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Crude back above $50 but analysts say further falls on way
24 Nov 2008Oil bounced back above $50 a barrel today, tracking Asian stock markets higher after sinking to a three-and-a-half-year low last night.
Crude put on 76 cents to $50.18 in New York although it was still below $50 in London, up $1.13 to $49.21. The rally, inspired by a solid performance by Asian stocks, came a day after oil fell below $50 for the first time since May 2005.
However, analysts warned the recovery would be short-lived with prices set to fall further as demand dwindles during the global recession.
Analysts at ODL Securities said: "This downtrend has provided us with small pockets of consolidation on the way down but no real corrective rally. This suggests the down move is very powerful, with many traders looking to sell into any bounce. The short, medium and long-term trends are all bearish. As the recession continues, the outlook for oil demand is very bleak especially with the dismal condition of the US automobile industry."
Despite today's slight rise, oil is still 12% down on the week and almost $100 cheaper than at its peak of $147 in July.
"The economy is pulling everything down like a black hole," said Anthony Nunan at Tokyo-based Mitsubishi. "Until the economy stabilises, it will be hard for oil to put in a bottom."
The price falls brought more Opec members out in support of further output cuts. Libya's top oil official said the cartel may decide to reduce supply further at its informal meeting in Cairo next week if it finds members have implemented a previous decision to lower output.
Reader views (1)
We can expect dog-eat-dog amongst the OPEC countries as per the last recession (1989-92 for those with long memories). Unfortunately, UK duty (50p/litre) and VAT on duty (another 7.5p if the rate falls to 15%) plus distribution costs at 10p/litre mean petrol cannot fall below 68p/litre even if oil royalties were suspended and refining were free. Add another 5p/litre for diesel as this government thinks fuel economy a more punishable sin than fuel extravagance (the diesel you put in your VW Polo is taxed more heavily than the Super Plus petrol you put in your Ferrari) and you get the message. Life is not going to get any easier under any government.
The solution is: a taxpayers strike. Not my territory but I leave it for others to work out how that will dislodge the smug political class that believes government is simply a matter of taking their turn at abusing the energy consuming taxpayer.
- Anonymous, England, 23/11/2008 15:31
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