NYMEX crude oil prices rebound above $50 on OPEC cuts, Russia gas dispute, Middle East conflict

NYMEX crude oil prices rose above $50 a barrel to a five-week high as Kuwait and Qatar indicated they will implement OPEC production cuts announced last month [Dec 2008], and a dispute between Russia and Ukraine reduced natural gas shipments to Europe. Crude oil for Feb 2008 delivery rose as high as $50.47 on NYMEX, the highest since 1 Dec 2008. Oil also advanced as the conflict between Israel and Hamas reached its 11th day with battles in the Gaza Strip. Iran has called for a suspension of crude exports to allies of Israel. OPEC decided to cut production by 4.2 million barrels a day from Sep 2008 levels at a Dec. 17 meeting in response to tumbling prices. Kuwait will reduce shipments of oil sold under long-term contracts by 5% starting 22 Jan 2009. Qatar will slash cargoes by as much as 6% in Feb 2009.

- Here we go again on the crude oil roller coaster. This time round it took 3 major factors to bring up crude oil prices, including OPEC production cuts, a repeat of the Russia-Ukraine natural gas dispute (while awaiting a Gas OPEC), and, the more worrisome one, an escalating Middle East conflict that has every chance of spinning out of control.

Given these major factors, it's a wonder crude oil prices aren't back at $100 already. This speaks volumes about the depth of the ongoing global economic collapse and how weak demand is. We're now quite a bit of distance away from $32.40 oil, pulling away from that low point for now, but it will have to take a really big collapse on the supply side to move prices much further than this. And at the rate things are collapsing, we could count out a big jump on the demand side.

Chinese New Year 2009 : China travel season starts early - another 2 billion trips

channelnewsasia.com :

China's massive Lunar New Year travel rush has begun early this year [2009] with hordes of migrant workers streaming out of cities where jobs have dried up due to a slowing economy. Lunar New Year for 2009 falls on January 26, but the annual exodus is already under way in major cities, with many of China's millions of migrant labourers heading home to an uncertain future. State media said previously that a record 2.3 billion passenger trips were expected to be taken during the Lunar New Year period, the country's most important holiday.

The impact of the global economic crisis was expected to boost this year's travel rush. The millions of workers who have migrated from poor and rural regions to the country's cities and coastal manufacturing regions have played a vital role in China's recent economic expansion. But slowing overseas demand for Chinese products has already shuttered many factories and was expected to throw millions out of work. The yearly exodus is marked by chaotic scenes as masses of Chinese desperate to return home overwhelm the nation's transport grid. Last year, the chaos was compounded dramatically by freak winter ice storms that spread misery across a huge swathe of the country.

- With over 100,000 factories in China reportedly shut down into the closing months of 2008, quite a few of these workers would probably not be going back to the cities. The Chinese government is trying to put in place some programmes in the rural areas and is going to spend a sizeable chunk of its massive reserves to try to prop up the economy. How effective that will be remains to be seen.

(2009-01-06 22:41:00 SGT) [Energy] Permalink

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