Forex Trading Education : Forex Trading Blog by FOREXYARD

Crude Oil Expects to Dip below $50 a Barrel by End of November

Name: Greg Holden

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Oil is currently priced at just below $53 a barrel, down from its high of $147.27 in the middle of July. The price of Crude is set to continue its downward spiral. According to analysts, this is in response to the news that Japan and the Euro-Zone have recently slipped into recession. They argue that the falling demand in developed countries, especially the world’s biggest Oil consumer, the United States, backs their assumption.

Members of the Organization of the Petroleum Exporting Countries (OPEC) members have mixed views about how to increase Oil prices to more desirable rates of at least $70 a barrel. The cartel, which controls 40% of Oil exports, is set to meet in December. Saudi Arabia currently objects to cutting production further. However, Venezuela and Iran are content in further cutting production, in addition to the recent cut of 1.8 million barrels a day as of November 1.

As the financial crisis spreads from the U.S. to China, the fastest growing Oil consumer, and other countries in the developing world, market analysts expect additional downward pressure on the price of Oil. It’s important to note that china’s economy grew by its smallest amount since 2003. The recent $600 billion dollar bailout plan that the Chinese government injected into the Chinese economy may be positive for China and the surrounding region in the short-term, but it seems that the politicians have no answer for the long-term economic future.

The strength of the greenback is expected to have a strong impact on Oil prices, as Oil itself is traded in USD. The recent strength of the USD against the GBP, and the unpredictability of the Euro-Zone may well see investors seeking to put their money in the USD, as a safe haven for the short-medium term.

FOREXYARD expects that the price of Oil will continue its dip, and drop below $50 a barrel by the end of November. The continuing drop in global demand of Oil, led by the U.S. is set to be the key determinant of Oil prices in the short-medium term. Analysts expect the developed nations to cut over three million jobs by the first quarter of 2010. The gloomy economic outlook is set to have a knock-on effect as demand in Oil is set to drop for at least the short-medium term as well.