Crude prices fell below 89 U.S. dollars a barrel Friday on
concerns of weakening demand and expectations that the Organization
Petroleum Exporting Countries (OPEC) would raise output next
week.
Light, sweet crude for January delivery fell 2.30 dollars to
88.71 dollars a barrel on the New York Mercantile Exchange. In
London, January Brent crude dropped 1.96 dollars to 88.26 dollars a
barrel on the ICE Futures exchange.
Weakening demand
Crude prices declined on the concern by the market that economic
growth in the United States will slow in coming months and hence
reduce demand for the commodity, Wall Street Strategies' senior
research analyst Conley Turner told Xinhua.
The White House lowered its projection for the U.S. economic
growth next year and raise its forecast for unemployment Thursday
due to the deteriorating housing market and credit crisis. Under
the administration's new forecast, the gross domestic product
(GDP), will grow by 2.7 percent next year. Its old projection was a
3.1-percent increase.
Golden Sachs, a leading global investment banking, on Tuesday
increased the U.S. economy recession risk to 40-50 percent and
predicted the U.S. unemployment would increase from 4.7 percent to
5.5 percent. Therefore, the firm saw more rate cut and GDP growth
below trend for extended period.
Investors worry that slowing economic growth in the United
States and Europe is likely to curtail the demand for crude
oil.
"While today the news driving the market is the possibility of a
recession in the United States, the fact remains that demand from
China and India is increasing as their economies continue to
expand. As such, the sentiment in the coming weeks could shift due
to some other geopolitical event or concerns about current supply,
" Turner added.
OPEC's output hike
"Comments by the Saudi Oil Minister al-Naimi that current
supplies in the market are ample prompted additional selling," said
Turner.
On Friday, Ali al-Naimi said world oil markets are well supplied
and it remains to be seen whether OPEC needs to boost output when
it meets next week.
"There is absolutely ample supply," said Naimi. "The price
movement has nothing to do with the fundamentals of the
market."
Ministers from the OPEC, which includes 13 countries together
producing around 40 percent of the world's oil, are to meet on Dec.
5 in Abu Dhabi under pressure from consumer nations to boost supply
to lower prices that last week hit a record high near 100 dollars a
barrel.
Since Tuesday, crude futures have declined more than 10 percent
below the all-time high of 99.29 dollars a barrel set last
week.
"The 100 dollars per barrel scenario while it may not be
achieved this year is likely to occur in the not too distant
future. This supply demand issue is not going away and the days of
cheap oil are for the history books," Turner pointed out.
(Xinhua News Agency December 1, 2007)
