The International Energy Agency cut its forecasts for world oil demand growth for 2008 to its lowest level since 1993. This sent ripples across the market in a reverse effect of the mid-summer madness brought on by high barrel costs. Prices have dropped nearly 45 percent from a peak of $147.27 in July. The agency said the impact of global economic weakness was most acute in developed countries, while developing countries were showing “a degree of resilience.” This bears good news for the manufacturing and transportation industries who have been hit hard by the rising cost of fuel.
The Organization of the Petroleum Exporting Countries has called an emergency meeting in Vienna on November 18 to discuss the impact of the global financial crisis on the oil market. The Organization will talk about the base costs of oil and a realistic barrel valuation. Expectations are that given the geographical location of marginal demand and supply, $60 a barrel was a more realistic characterization of “cheap” oil. $60 barrel of oil translates to roughly $3.10 per gallon of gasoline depending on geographic region. This would give some welcome relief to Americans hurting under the energy crunch.
Some analysts have expressed interest in light crude reaching lower prices, “We find oil prices would need to fall to $35 a barrel in order to bring prices in real terms back to their long run historical averages,” Deutsche Bank said in a note. Others are interested in maintaining current drops in price, “OPEC appears to be scrambling to put in another, firmer floor at $80,” said Jonathan Kornafel, Asia director of U.S. based options trader Hudson Capital Energy.
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