Business | Oil & Gas
DME Oman less sensitive to gloomy US growth forecasts
The past trading week saw oil prices on the April delivery month for the light sweet West Texas Intermediate (WTI) benchmark soar to $111.80 before closing at $104.50. The May contract had been up to $110.40 before closing the week at $101.80.
- By Dalton H. Garis, Special to Gulf News
- Published: 00:16 March 23, 2008
Abu Dhabi: The past trading week saw oil prices on the April delivery month for the light sweet West Texas Intermediate (WTI) benchmark soar to $111.80 before closing at $104.50. The May contract had been up to $110.40 before closing the week at $101.80.
Natural gas on Nymex followed suit on March 17. It went from $10.18 per million btu to $9.16, a 10 per cent drop in one day. Notably, gold experienced an almost identical change, going from $1,036 an ounce to settle at $922 on Thursday.
Prior to the end of last week, with the US dollar reaching new lows against the euro and Japanese yen, all commodities had continued their relentless climb to ever loftier prices, reflecting their ancient role as a hedge against inflation.
But by the end of the week this had changed, as traders wondered if they might be over-buying at a time when the US economy - which represents about one-fifth of total world demand - was clearly slowing down. Supply and demand fundamentals for petroleum markets reasserted themselves in the minds of New York and London energy traders.
Local energy market trading, however, took a distinctly different path, with the Dubai Mercantile Exchange (DME) Oman heavy sour going from $99.80 for the high in after hour trading to $97.88. It was decidedly less sensitive to expected negative economic projections for the US.
And for good reason: local markets are more attuned to China and Far East demand, which continues to be robust. China's demand growth is dominated by long-term infrastructure expansion rather than just consumer demand.
The DME Oman, reflecting petroleum values in emerging economies, did not suffer any severe retrenchment.
- The writer is associate professor of Economics and Petroleum Market Research at The Petroleum Institute, Abu Dhabi.
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