Even with this bigger than expected cut, crude oil futures are trading down sharply. Sentiment is still very dark in the oil market and demand is falling rapidly.
Oil is going down on good news, and we expect even lower prices ahead. Oil traded lower with the dollar having its worst day ever against the euro and with a bigger than expected cut by the oil cartel. Crude oil futures dipped below 40 dollars a barrel for the first time in more than four years and yesterday the API said supplies climbed for the 11th time in 12 weeks.
Word on the Pits
“They [OPEC] are facing the distinct possibility of oil falling to 30 dollars a barrel and even lower.” Addison Armstrong, director of market research for Tradition Energy in Stamford, Connecticut.
“The OPEC announcement looks big on first glance but really isn’t. They are playing with smoke and mirrors.” Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc.
The oil market completely ignored OPEC decision and traded sharply lower on the news.
UBS Expects 70 Dollars a Barrel by the End of 2009
In a research note entitled "Ten Surprises for 2009", UBS expects a combination of supply discipline from OPEC and the beginning of a moderate global economic recovery in the second half of 2009 to stabilize oil prices near current levels and then lift them toward US$70 by year's end. Crude oil futures are showing contango and futures for delivery in three months time are almost 20% above January futures.