Will Moderate For Cigars
Date registered: Apr 2005
Vehicle: 2002 ML320, 2005 S430 4MATIC, 2010 F150 Crew Cab
Location: City on the TN River
Mentioned: 3 Post(s)
Quoted: 221 Post(s)
What happened to the $200 barrel oil prediction?
Crude Oil May Fall Below $80 This Year, CGES Says (Update2)
By Fred Pals
Oct. 8 (Bloomberg) -- Oil prices may drop below $80 a barrel by the end of the year because of weakening demand and continue to slide next year as global demand deteriorates, the Centre for Global Energy Studies said.
``It will go slowly down further because the world economy is heading for the rocks. There are clearly big problems,'' CGES Deputy Executive Director Leo Drollas said today in an interview in Amsterdam. ``Forget even about $70 a barrel next year if there's a major recession.''
Crude has plummeted 40 percent from its July record of $147.27 as the worsening global financial crises threatens to restrain economic growth and energy demand. Yesterday, OPEC member Libya called on the group to cut production further in an attempt to stall the price slide, and Qatar said it was already curbing supply.
``The Saudis are probably really worried now. This is not the time to keep prices at $90 or even $80 a barrel,'' Drollas added. ``The Saudis probably will let it slide, their rock bottom price is $65 a barrel according to our calculations.''
London-based CGES was founded by former Saudi Arabian Oil Minister Sheikh Ahmad Zaki Yamani.
The Organization of Petroleum Exporting Countries decided at a meeting in Vienna on Sept. 10 to comply strictly with formal production targets, a move that OPEC officials said would reduce oil supply by 500,000 barrels a day.
Meeting in Oran
OPEC will discuss production levels again on Dec. 17 at a meeting in Oran, Algeria. Drollas doesn't expect an emergency meeting before then and said OPEC might agree to cut supply at the December meeting.
``But what matters is what they actually do,'' Drollas said. ``The Saudis increased the discounts for November lifting and that means they don't want to add to pressure on the world economy now.'' Saudi Arabia can make its oil cheaper by altering price formulas linked to benchmark prices.
Crude oil prices fell, giving up an earlier rebound that followed coordinated interest rate cuts by central banks in the U.S., Europe and China intended to thaw credit markets. Oil for November delivery traded at $88.06 a barrel, $2 lower, on the New York Mercantile Exchange at 10:38 a.m. local time. Earlier in the day, before the rates cuts, crude had fallen as much as 4.5 percent, to $86.05, the lowest since Dec. 6, 2007.
``The oil price peak of $147 a barrel in July 2008 is unlikely to be seen again for the foreseeable future, unless the geopolitical scene deteriorates rapidly,'' Drollas said in a separate presentation at the conference today.
Nigeria, Goldman Views
``We remain optimistic the oil price will stabilize,'' Nigerian Oil Minister Odein Ajumogobia said at a conference in Cape Town today. ``I think we will get to a point where a new benchmark will be established as to what a reasonable oil price is.''
Goldman Sachs Group Inc. said in a note yesterday that oil prices may fall because a ``severe deterioration'' in U.S. credit markets is forcing storage operators to empty their tanks at the same time that U.S. refineries are returning to service after hurricanes. Prices may fall as low as $75 a barrel if there is a global recession, said the Goldman commodity analysts, led by Giovanni Serio and Jeffrey Currie.
Drollas said hedge funds are ``heavily leveraged'' and the decline in open interest in oil contracts over recent weeks on the New York Mercatile Exchange was likely to be the result of hedge funds leaving the market.
``I suspect that large speculators are no longer able to find financing and are moving out of their positions,'' he said.
The number of outstanding crude oil futures held by traders on the New York Mercantile Exchange is at the lowest in more than two years as global banking failures heighten concerns over the economy. Open interest reported by the exchange stood at 1.087 million contracts as of Oct. 6, down 11 percent from the start of September.
2005 S430 4Matic 'Morton' W220.183 • 722.671 Rest in Peace
Bells and whistles are thorns and thistles.