Headlines
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Stronger dollar and cheaper oil press gold down
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Pessimistic outlook send base metals down
Brent and Distillates
Crude oil traded at fresh lows Wednesday, as a bleak demand continues to influence the markets.
Today markets expect weekly release of the API and DOE numbers this time delayed one day by Veteran’s holiday on Tuesday. Small builds in crude and gasoline inventories together with higher refinery utilisation are expected.
The U.S. DOE/EIA said that the recent dramatic deterioration in the economic growth outlook for the whole world has led to a significant reduction in their projections for oil prices. EIA now sees WTI oil prices averaging only 63.50 $/b in 2009, down from a previous forecast that was over 100$/b just a month ago.
Despite the gloomy outlook, continuing oil demand from China, India and the Middle East could put a limit under tumbling world oil prices, IEA chief economist Fatih Birol said after the IEA released its annual World Energy Outlook, which predicts that crude prices will average 100 $/b for the next few years. However, he expects that a continued slide in oil prices, which have more than halved since reaching record highs, would have adverse effects on energy investment in general, and warned that failure to meet demand when it picks up after 2010 could lead to a supply crunch.
OPEC could decide to make a further cut in oil supply before its scheduled meeting next month in Algeria if prices continue to slide, the OPEC president Chakib Khelil said on Wednesday. Probably OPEC will not have a choice but to take another decision in Oran, if not before Oran, if the prices continue their decline in the market," OPEC President said. Also Libya's top oil official confirms that OPEC ministers are consulting by telephone about the slide in oil prices and all options including a further cut in output are open.
Russia and China have failed to negotiate the terms of crude supplies to China and export-backed loans from Beijing, Russia's Prime-Tass news agency reported Wednesday citing an unnamed source. Russia and China have repeatedly postponed the signing of the long-term supplies contract due to disagreements over the price. At the end of October, Moscow and Beijing reportedly were negotiating signing a 20- year deal on crude supplies to China, under which Beijing would lend Russian state oil producer Rosneft and oil pipeline monopoly Transneft 20 to 25bln.$ in exportbacked loans.
According to customs data released on Tuesday China imports 3.8 mln.b/d crude oil last month, i.e. its import rose 28%y/y. It is said that China uses lower prices to increase its strategic reserves.
Mexico hedged almost all of next’s year oil exports at prices ranging from $70 to $100 at a cost of about 1.5 bln.$ through derivatives contracts, bankers familiar with the deal said. The cover is far higher than the country, which relies on oil for up to 40% of government revenue, usually seeks. Last year, Mexico hedged 20-30 % of its exports. Without the hedge, the recent price falls would have been a serious concern for Mexico. The government has already revised its budget, lowering its oil price target from 80 to 70$/b.
