labels: Economy - general, World economy
Crude hits 5-year low below $34 a barrel news
19 December 2008

Crude oil prices fell below $34, hitting its lowest level in almost five years, continuing its southward journey in the wake of the global economic slump. The market also ignored record supply cuts proposed by the oil exporting countries.

Sweet light crude for January delivery on the New York Mercantile Exchange fell $2.64 to $33.58 a barrel in the morning trade, its lowest since it touched $33.44 in early February 2004.

North Sea Brent crude was trading 18 cents up at $43.54 in London.

The 13 nations belonging to the Organisation of the Petroleum Exporting Countries announced an agreement to slash daily production at the start of next year by 2.2 million barrels - a total of 4.2 million barrel since September 2008 (See: OPEC's 4.2-million barrel supply cut rebounds as prices fall below $40)

 Before the production cuts, Algerian oil minister and OPEC president Chakib Kheilil said that $70-$80 a barrel was a "fair price for oil". However the markets are proven him wrong by going for a spin that s left all observers dizzy.

Oil price cuts being used to boost demand

India had used a reduction in domestic prices for pertol and desiel on 6 December to bouy up the demand. It reflected in the lower inflation figures released yesterday and has given the stock market a leg up.

China hopes to repeat the feat. Beijing announced a 14 per cent cut in refinery gate gasoline prices and 18 percent drop in diesel prices, plus a nearly one-third cut in jet fuel.

After five years of infrequent and unpredictable price adjustments by Beijing, policymakers are now taking advantage of the collapse in global rates to address its domestic pricing system, which has kept prices cheap to maintain social stability at the cost of encouraging wasteful consumption and pollution

Demand expectations falling

Oil prices hover around to their lowest levels in more than four years and were seen trading at to $36.37 a barrel, off its morning low of 36.04, at 2.00 pm in Singapore.

World oil consumption next year will drop by 0.2 per cent to 85.68 million barrels a day, OPEC said in a report.

The US Energy Department said that global demand would decline 0.5 per cent to 85.3 million barrels a day.

With overall liquid fuel demand growing by only 1 million barrels per day between 2007 and 2030, increased use of domestically-produced biofuels, and rising domestic oil production spurred by higher prices, the net import share of total liquids supplied, including biofuels, declines from 58 per cent in 2007 to less than 40 per cent in 2025 before increasing to 41 per cent in 2030

JPMorgan Chase & Co., the largest U.S. bank by assets, reduced its 2009 average oil price forecast to $43 a barrel from $69 as a global economic slowdown causes a contraction in demand.


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Crude hits 5-year low below $34 a barrel