Oil prices rose slightly to above $35 a barrel on Thursday in Asia despite grim U.S. economic news that pointed to a deep recession and weaker crude demand.
Light, sweet crude for March delivery rose 54 cents to $35.18 a barrel by late afternoon in Singapore on the New York Mercantile Exchange. The contract on Wednesday fell 31 cents to settle at $34.62.
The March contract expires on Friday, and traders switched their focus to the April contract, which rose 62 cents to $38.03.
The Federal Reserve on Wednesday confirmed what many investors already suspected _ that the US economy has significantly deteriorated in the last few months.
The Fed said it expects the economy will contract between 0.5 and 1.3 per cent this year. Its previous forecast from November had a 0.2 per cent contraction as the worst case scenario.
The Fed also said the unemployment rate will likely rise to between 8.5 and 8.8 per cent this year, higher than its previous forecast of between 7.1 and 7.6 per cent.
The current global economic slump began in 2007 with a crisis in the US sub-prime mortgage sector, and the housing market continues to buckle under the weight of surging foreclosures.
A report from the Commerce Department on Wednesday said construction of new homes and apartments plunged 16.8 per cent in January from the previous month, to a seasonally adjusted annual rate of 466,000 units, a record low.
``The housing data suggests the recession is even worse than we thought,'' said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. ``We need to see the housing market stabilize because consumer sentiment is very much correlated to it.''
Investors are skeptical that a $787 billion stimulus bill signed this week by President Barack Obama will spark a quick recovery. The White House on Wednesday said the government will spend $75 billion to help prevent millions of Americans from losing their homes.
Crude investors are also concerned a jump in oil inventories is reflecting a steep drop-off in demand.
Analysts expect crude stocks will grow by 3.5 million barrels when the Energy Department releases inventory data for the week ended Feb. 13, according to a survey by Platts, the energy information arm of McGraw-Hill Cos. Inventories have risen more than 30 million barrels in the last six weeks.
``Inventories are the focus now,'' said Moltke-Leth. ``If they rise again, it will put more downward pressure on crude.''
The Organization of Petroleum Exporting Countries has struggled to bolster prices as output cuts fail to keep up with falling demand.
Venezuelan Oil Minister Rafael Ramirez said Wednesday the group may cut production again at a meeting on March 15, on top of the reduction of 4.2 million barrels a day announced since September. Ramirez said the 13-member cartel would like prices to rise to $70 a barrel.
``OPEC is looking very weak right now,'' said Moltke-Leth said. ``There's a lot of chatter from them, but the market isn't really listening.''
Moltke-Leth said prices will likely fall to about $32 a barrel, which would test the 10-year average price.
``$32 and a half is a significant line in the sand,'' he said. ``It's a key support level, and I expect the market to test how strong it is.''
In other Nymex trading, gasoline futures rose 0.83 cent to $1.07 a gallon. Heating oil gained 1.71 cents to $1.16 a gallon, while natural gas for March delivery jumped 3.0 cents to $4.24 per 1,000 cubic feet.
In London, the March Brent contract rose 98 cents to $40.54 on the ICE Futures exchange.
Agencies
Showing posts with label gulf. Show all posts
Showing posts with label gulf. Show all posts
Thursday, February 19, 2009
Saturday, December 6, 2008
Oil could plummet down to $25 a barrel!
Oil prices are likely to keep falling until well into next year and could reach $25 a barrel before recovering, US bank Merrill Lynch. In a research report published on Thursday, it said oil prices should begin to rally in the second half of 2009.
Merrill Lynch recently cut its forecast for the average price of US crude oil futures and North Sea Brent crude oil to $50 a barrel from a previous estimate for both crudes of $90.
"With demand vanishing across all key oil consuming regions, benchmark crude oil prices continue to plummet," it said. "In the short-run, market participants will focus on both OPEC and perhaps even non-OPEC producer responses to balance the market."
"A temporary drop below $25 is possible if the global recession extends to China and significant non-OPEC production cuts are required," it said.
"In our view, oil prices could find a trough at the end of Q1 2009 or early Q2 2009 with the seasonal slowdown in demand. Then, as economic activity starts to strengthen, we see oil prices posting a modest recovery in the second half of 2009."
Oil prices hit a peak above $147 a barrel in July but have fallen more than $100 since then as the severity of the global economic downturn has become clear.
Merrill Lynch said a combination of high oil prices and high leverage had proven dangerous for the global economy.
"On October 1, we lowered our average crude oil price forecast in 2009 to $90 per barrel based on a global GDP growth forecast of 3 percent. Since then, our economists have revised their 2009 global GDP growth forecast down to 1.3 percent, a scenario consistent with a global recession.
"As a result, we are now lowering our average WTI and Brent crude oil price forecast to $50 per barrel for 2009."
It said the major downside risk to its price forecast would be a revision of economic growth assumptions for China, which are currently at 8.6 percent for next year.
"In the short-run, global oil demand growth will likely take a further beating as banks continue to cut credit to consumers and corporations," it said. "We now expect an outright contraction in global oil demand in 2009."
Source: Economic Times
Merrill Lynch recently cut its forecast for the average price of US crude oil futures and North Sea Brent crude oil to $50 a barrel from a previous estimate for both crudes of $90.
"With demand vanishing across all key oil consuming regions, benchmark crude oil prices continue to plummet," it said. "In the short-run, market participants will focus on both OPEC and perhaps even non-OPEC producer responses to balance the market."
"A temporary drop below $25 is possible if the global recession extends to China and significant non-OPEC production cuts are required," it said.
"In our view, oil prices could find a trough at the end of Q1 2009 or early Q2 2009 with the seasonal slowdown in demand. Then, as economic activity starts to strengthen, we see oil prices posting a modest recovery in the second half of 2009."
Oil prices hit a peak above $147 a barrel in July but have fallen more than $100 since then as the severity of the global economic downturn has become clear.
Merrill Lynch said a combination of high oil prices and high leverage had proven dangerous for the global economy.
"On October 1, we lowered our average crude oil price forecast in 2009 to $90 per barrel based on a global GDP growth forecast of 3 percent. Since then, our economists have revised their 2009 global GDP growth forecast down to 1.3 percent, a scenario consistent with a global recession.
"As a result, we are now lowering our average WTI and Brent crude oil price forecast to $50 per barrel for 2009."
It said the major downside risk to its price forecast would be a revision of economic growth assumptions for China, which are currently at 8.6 percent for next year.
"In the short-run, global oil demand growth will likely take a further beating as banks continue to cut credit to consumers and corporations," it said. "We now expect an outright contraction in global oil demand in 2009."
Source: Economic Times
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