Commodity Daily News

Crude Declines amid Worsening Demand Outlook

The price of Crude Oil continues to fall, dropping 4.6% to $93.97 a barrel so far this week. This weekly drop is the biggest since the December of 2004. The price of Oil most likely will not stay at current levels near $100 if the global economy skids into recession and economic activity slows, dragging down demand for Crude Oil. With the ongoing financial crisis, demand for energy in the world's largest energy consuming nation, the U.S., has reduced. If indeed the U.S. falls into a deep, sustained recession, the price of Oil will likely go even lower, potentially reaching as low as $50 a barrel!

Today's chapter will be about whether or not the U.S. House of Representatives approves the government's $700 billion bank-bailout plan. After the House rejected the first version on Monday, the legislative body will now consider the Senate's revised bill again today. However, the market remains pessimistic about this legislation; even if the financial bailout plan is passed it is highly unlikely that it will slow down the onset of the coming recession.

The downward pressure on the price of Crude Oil is likely to persist, and it depends now on whether or not the Organization of the Petroleum Exporting Countries (OPEC) can maintain production discipline and restrict supplies. If OPEC can control its Oil exports, it may be able to keep the price of Crude Oil near its recent highs; if not, prices will continue to deteriorate.