Tuesday November 11, 2008 | ${log.root}/lowem.log Inflation, Investing and Everything |
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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. 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 (2008-11-11 14:26:39 SGT)
[Energy]
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