Commodity Daily News

Oil Tumbles on Falling Demand

The price of Crude Oil tumbled $2.31 to $38.01 a barrel in yesterday's trading, as OPEC foresaw demand falling faster than the cartel's production cuts. OPEC has cut its oil production by several million barrels a day since September, and is expected to cut further when they meet again in March. One of the main issues that is affecting Oil's volatility is the U.S. economy. It seems that the only way for Oil to make a mini-recovery is if the U.S. shows that it is resilient when it comes to the recession. However, facts on the ground seem to contradict this.

With over 500,000 Americans losing their jobs each month, the collapsing car industry, and with the closure of factories in the U.S., it seems unlikely that Oil prices will recover at all, at least in the next few weeks. This is increasingly valid as Japan, China, and the Euro-Zone are also increasingly feeling the heat of the global recession. It seems that only daily U.S. stockpile increases or a string of positive economic figures coming out of the U.S. may push-up Oil prices in the short-term. In the long-term, traders should look for a continuance of this steady price depreciation.