Oil falls below $114, free-fall or floor?

August 15, 2008 by · Leave a Comment
Filed under: Economic News 

With the geo-politics that are happening in Eastern Europe it is very interesting that oil and gold dropped in the same day.  Many forces are competing for confidence from the market.  With production staying flat and demand growing national and in emerging markets it is hard to see this staying so low for long.

Release:

Oil prices fell below $114 a barrel on Friday on growing concerns about demand in industrial nations and the stronger dollar.  U.S. crude settled down $1.24 at $113.77 a barrel, after dipping to $111.34, the lowest level since May 2. London Brent lost $1.13 to settle at $112.55 a barrel.

Crude has fallen sharply since reaching an all-time high of $147.27 a barrel on July 11 as growing global economic problems and high fuel prices have cut demand in top consumer the United States as well as Europe.

“We might get to $110. How quickly we get there would depend on the demand outlook,” said Simon Wardell, an oil analyst at Global Insight. “If next week’s U.S. inventory data shows an increase in stocks, we could go lower.”

The Organization of Petroleum Exporting Countries cut its 2008 demand forecast on Friday and added that ample supplies were paving the way to building inventories.

Output by the producer group rose 145,000 barrels per day in July to 32.8 million bpd, the International Energy Agency said this week.

A Reuters poll of analysts, banks and industry groups shows demand growth should rise next year, however, as demand from emerging economies like China outpaces losses from industrial nations.

The euro hit a six-month low against the dollar on Friday following further proof that the U.S. economic slowdown is spreading.

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