Oil prices remain near their lowest in five years. Traders are trying to balance the effects of declining demand from the global economic slowdown with cuts in production by the world’s major exporters. At one stage US light crude for delivery next month dropped as low as $33.44 a barrel.
It started the year at $100 and reached a high of almost $148. Analyst Tom Mundy sees only modest rises. He said: “Right now it’s much more of a demand question. The world needs to see an increase in industrial output. I think the oil prices will go up; if you look through to 2009 it wouldn’t be that surprising if we see $50, but right now these kind of short-term cuts from OPEC won’t be that significant for the market.” Oil prices remain stagnant despite this week’s pledge from the producers group OPEC to remove a further 2.2 million barrels per day from its supply. It is OPEC’s largest ever reduction, but many traders doubt its ability to fully implement the agreed cuts. And at a meeting in London on Friday of energy ministers from OPEC and the big consuming nations as well as energy companies, the point was made that cheaper oil prices may please consumers, but they lead to under-investment and future supply shortages.