Business | Oil & Gas
Opec cuts may not halt price plunge
Opec's first production cut in almost two years may fail to staunch a collapse in oil prices as roiling stock markets signal that the financial crisis has spread to emerging markets, the centre of demand growth.
- Bloomberg
- Published: 20:38 October 23, 2008
Vienna: Opec's first production cut in almost two years may fail to staunch a collapse in oil prices as roiling stock markets signal that the financial crisis has spread to emerging markets, the centre of demand growth.
The Organisation of Petroleum Exporting Countries will likely slice output by at least 1 million barrels on Friday at a meeting in Vienna. It may not be enough. Morgan Stanley warned that global demand may fall this quarter, normally the peak period for oil consumption.
"The correlation between Opec supply cuts and price increases is near zero," said Ben Dell, an analyst at Sanford C. Bernstein & Co. in New York "All a cut does is reaffirm we're oversupplied and demand is weakening. Developed economies are already negative and emerging markets are slowing."
Crude oil for December delivery fell to a 16-month low of $66.75 (Dh 245) a barrel in New York Wednesday as Argentina's seizure of pension funds rattled markets around the world. Options trading shows crude prices are likely to extend their slide and may trade below $55 in December, Merrill Lynch & Co. said this week. Oil has fallen 54 per cent from a July 11 record of $147.27.
Argentina's main stock index had its biggest three-day loss in 18 years Wednesday, on concern the government seizure of $29 billion of private pension funds will further undermine investor confidence.
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