Oil prices are in fear of a strong dollar

Oil Prices: OPEC encouraged the growth of dollar

In brief: The growth of the dollar has a favorable backdrop for OPEC to make further attacks on the oil market. Analysts expect the stabilization of oil prices in the foreseeable future.

Strong dollar saves OPEC from large losses in exports of oil, putting into question the willingness of OPEC to defend a certain price. This month, oil futures have fallen in price on American sites by 26%. 18-month intraday maximum of $ 87.15 per barrel on Thursday replaced a minimum of $ 64.24 per barrel. This is the lowest point since July 30. On Thursday, crude oil price set at $ 68.01 a barrel on the background of large stocks of raw materials, problems in Europe and the stock market crash.

During the same period the euro sank 5.2%. As the worldwide payments for oil produced in U.S. dollars, a strong U.S. currency has increased the purchasing power of oil exporting countries, particularly on imports from Europe. Prior to OPEC, which accounts for about 40% of global oil production, has a difficult task. Making the countries to cut oil production seriously, because it will reduce their revenues. And at the current market conditions it may be more difficult, since the region went to the strong dollar inflows for exported oil. “Now there is little reason to cut its oil production, as it was before a weak dollar, said an analyst at IAF Advisors in Houston Kyle Cooper. Traders and analysts believe that in the near future, prices will fall and remain below a comfortable level for OPEC $ 70 – $ 80. OPEC representative from Libya, Shokri Ghanem, saw prices fall in the last wake-up call. According to him, OPEC is closely monitoring the situation and he also argues that the nonspecific decline in prices could provoke a decline in production. As announced last week by the International Energy Agency, OPEC is producing more oil than the world needed, given the low demand growth and increased oil production in other regions. OPEC promised to cut oil production to 4 million barrels per day in September 2008, when after reaching a historic high of $ 150 per barrel, the market started to fall. Since the beginning of last year the price of oil kept at an average of $ 70 in spite of the fact that OPEC has kept its promise to only half. With the growth in oil demand outside China and some other countries, and increased world oil reserves. Now related concerns continue to grow at a time when the fate of the European economy in question.

According to forecasts Edison Armstrong, senior manager of market research companies Tradition Energy of Stamford, Conn., the price of oil will soon reach $ 65 a barrel. “If the cost of the main contract for long delayed below $ 70, you will hear, as OPEC will prevent the need to adhere to quotas,” – he said. A weak euro will put pressure on crude oil, says Mr Cooper. “While the euro did not reach the bottom, oil prices will continue falling,” – he adds, noting also that it could amount to at least another $ 10. In the U.S., which are considered the world’s largest consumers of energy, the largest oil reserves are concentrated in Cushing, Oklahoma, which is the point of delivery of oil futures contracts traded on NYMEX. This too will have a significant pressure on prices Oil reserves are outside the U.S. are also high, said analyst Chicago brokerage house PFGBest Phil Flynn. On Thursday, prices for futures contract nearest delivery month Brent crude fell below $ 72. This month, the fall was more than $ 17. Economic crisis in Europe “took off his mask with the real fundamental indicators, which show the weakness of the oil market, he said. Mr. Flynn expects another shock to the oil market because of a combination of these factors, which result in lower prices to $ 50 per barrel. According to the latest figures from the U.S., for the bulls is taking a favorable situation. Refineries increased processing volumes of oil to 15.2 million barrels per day. This is the highest level since Aug. 29, 2008 Demand for diesel and fuel oil has exceeded 4 million barrels a day the first time since February 2009. However, the bears point out that American oil reached its highest level since early December, exceeding the five-year average rate.

Anrey Torbinski
2010-05-22 07:03, Economics.

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One comment к “Oil prices are in fear of a strong dollar”

  1. Guava Says:

    Yes, oil prices down as a stronger dollar…

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