حزب التحرير

Thursday, October 16, 2008

Oil Falls Below $75

WSJ(10/16) Commodities Report: Oil Falls Below $75 Wed

Wed Oct 15 18:45:45 2008

By Gregory Meyer

With oil trading at half of its record highs, price forecasts once seen as a
remote possibility are gaining mainstream acceptance.

Crude closed below $75 a barrel for the first time in more than 13 months
Wednesday, as the story of inexorable world demand growth starts to unravel.

Absent aggressive action from the Organization of Petroleum Exporting
Countries, oil now looks on track to fall below $70 -- possibly to $50 -- a low
last reached in January 2007, analysts say.

It's been a punishing few months for anyone who bought crude when it traded
above $147 a barrel in July. After a decadelong climb from $10 a barrel, oil
has fallen 50% in three months. Light, sweet crude settled at $74.54 a barrel
Wednesday, down $4.09, or 5.2%, on the New York Mercantile Exchange. In late
electronic trading, it sank as low as $73.55.

Copper on the Comex division of Nymex fell as weakness in stocks and worries
about the strength of the economy after a weak retail sales report pressured
the commodity. Nearby October copper lost 18.60 cents to settle at $2.2235 a
pound, while most-active December tumbled 18.40 cents to $2.2105.

The declines reflect fears that the credit crisis upending global financial
markets will snowball into a full-blown recession around the world.
Energy-demand growth has also slammed into reverse in large consuming nations,
and some forecasters now see global oil use shrinking next year, potentially
the first contraction since 1983.

Frozen credit has also altered the trading landscape. Investors have grown
leery of doing business with Wall Street firms that fashion complex products
pegged to commodities. Hedge funds with big positions in commodities are facing
redemptions from investors and demands for new collateral on bets made with
borrowed money. The number of open Nymex crude-futures contracts is at its
lowest since July 2006.

Stock markets have also been discouraging. In an industry short of good
supply-and-demand data, stocks indexes have become a "moment-by-moment
indication of future demand prospects," said Tim Evans, a New York-based energy
analyst at Citi Futures Perspective. Crude extended declines after a
late-afternoon plunge in the Dow Jones Industrial Average, which closed down
7.9% at 8577.91.

Having been overwhelmingly bullish amid oil's gains earlier this year, a host
of Wall Street energy analysts have chopped forecasts to account for the price
drop and the future demand scenarios. J.P. Morgan Chase & Co. on Wednesday said
it now sees oil averaging $74.75 a barrel next year; this is $25 lower than its
prior prediction. Prices could dip to as low as $60, the bank said.

Unlike most others, J.P. Morgan sees world demand shrinking next year, albeit
by a modest 320,000 barrels a day, to about 85.5 million barrels a day, as
drivers and businesses in heavily industrialized countries use less oil.

"The world economy is currently in recession," said Lawrence Eagles, J.P.
Morgan's head of commodities research and a former official at the
International Energy Agency. "This global recession, which has occurred very,
very suddenly, has reduced global demand."

Government analysts continue to see world demand growing next year, albeit
hesitantly. OPEC on Wednesday trimmed 100,000 barrels a day from its 2009
demand forecast and now sees consumption growing by 800,000 to 87.2 million
barrels a day.

Oil's slide suggests the cartel may agree to cut output at an emergency
meeting Nov. 18, or perhaps even earlier, if prices fall below $60. Iraq's oil
minister said Wednesday that OPEC should trim production at the meeting. Saudi
Arabia, OPEC's de facto leader and the only member with spare capacity, has yet
to tip its hand.

"Unless OPEC -- by that I mean the Saudis -- are willing to cut output, this
market will remain in free fall," said Nauman Barakat, senior vice president at
Macquarie Futures USA in New York.

Some commodity veterans argue for a rebound. Oil's decline could subside once
the rush by traders is over to unwind oil trades with counterparties they view
as risky, or once hedge funds stop unloading oil bets just to cut down on
leverage. But for now, oil's decline is also being exacerbated by a drying up
of physical oil deals amid the credit crisis: Some refiners and traders can't
get short-term trade financing to move tankers around the world or even to ship
fuel on pipelines.

In other commodity markets:

PLATINUM: Nymex prices tumbled as economic worries threaten demand for
platinum, which is mainly used in automobile catalytic converters and jewelry.
The demand worries at the moment are enough that investors may be reluctant to
hold the metal even if supply cuts should occur, traders said. October platinum
fell $68.40 to $966.70 an ounce.

Click here to go to Dow Jones NewsPlus, a web front page of today's most
important business and market news, analysis and commentary:
http://www.djnewsplus.com/al?rnd=QrtSllHcvSwqAE2cjOAk%2Bw%3D%3D. You can use
this link on the day this article is published and the following day.

(END) Dow Jones Newswires

15-10-08 2245GMT

Copyright (c) 2008 Dow Jones & Company, Inc.

101508 22:45 -- GMT

I/ONF, I/PCS, 1044, N/BKG, N/DJG7, N/DJGP, N/DJI, N/DOI, N/ECR, N/EWR, N/FXW, N/IPR, N/WER, N/APIN, N/CMD, N/CMM, N/DJSS, N/DJWI, N/EMT, N/JNL, N/PET, N/WLS, N/XDJ, M/BSC, M/NND, M/TPX, R/IL, R/NME, R/NY, R/US, R/USC, R/USE, J/CMK, J/MIM, This content is for use with eSignal products by authorized persons only. Any reference; link, frame, or other use of this material without the explicit permission of eSignal is prohibited.**storysrvr-h-02(WEBSTORY-B-03)(DJF042MY81015)

No comments: