Once more the Portuguese economy is being rocked by the oil companies that have once more in a period of a week increased the final consumer price twice.. The players are always the same the energy companies like Galp,BP.Repsol and Cepsa continue to inflate oil prices for the consumer, Portugal is facing ever harder times as corruption at all levels is now a daily routine from the Free case to the oil companies scamming motorist with ever higher prices. Curious is the fact that elections are at hand and the population will now face the opportunity to replace existing government with one that works for the people and not the oil companies.
The decision finally reflected concern for the world economy and a belief production curbs so far have begun to take away some of the over-supply from oil markets, the Organization of the Petroleum Exporting Countries said in a communique after the nearly five-hour conference.
OPEC adherence has been estimated at roughly 80 percent and full compliance would take away up to a million bpd more.
For consumer nations, cheaper oil equates to a huge financial stimulus.
Barack Obama, president of the world's biggest energy consumer the United States, called Saudi King Abdullah last week.
The White House did not disclose the contents of the call, but analysts said the timing was significant.
They predicted leading OPEC producer Saudi Arabia would not want to be seen to be destabilizing the economy ahead of a Group of 20 summit in London in April, to which the kingdom is invited to help seek solutions to the world's financial crisis.
The International Energy Agency (IEA), which advises consumer countries, in a report on Friday said the OPEC supply curbs already in place were enough to shrink oil stocks in developed nations even though it expected 2009 demand to fall by a million bpd compared with last year.
OPEC's cuts since last September have helped to pull prices up from a low of $32.40 in December, however if crude prices go beyond the $50 mark world recessing will be agravated, crude demand will fall more than 7% this will cause a OPEC "CRASH" from which the cartell will never recover.
But levels are still just over $100 below last year's record high of nearly $150 and the group cannot forget the price crash of the late 1990s when oil fell toward $10 a barrel.
Although cheaper oil in the short term can help offset what the OPEC statement referred to as "the worst global economic recession in decades," OPEC says the risk for the longer term is that it inhibits investment in new production, which will drive the price back up again.
This attitude by OPEC may lead to lower prices, but I think the stimulus to the economy will help increase demand for oil down the road...
This global recession was mostly caused by the same group OPEC who last year forced crude prices to reach a staggering $147 per barril.
This week oil dropped 10 percent as the Dow Jones Industrial Average slipped below 7,000 for the first time after Warren Buffett said the economy is in “shambles” and insurer American International Group Inc. reported a $61.7 billion loss. manufacturing output in February shrank for a 13th consecutive month. Until the bad economic news abates, we are going to primarily move on demand concerns, at this point there are no signs pointing to when this crisis will come to an end. Crude oil for April delivery fell $4.61 to settle at $40.15 a barrel at 2:49 p.m. on the New York Mercantile Exchange, the biggest one-day drop since Jan. 7.
Prices are down 10 percent so far this year. Brent crude oil for April settlement declined $4.14, or 8.9 percent, to end the session at $42.21 a barrel on ICE Futures Europe exchange. The discount of oil in to the Brent grade in widened to $2.06 a barrel. That’s still down from $10.67 on Feb. 12. Therre has recently been a close correlation between the stock and energy markets, the Dow has become an indicator for where the economy is going. According to CLSA Asia-Pacific Markets Manufacturing also contracted last month. The CLSA China Purchasing Managers’ Index rose to a seasonally adjusted 45.1 from 42.2 in January.The Chartered Institute of Purchasing and Supply said in a report U.K. manufacturing shrank for a 10th month. Commodities had the biggest drop since October as the deepening global recession slashed demand. The Reuters/Jefferies CRB Index of 19 raw materials fell 11.23, or 5.3 percent, to 200.34, the biggest decline since Oct. 10. The 6.6 percent decrease on that date was the largest since the debut of the index in 1956.
Oil also declined as the dollar strengthened to the highest level since April 2006 against the currencies of six major trading partners, reducing the appeal of commodities as an alternative investment. The Dollar Index, which the ICE exchange uses to track the currency versus the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, climbed to 88.969. Officials from the Organization of Petroleum Exporting Countries, the supplier of 40 percent of the world’s oil, gave conflicting signals on their intentions to cut output further when they meet in on March 15.
The group “will likely” reduce supplies to support prices, Algerian Oil Minister Chakib Khelil said in an interview in today. Yesterday,Iran oil minister said OPEC is unlikely to lower crude production when it meets, this will cause global recession to worsen and crude demand will continue to decline. OPEC members have reached almost 100 percent compliance with existing cuts at the end of February, Khelil said. The group has implemented as much as 80 percent of previously announced supply cuts, preventing a sharp fall in the oil price, Iranian Oil Minister Gholamhossein Nozari said in comments posted yesterday on the Web site of state-run Iranian Students News Agency.
This attitude by OPEC members will cause a "crash" to the balance between production and demand, prices will not rise above $40 per barrel and the cartel will be at risk in collapsing.
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