Declining Oil Prices

Oil’s Bearish Run

January 5th, 2009 Posted in Crude Oil, Market Analysis

Name: Aylon Branson

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The price of Crude Oil continues to fall despite the current conflict in the Middle East. On Monday, Crude Oil rose 12% as Israel attacked Hamas installations in the Gaza Strip over the weekend. However, since Monday, Oil has continued to fall and currently stands just above $37 a barrel. Many analysts, however, wonder if Oil prices will rebound in 2009.

Current evidence suggests that Oil prices will continue to slide into next year as there seems to be no light ahead as the world’s economies slip further into recession. Furthermore, the U.S., Japan, and China who consume a large portion of the world’s Oil, have been affected much worse by the current global economic crisis than many analysts originally anticipated.

Oil prices are down about a record 60% on the year. This would have seemed far fetched back in July as Merrill Lynch forecasted prices around $200 a barrel. However, as of late they changed their forecast to $50. This just shows how volatile Oil prices are, and that deep analysis is needed to foresee future movements in the price of black gold.

Oil is likely to decrease further in the coming months as the global recession worsens. However, prices are unlikely to decrease as much as they did in recent months as the Organization of Petroleum Exporting Countries (OPEC) cut oil production by 2.2 million barrels a day. Additionally, if the price of Crude slips further, the cartel is likely to cut oil production further. Analysts forecast that Oil prices will continue to slide until the 3rd quarter of 2009.