Tuesday November 11, 2008

NYMEX crude oil drops below $60 on demand destruction concerns

bloomberg.com :

Crude oil fell as equities dropped because of a worsening outlook for company earnings, renewing concerns the global credit crisis and financial meltdown will curtail energy demand. NYMEX crude oil prices have tumbled 58% since reaching a record $147.27 on July 11. Crude oil for Dec 2008 delivery rose yesterday [10 Nov 2008] on a $586 billion Chinese economic stimulus plan, but then dropped to $59.10, the lowest since March 20, 2007.

Oil slumped 10% last week as equities dropped, US fuel stockpiles rose more than expected and the US unemployment rate climbed to a 14-year high of 6.5%. The G20 called for lower interest rates. OPEC agreed on Oct. 24 to a production cut of 1.5 million barrels a day after global demand fell.

- So we're back on the "free crude oil" track. That's the ongoing joke nowadays anyway, but I'd suppose it's really un-funny considering the global economic collapse that is underway. Looking back, here's what I said earlier :

* at $105 oil on 4 Sep 2008 : the $100 level should hold, but if this support level fails, we could probably get ready to declare an imminent global economic collapse.
* at $92 oil on 16 Sep 2008 : There is no longer any point in being long oil, wheat, or any other commodities if indeed this is a global economic collapse which will completely wipe out demand, shrink economies ...

And here we are bouncing around and dipping below $60. At this price level, the tar sands should be shutting down as they are no longer cost-effective, requiring at least $70-$80 oil to break even - some say $90. Higher-cost producers such as Iran and Venezuela are also yelling for further OPEC production cuts, as their cost also happens to be around the $80 to $90 level.

Since we are in a period of hyper-deleveraging leading to hyperdeflation, one wonders what the situation would be like when the trend finally reverses itself. I suspect that the result would not be pretty.

See also :

1. NYMEX crude oil price falls below $90 as credit crisis deepens in Europe
2. NYMEX crude oil rebounds off $87.56 low as governments respond to credit crisis
3. NYMEX crude oil drops below $80 as financial market meltdown continues
4. NYMEX crude oil falls for the third day to below $72 on recession concern

(2008-11-11 14:26:39 SGT) [Energy] Permalink

Most popular blog postings on lowem.log :

1. Singapore MRT rail network length to double by 2020
2. 2010 Nissan Leaf electric car specifications : 107hp, 24KWh lithium-ion batteries, 100-mile range
3. Live spot gold price quotes chart on COMEX
4. 2010 Toyota Prius specifications released : 50 mpg, 1.8L, 134hp, Ni-MH, solar roof option
5. AVG Anti-Virus Free Edition 2011 direct download link
6. Real-time live gold and silver price quotes chart on COMEX
7. Singapore electric vehicles : Government agencies EMA and LTA to study EV introduction
8. Book review : Shut Down by William Flynn

Featured articles on lowem.log :

1. Book review : Shut Down by William Flynn
2. Singapore electric cars testing starts with 9 electric vehicles
3. Honda, GS Yuasa JV to make lithium-ion batteries for 2010/2011 Honda Civic Hybrid
4. 2010 Honda Civic Hybrid preliminary specifications released
5. 2010 Honda CR-Z hybrid, 2010 Honda Fit/Jazz hybrid models confirmed
6. 2010 Toyota Prius specifications released : 50 mpg, 1.8L, 134hp, Ni-MH, solar roof option
7. NYMEX crude oil recovers from $32.40 low after 2.2 mbpd OPEC production cut announced
8. Singapore : Nuclear power not ruled out