OPEC Invalid to Save Oil, Trend Capital Commentator
Azerbaijan, Baku, 11 October / Trend corr.A.Badalova /The world oil prices keep on falling and have reached the minimum rate of late. As a result of the auction of 10 October, the Brent prices dropped by $8.57 per barrel to $74.09 per barrel in the London stock exchange. The cost of the U.S. WTI decreased by $8.89 per barrel to $77.70 per barrel in New York.
In the mid of July, the price of one barrel of oil was $150 per barrel. Both importers and exporters ask themselves a question whether the oil prices would touch $200 per barrel. Now, they are concerned with oil quotations drop to $60 per barrel.
The forecasts on increase of the world oil demand for 2008 and 2009 by world financial organizations have become an impact on drop of quotations. By the forecasts of the International Energy Agency, in 2008, the world oil demand, compared to 2007, will increased by 400,000 barrels per day to 86.5mln barrels. In 2009, the oil consumption in world will up by 700,000 barrels per day to 87.2mln barrels. The U.S. State Energy Information Agency (EIA) cuts the world demand forecasts in 2008 by 350,000 barrels per day to 86.14mln barrels. In 2009, the world oil demand, according to EIA, will make up 86.92mln barrels per day.
OPEC harassed the situation at the world oil market strongly. The prices, which dropped lower than $80 per barrel, do not satisfy world experts, whose budget is directly depend on the oil quotations.
At the call of Iran, Libya, Nigeria, Iraq, Venezuela and Ecuador, OPEC will meet to discuss the world financial crisis and its influence on oil markets on 18 November. OPEC is afraid of drop of oil consumption as a result of the world financial crisis, and support of price stability may take a decision to cut of oil production.
Most believe in OPEC. However, will it manage to keep the prices from falling in severe financial crisis conditions? This cause doubts.
For recently OPEC had kept oil quotas, considering that the markets did not feel oil deficit. Saudi Arabia, increasing oil production from 9mln to 9.7mln barrels per day, has become the one OPEC member-country which stood against the cartel, in the moment when the oil prices were reaching the record rate. However, this decision by OPECїs largest oil delivery, nevertheless, failed to stabilize the situation in oil markets.
Recently the organization had to cut the oil production consignment by 520,000 barrels per day to 28.8mln barrels to keep prices on $100 per barrels. This, according to the organizationїs members, is the most acceptable price for oil.
However, the oil production cutting down did not give the expected results. For the recent two weeks, the oil quotations have dropped totally lower than $20/barrel.
Looking through the recent developments one can say that the commitments assumed to OPEC do not have results. OPECїs decision stands only the psychological factor, which today, in the world financial crisis conditions, have stopped functioning. The oil production cutting by cartel will have short term effect.
Most west analysts are also adhering to the opinion that OPEC will fail keeping oil prices from falling down.
Analysts of largest banks, cut their forecasts on world oil prices equally with world demand rate. The Swiss UBS AG bank has reduced forecasts on Brent prices by 15.2% from $125 to $106 per barrel in the fourth quarter. In 2009, the North Sea oil price will total $105 per barrel. Merrill Lynch also has reduced forecasts on Brent prices from $118 to $106 per barrel and from $106 to $90 per barrel in the fourth quarter in 2009.
According to EIA, in the case of absence of strong world economic recession, which has considerable impact on world demand, WTI prices in average will make up $112 per barrel in 2008 and 2009.
So, we can make a conclusion that the main problem is in the world financial crisis. Great attention should be paid to restoration of financial system in order to settle oil prices.
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