Oil prices collapsed this week to under US$50, their lowest levels in almost four years, as the market focused on the threat of a global recession and tumbling energy demand.
Base metals aluminum and copper also hit their worst levels for more than three years as traders fretted about weaker demand from struggling automakers in the US.
“The deterioration in the global economic outlook had led to a significant decline in commodity prices and, most notably, energy and industrial metal prices,” Deutsche Bank analyst Michael Lewis said. “It has also led to a significant increase in inventories, for example across the industrial metals complex.”
Oil prices have plunged two-thirds since striking record highs above US$147 in July when fears of supply disruptions had helped to send them into orbit.
The fall below US$50 reflects an assumption that demand will be affected not only in Western countries but in China and India, whose rapid growth was also a major force pushing prices to record highs earlier this year, Jason Feer of energy market analysts Argus Media said.
“The market is fully internalizing the realization that the coming recession is going to be pretty significant and is likely to affect demand in some of the emerging countries that have been propping up the market,” Feer said.
Analysts said sentiment has been hammered by an unrelenting series of bad economic data in the US, the world’s biggest energy consumer.
The eurozone is already in recession — defined as two successive quarters of negative economic growth.
Action should meanwhile be taken to halt the decline in oil prices, Libya’s OPEC representative told reporters on Friday.
Nevertheless, Shukri Ghanem — the head of Libya’s national oil firm and its envoy to the OPEC oil cartel — did not explicitly repeat his call for oil production to be cut when the organization meets in Cairo next Saturday.
Ghanem said the group should examine whether the fall in prices was the result of weaker consumption or of speculators liquidating their positions in the market.
“The oil market needs some kind of action,” he said. “Of course the falling price hits our earnings but we’re not worried because it can’t last. We expect a turnaround.”
Last month, OPEC, which produces 40 percent of world oil, decided at an emergency meeting to slash its official oil output quota by 1.5 million barrels a day from Nov. 1.
The London-based Centre for Global Energy Studies on Tuesday forecast a contraction in global demand for the first time in 25 years.
By Friday, light, sweet crude for January delivery rose US$0.51 to settle at US$49.93 a barrel on the New York Mercantile Exchange. Earlier, in electronic trading, the price dipped to US$48.25, the lowest level since May 18, 2005.
In London, January Brent crude rose US$1.17 to settle at US$49.19 on the ICE Futures exchange.
TYPHOON: The storm’s path indicates a high possibility of Krathon making landfall in Pingtung County, depending on when the storm turns north, the CWA said Typhoon Krathon is strengthening and is more likely to make landfall in Taiwan, the Central Weather Administration (CWA) said in a forecast released yesterday afternoon. As of 2pm yesterday, the CWA’s updated sea warning for Krathon showed that the storm was about 430km southeast of Oluanpi (鵝鑾鼻), Taiwan’s southernmost point. It was moving in west-northwest at 9kph, with maximum sustained winds of 119kph and gusts of up to 155kph, CWA data showed. Krathon is expected to move further west before turning north tomorrow, CWA forecaster Wu Wan-hua (伍婉華) said. The CWA’s latest forecast and other countries’ projections of the storm’s path indicate a higher
SLOW-MOVING STORM: The typhoon has started moving north, but at a very slow pace, adding uncertainty to the extent of its impact on the nation Work and classes have been canceled across the nation today because of Typhoon Krathon, with residents in the south advised to brace for winds that could reach force 17 on the Beaufort scale as the Central Weather Administration (CWA) forecast that the storm would make landfall there. Force 17 wind with speeds of 56.1 to 61.2 meters per second, the highest number on the Beaufort scale, rarely occur and could cause serious damage. Krathon could be the second typhoon to land in southwestern Taiwan, following typhoon Elsie in 1996, CWA records showed. As of 8pm yesterday, the typhoon’s center was 180km
TYPHOON DAY: Taitung, Pingtung, Tainan, Chiayi, Hualien and Kaohsiung canceled work and classes today. The storm is to start moving north this afternoon The outer rim of Typhoon Krathon made landfall in Taitung County and the Hengchun Peninsula (恆春半島) at about noon yesterday, the Central Weather Administration (CWA) said, adding that the eye of the storm was expected to hit land tomorrow. The CWA at 2:30pm yesterday issued a land alert for Krathon after issuing a sea alert on Sunday. It also expanded the scope of the sea alert to include waters north of Taiwan Strait, in addition to its south, from the Bashi Channel to the Pratas Islands (Dongsha Islands, 東沙群島). As of 6pm yesterday, the typhoon’s center was 160km south of
STILL DANGEROUS: The typhoon was expected to weaken, but it would still maintain its structure, with high winds and heavy rain, the weather agency said One person had died amid heavy winds and rain brought by Typhoon Krathon, while 70 were injured and two people were unaccounted for, the Central Emergency Operation Center said yesterday, while work and classes have been canceled nationwide today for the second day. The Hualien County Fire Department said that a man in his 70s had fallen to his death at about 11am on Tuesday while trimming a tree at his home in Shoufeng Township (壽豐). Meanwhile, the Yunlin County Fire Department received a report of a person falling into the sea at about 1pm on Tuesday, but had to suspend search-and-rescue