Oil prices continued their months-long retreat today, falling again below $70 a barrel despite widespread expectations that Opec will slash output at its emergency meeting in Vienna on Friday.
Concerns about shrinking oil demand because of the global economic crisis outweighed the expected cut in supply, analysts said.
The price of West Texas Intermediate crude for December delivery fell $2.72 to $69.46. Brent crude also dropped $2.72 to $67.
“The market is pricing in the probability that there will be a production cut,” said Robin Mills, a Dubai-based oil analyst. “I don’t think anyone has control of the markets right now. They’re battling some very negative sentiment.”
As prices creep downwards towards producers’ budget targets, few doubt that Opec will move to defend prices. The question, however, was whether an output cut would have a measurable effect, said Dalton Garis, an associate professor of economics and market behaviour at the Petroleum Institute in Abu Dhabi.
“They’re not paying any attention to Opec at all,” Prof Garis said of traders. “I think they’re really looking at demand more than supply.”
With demand for oil shrinking in the West, all eyes are on demand data from China, which announced on Monday that economic growth slowed to nine per cent in the third quarter, from 10.2 per cent three months earlier.
The rapid fall in the price of oil has already begun to take a toll on producers.
Barham Salih, the deputy prime minister of Iraq, told Reuters that the country would have to amend next year’s budget, which had been based on a price forecast of $80 a barrel. The US$78.7 billion (Dh289.02bn) budget still has to be approved by parliament.
Also today, EFG Hermes predicted that the growth in Kuwait’s GDP next year would slow to 3.1 per cent from 5.7 per cent because of lower oil prices.
