Oil prices back to below $50


OCrude oil fell below $50 a barrel after the Organisation of the Petroleum Exporting Countries deferred a decision to reduce output until its next meeting on December 17.

Crude oil for January delivery declined $4.70, or 8.6 per cent, to $49.73 a barrel at 12:52 p.m. on the New York Mercantile Exchange. Futures are heading for the biggest one-day drop since  October 10.

Brent crude oil for January settlement fell $4.83, or nine per cent, to $48.66 a barrel on London’s ICE Futures Europe exchange.

Oil prices have tumbled 66 per cent since reaching a record $147.27 on July 11, as the United States , Europe and Japan face their first simultaneous recession since World War II.

A global economic slowdown that has tipped a growing number of countries into recession has caused sharp falls in demand for oil.

Already, the falling prices have begun impacting on producer nations, especially Nigeria, as feared.

In spite of being the world’s largest seventh exporter of crude oil, the Federal Government, even with a benchmark of N45 per barrel, is presenting a deficit budget of N800bn for its 2009 budget.

The country depends mainly on crude oil exports for revenue, with analysts urging government to diversify the economy away from oil, to prevent future deficit budgets.

OPEC said it will use the time to gauge the impact of a 1.5 million-barrel-a-day reduction agreed to in October.

The group will trim production at its next meeting, its secretary general said today. Slowing growth means demand will be “much lower” than expected a month ago, OPEC said after a November 29, gathering.

OPEC ministers put off debate on a second cut in output in as many months during the November 29, meeting in Cairo .

The group will reduce crude production when it meets in Oran , Algeria , this month, OPEC Secretary General Abdalla el-Badri said. Oil demand is likely to drop further next year, he said.

Culled from www.punchontheweb.com