News

December 19, 2008

The OPEC Production Cut Seems To Have Failed To Arrest The Fall In Oil Prices For The Moment

By Eithne Treanor

The oil price held steady earlier this week on news that OPEC would cut production. Then we saw a surprising decline. The Ministers decision appeared to disappoint the market with announced cuts of 2.2 million barrels a day, to take effect from January. The immediate impact was a fall in price to US$40.20 as the market was not convinced of compliance. It continued to fall below US$36. In early trading on Friday, the oil price was trading above US$36.

This week’s price below US$36 was the lowest since June 2004. The technical state of the market is one of contango where the price in the future is higher than at present. That would not be difficult and crude for February 2009 delivery is priced at about US$43. Many analysts fear that the price could actually go lower before we find a bounce back above US$50 in the second or third quarter.
 
London played host to energy ministers and organisations from around the world on...