Money Matters, Simplified.
Crude oil falls below $80
by Jaspreet Virk - March 16, 2010 - comments
Organization of Petroleum Exporting Countries (OPEC) will be meeting for the first time in three months on Wednesday to discuss production policy.
Amid rising concerns that China's possible credit tightening policy might curb energy demand, and pressured by strengthening of the dollar, oil prices on Monday fell nearly 2 percent below $80 a barrel.
The oil prices plummeted $1.57 to $79.67 a barrel by 12:46 p.m. EDT. This price level is the lowest since March 2.
Crude prices had risen to $82 last week but now the analysts expect the prices to move down.
In a report Ritterbusch and Associates stated, "We have shifted from a bullish to a bearish trading posture. We will look for a resumption of selling by mid week.”
Phil Flynn, analyst at PFGBest Research in Chicago, was quoted by Reuters as saying that stronger dollar is “pressuring oil.”
"People are also watching what the Fed might say on interest rates at its Tuesday meeting," Flynn said. They are also eagerly waiting to know what China will do to control inflation.
Considering the fragile nature of the economy, the U.S. Federal Reserve is expected to keep the benchmark interest rate near zero for an extended period of time.
OPEC unlikely to increase production
Meanwhile, Organization of Petroleum Exporting Countries, (OPEC) will be meeting for the first time in three months on Wednesday to discuss production policy.
According to Saudi Arabia’s Oil Minister Ali Al-Naimi, OPEC is unlikely to increase oil production as supplies are expected to meet demand.
“We are extremely happy with the market, the economy is doing well, it will do better down the road, so I don’t see any reason to disturb this happy situation,” stated the minister.
Countries like Nigeria, Angola, and Venezuela want OPEC to change production quotas and increase targets within the group's quota system.
But OPEC is not expected to make any decision on this issue when it meets this week.
Fed to keep benchmark rate near zero
Back home, though the nation’s economy is on the road to recovery, it is still fragile. The companies are expected to increase and hire more employees, but the U.S. job market is still very weak.
Considering the fragile nature of the economy, the U.S. Federal Reserve is expected to keep the benchmark interest rate near zero for an extended period of time.
Unlike United States, China is contemplating hiking bank reserve requirement ratios within this week, following inflation concerns.
According to a data released earlier this week, consumer inflation in China has risen to a 16-month high. To tackle soaring inflation, Chinese officials are likely to introduce credit tightening policy.