Oil prices plunged Friday on signs of slowing demand and expectations that OPEC will raise its output quotas tomorrow to appease oil-importing nations struggling with expensive crude.
In New York, a barrel of light sweet crude for delivery in October plummeted US$1.75 to close at US$63.00. In London, a barrel of Brent North Sea crude dropped US$1.85 dollars to US$61.81 dollars.
Expectations of lower demand growth have seen oil prices fall sharply from record highs of US$70.85 in New York and US$68.89 in London on August 30, a day after Hurricane Katrina slammed into the southern US.
PHOTO: AP
"There's a bit of concern that demand has been destroyed as a result of the high prices. That was reflected in the OPEC report [Thursday] that revised down demand growth," Refco analyst Marshall Steeves said.
"I think that OPEC will increase quotas next week. But I think in reality their production is almost near maximum capacity. Only the Saudis can increase production if they want to," he added.
At their meeting in Vienna tomorrow, oil ministers with the Organization of Petroleum Exporting Countries are expected to increase their output quotas as the US and Europe groan under the impact of a sky-high energy bill.
Analysts predicted the talks will raise the 11-nation group's output ceiling by 500,000 barrels to 28.5 million barrels per day, its highest level since 1987.
On Thursday, Prince Sultan bin Abdul Aziz of Saudi Arabia pledged his help in combatting the spiralling oil price, which has raised fears of an economic shock for rich countries and angered drivers who are feeling the pinch at the gasoline pump.
But experts predict the OPEC move will not resolve the real problem of lack of global refining capacity, which as Katrina showed is near to breaking point.
Simon Wardell of Global Insight said a decision after Katrina by US and European authorities to release extra crude had helped illustrate the lack of appetite for unrefined oil.
Of the 30 million barrels of crude made available from the US Strategic Petroleum Reserve, orders from oil companies only came to 11 million, he recalled.
"There were 19 million barrels that no one wanted."
Sucden analyst Sam Tilley said "traders switched focus from a fall in crude inventories to a general surplus of oil and signs of falling demand."
OPEC said Thursday in its monthly report that oil demand this year would likely rise by an annual 1.7 percent to 83.5 million barrels per day.
This was down from the oil cartel's previous prediction last month of a 1.9 percent gain. The oil cartel also cut its forecast for next year, saying it now expected demand to increase by 1.8 percent.
The International Energy Agency in the last week also lowered its demand projections, for the third time in a row, forecasting growth for this year at 1.6 percent instead of two percent.
Both organizations spoke of slower consumption in China as well as in the US because of high gasoline prices and Katrina's devastation.
But the market remains anxious about supplies, particularly since refineries are struggling to turn crude into heating fuel in time for the northern hemisphere winter.
"Considerations over demand and growth are so long-term that they don't change things dramatically from one day to the other," said Christopher Bellew, an analyst with Bache Financial.
"I think everybody agrees that it is likely that we're going to see lower oil prices, and the question is now when," he said.
‘SWASTICAR’: Tesla CEO Elon Musk’s close association with Donald Trump has prompted opponents to brand him a ‘Nazi’ and resulted in a dramatic drop in sales Demonstrators descended on Tesla Inc dealerships across the US, and in Europe and Canada on Saturday to protest company chief Elon Musk, who has amassed extraordinary power as a top adviser to US President Donald Trump. Waving signs with messages such as “Musk is stealing our money” and “Reclaim our country,” the protests largely took place peacefully following fiery episodes of vandalism on Tesla vehicles, dealerships and other facilities in recent weeks that US officials have denounced as terrorism. Hundreds rallied on Saturday outside the Tesla dealership in Manhattan. Some blasted Musk, the world’s richest man, while others demanded the shuttering of his
ADVERSARIES: The new list includes 11 entities in China and one in Taiwan, which is a local branch of Chinese cloud computing firm Inspur Group The US added dozens of entities to a trade blacklist on Tuesday, the US Department of Commerce said, in part to disrupt Beijing’s artificial intelligence (AI) and advanced computing capabilities. The action affects 80 entities from countries including China, the United Arab Emirates and Iran, with the commerce department citing their “activities contrary to US national security and foreign policy.” Those added to the “entity list” are restricted from obtaining US items and technologies without government authorization. “We will not allow adversaries to exploit American technology to bolster their own militaries and threaten American lives,” US Secretary of Commerce Howard Lutnick said. The entities
Minister of Finance Chuang Tsui-yun (莊翠雲) yesterday told lawmakers that she “would not speculate,” but a “response plan” has been prepared in case Taiwan is targeted by US President Donald Trump’s reciprocal tariffs, which are to be announced on Wednesday next week. The Trump administration, including US Secretary of the Treasury Scott Bessent, has said that much of the proposed reciprocal tariffs would focus on the 15 countries that have the highest trade surpluses with the US. Bessent has referred to those countries as the “dirty 15,” but has not named them. Last year, Taiwan’s US$73.9 billion trade surplus with the US
Prices of gasoline and diesel products at domestic gas stations are to fall NT$0.2 and NT$0.1 per liter respectively this week, even though international crude oil prices rose last week, CPC Corp, Taiwan (台灣中油) and Formosa Petrochemical Corp (台塑石化) said yesterday. International crude oil prices continued rising last week, as the US Energy Information Administration reported a larger-than-expected drop in US commercial crude oil inventories, CPC said in a statement. Based on the company’s floating oil price formula, the cost of crude oil rose 2.38 percent last week from a week earlier, it said. News that US President Donald Trump plans a “secondary