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Thursday, July 09, 2009

How Long OPEC Will Remain Satisfied with the Current Oil Prices?

Thursday, 09 July 2009

Almost every day, OPEC’s officials are trying to reassure the global oil markets that cartel members are satisfied with the current level of oil prices and they don’t want to cut their daily production again in the forthcoming summit in Vienna on September. They point out that a new cut of production could lead oil prices to very high levels that they will jeopardise the world’s economy rebound, under the current very fragile economic conditions. Instead, they support the prospect of higher compliance on the official exporting quotas, in order to drain the excessive amount of oil in the world market, in a period that U.S. oil and gasoline reserves remain on high levels.
But during the last week the situation seem to change. The economic fundamentals proved weak to support the party that started in stock and oil markets the last month. The change of sentiment reached the top last Friday when U.S. authorities reporterd that unemployment figures were much worst than expected. This figures gave the opportunity for a new round of speculative action in oil market as investors pulled money from investments that could get hurt if the economy doesn't rebound as soon as hoped. Now the majority of investors believe that the economy will take longer to recover than some investors have been betting.
The question is how long OPEC members will remain satisfied if oil prices continue to fall? Prices for oil continue its volatile dynamics on world markets. Hardly had they reached $70 per barrel, oil prices dropped $64 per barrel. Macroeconomic indices remain major factor of impact on descending tendency of prices. They deteriorated pessimistic mood over final restoration of world economy.   
Analysts skeptically consider probability of significant growth of prices as a result of 2009. Even moderate willing of OPEC to reach $75 per barrel by late 2009 seems to be unreal and unacceptable in current terms.
"If growth of prices was ruined by continuing impact of inflation in 2008, it is hard to imagine that they will be able to increase amid great deflation pressure in 2009," analysts of one of leading British consulting companies for economic research Capital Economics said.
According to forecasts of British analysts, average price for oil will hit $60 per barrel as a result of 2009. Later it will reduce $50 per barrel in 2010 and 2011.
According to forecasts of analysts, world level of inflation will hit 2 percent. World GDP will reduce 3.5 percent.Recent leap in prices for oil was result of initial hopes for stabile restoration of world economy. Later they went out that led to price-dropping, British analysts said.
According to analysts, weakening of U.S dollar played small role in price-dropping for oil.
According to U.S state department of energy information (EIA), prices for U.S light oil WTI will hit $67 per barrel.
Excessive volatility of prices on world markets caused anxiety of the biggest European countries. France and Great Britain call oil producers and consumers for talks to decrease volatility in prices that can be obstacle for economic growth this week. Both countries intend to publish joint document to establish reasonable prices.  
These issues will be discussed at the meetings of G8 and G20 to determine demand and supplies in future, British Prime-Minister Gordon Brown said.

Makis Theodoratos, Hellenic Shipping News