61.41 a barrel. Oil prices remain locked in a downward spiral based on expectations that global demand growth will be drastically lower in 2009 as economies cool worldwide. While little new happened to deepen demand worries, the market failed to receive any sign that it had hit bottom, either. Futures rallied briefly on comments by Organisation of Petroleum Exporting Countries secretary general Abdalla Salem el-Badri that the group could hold a second emergency meeting before its regular session in December. Mr El-Badri raised the prospect of another production cut, on top of the 1.5 million-barrels-a-day reduction announced last Friday, at OPEC's first emergency meeting. "OPEC is just going to address the supply side," said Darin Newsom, senior analyst with DTN, a market information service. "Adjustments to supply are not having the desired effect on the market, and they probably won't." Market participants have also raised doubts that OPEC members will fully comply with cuts. The US is moving toward an oversupply of crude, with analysts anticipating a 1.6-million-barrel build in crude stocks in weekly data due later this week from the US Energy Information Administration. Oil inventories are already above the five-year average, as refiners hold down runs in response to weak demand. "Refiners aren't in a real hurry to start making a lot of product that they're not selling much of," said Phil Flynn, an analyst with Alaron Trading. "Crude should continue to build for a while." Analysts surveyed by Dow Jones also gave an average forecast of a 1.8-million-barrel build in petrol inventories and a 500,000-barrel build in distillate stocks, which include heating oil and diesel.
