Crude Oil Futures Slide 10% On The Week
Crude oil for February delivery rose $1.16, or 3.3 percent, to settle at $36.56 a barrel at the close of floor trading on the New York Mercantile Exchange. A flurry of activity amongst short-sellers covering the wild ride that crude has taken over the last few months led to Friday’s gain.
The International Energy Agency’s revised down its 2009 demand estimate by 940,000 barrels per day to 85.3 million barrels per day.
Crude oil is off by more than $100 since reaching its peak of above $147 a barrel in July. The global economic recession has continued to slow demand, which may cause OPEC to cut their production even further. Since September, OPEC has cut 4.2 million barrels per day.
The February futures contract, which expires on Tuesday, sank to $33.20 on Thursday, the lowest point in nearly a month.
Traders, however, don’t believe that the low prices are here to stay.
The December futures contract is currently 58 percent higher than for the front-month contract. This phenomenon, in which the subsequent month’s price is higher than the one before it, is known as contango.
OPEC’s chairman says that the cartel is confident that their already pledged cuts will have an effect, but that if necessary they won’t hesitate to cut output again.
“I am convinced that these cuts will remove the current excess of crude oil in stock and re-balance the supply and demand at the world market,” Angolan Oil Minister Botelho de Vasconcelos said. “However, if it is necessary, OPEC will not hesitate to summon a meeting, meant to reduce the production for the balance and stability of the world market.”