Oil Price Drops over Fears of US Recession
By Chika Amanze-Nwachuku with agency reports
01.08.2008
Gloomy United States economic data, and the likely impact on demand should it slip into recession this year, may have led to a decline in the price of crude oil in the international market yesterday.
According to International Herald Tribune, US light crude for February delivery eased 54 cents to $97.37 a barrel by midday in London, extending Friday's $1.27 decline.
Oil has eased from a record peak of $100.09 a barrel last Thursday.
A government report showed the U.S. unemployment rate was up five per cent in December, its highest in more than two years.
The bleak unemployment report was the latest signal that the United States, the world's top energy consumer, could fall into a recession this year.
A resource analyst from the National Bank of Australia, Gerard Burg commented: "Concerns about the U.S. economy are clearly putting some pressure on oil prices. Some market players are also using this opportunity to take profits."
According to him, rumblings over the weekend from the Organisation of Petroleum Exporting Countries (OPEC) had not given any clear signal on what action it might take at its next meeting, there were growing expectations that it would increase output to rein in prices.
Saudi Arabia's oil minister, Ali al-Naimi, had on Sunday stated that the rise in oil prices had been determined by market forces, but declined to comment further on what action OPEC would take at its next meeting, on February 1 in Vienna.
But OPEC's President, Chakib Khelil, said on Saturday that he expected oil prices to keep rising in the first quarter of this year before stabilising in the second quarter.
Goldman Sachs, the most active investment bank in energy markets, also appears to believe that oil will stay strong; it kept its average 2008 price forecast unchanged at $95.
"We maintain that the combination of tighter short-term fundamentals and escalating costs will continue to provide strong support to oil prices in 2008, with the risk skewed to the upside from current levels," it said.
Crude-oil speculators on the New York Mercantile Exchange raised their net long positions near to a two-month high in the week ended December 24, the Commodity Futures Trading Commission said Friday. The increase in bullish sentiment came just before oil prices hit last week's peaks.
