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Oil Weakens as Recovery Hopes Dim

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Published at: www.nytimes.com

Michael LynchConsultantMichael E. Lynch

The international oil and gas industry will produce oil to meet consumer needs

July 12, 2009

Jad Mouawad in New York reported in the July 10 issue of the New York Times that oil prices fell below $60/bbl on Thursday. Traders and investors now accept that global economic recovery will take longer than earlier hoped. After a volatile session, crude oil closed above $60. In the last six trading days, prices have fallen by $10/bbl. On Thursday the U.S. Energy Department reported higher gasoline inventories indicating weak consumption. Michael Wittner at Societé Generale in London expects prices to fall to $50/bbl. Still oil prices have rebounded sharply from the $33/bbl low of December 2008. The International Monetary Fund thinks the global economy will shrink by 1.4% this year. The U.S. Commodity Futures Trading Commission is contemplating a clamp down on speculation. Still, even with continued weak demand, many analysts do not expect a substantial fall in prices. OPEC has managed to reduce production to match the drop in demand. Oil consumption is expected to fall again in 2009.