Lisa Simpson
Aug 6,2009
In: Finance

Crude Oil Prices Have Fallen By More Than 10%:

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Oil prices have dipped below $60 a barrel on Friday. Crude prices have fallen by more than 10 per cent amidst growing pessimism that the economy is in turbulence. The companies will also come up with their quarterly reports soon.

The crude prices settled $59.89 a barrel on the New York Mercantile Exchange. At one point it traded at even a lower level of $58.72. The International Energy Agency (IEA) says that the demand for energy will drop by 2.9 per cent in 2009.

IEA says that the developing countries are poised for economic recovery. This will definitely help counter the effects of recession that has gripped the Western World and Japan. The agency expects the demand for crude to grow by 1.7 per cent next year.

The corporate houses will also declare their financial results in the course of the next two weeks and that will be an indicator of the health of the global economy. The corporate results will also indicate if energy use would be reduced further.

Crude prices had dropped to $30 a barrel. Prices had since been inching up steadily and reached a peak at $73. But the bleak job scenario means that energy usage will be low for some time. Prices have also plunged by 19 per cent ever since.

Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets, says that the focal point remains on demand. The quarterly results will be crucial for crude demand. Aluminum major (AA) declared the quarterly earnings. Its losses were lower than expected. A major ingredient in the construction sector, aluminum is an indicator of economic health. Its usage will also indicate the demand for fuel.

Well-known FMCGs like Colgate Palmolive, Pepsico and Johnson & Johnson will also come up with their financial results soon. The reports will also be an indicator of the oil outlook. If sales of household items drop then gasoline and crude usage will also drop. Americans, who are one of the largest users of gasoline may further slash their gasoline budget and use their cars less and less.

The retail price of gasoline fell by nearly two cents. The national average price is now $2.565 a gallon. Prices at petrol pumps have continued to drop for the last 19 days. In 2008, the price of gasoline was $4.10 per gallon. In Nymex trading the price fell about a penny to $1.6495.

It now remains to be seen how demand for crude is set to be.