Oil prices slump towards US$40

Oil prices slump towards US$40

LONDON

Saturday, December 6, 2008

CRUDE oil prices slumped close to US$40 a barrel in trading yesterday as the United States lost a stunning half a million jobs in November, raising prospects of a steep drop in energy demand.

In London, Brent North Sea crude hit US$40.72 a barrel, the lowest level since the start of 2005. Light sweet crude for January slid to US$42.00 in New York, also a near four-year low.

Later on London's InterContinental Exchange (ICE), Brent North Sea crude for delivery in January recovered to stand at US$41.47, down 81 cents from Thursday's close.

Meanwhile, the International Energy Agency yesterday cut its forecast for world oil demand growth in the next five years, the latest in a series of downward revisions in response to the slowing global economy.

Oil demand is expected to grow by 220,000 barrels per day (bpd) in 2009, the agency, which advises 28 industrialised countries, said in its Medium Term Oil Market Report.

The Paris-based agency gave its previous forecast, for growth of 350,000 bpd, in a monthly report on Nov 13.

The IEA also said new investment in oil refineries is expected to boost crude distillation capacity in the next five years at a faster pace than growth in demand, a trend that would ease any strain on supplies.

"Refinery investments are forecast to add 8.0 million barrels per day of crude distillation capacity by the end of 2013, significantly outpacing expected demand growth," the report said.

Global oil product demand is expected to grow by 1.2 per cent on average, or about 1 million bpd, every year between 2008 and 2013, from 86.2 million bpd to 91.3 million bpd.

Agencies