NEW YORK (TheStreet) -- Crude prices are likely to decline during the fourth quarter on signals of a demand slowdown, given the faltering economic recovery. In addition, crude oil inventory data indicate a rise in inventory levels, driving crude prices lower.
Diminishing appetite in the U.S. and China, both major oil consumers, has impacted global crude consumption. Worldwide consumption is forecast at 86.37 million barrels per day (mb/d), which has been revised lower. European oil demand forecast has contracted by 0.35 mb/d. Crude oil supply in the U.S. is expected to increase more than 3%, although demand is expected to weaken. Oil supply from the OPEC is forecast to rise from the last quarter to 35 mb/d. Therefore, rising supply coupled with sagging demand could pull back oil prices.
The gold-crude ratio is expected to strengthen in the current quarter, as demand for the yellow metal is expected to boost, whereas prices of crude futures will come under pressure. The gold-crude relationship seems to have ruptured in 2010. Crude priced drifted lower during the second quarter as the deepening European sovereign lifted bullion prices on the safe haven status, and the trend is continuing.
During July, oil consumption slumped to 19.10 million barrels per day (bpd) from 19.22 million bpd recorded in June. Jet fuel consumption in August was down more than 5%, whereas the drop in distillates consumption was higher than 7% in July. Sluggish economic growth has impacted oil consumption.
The benchmark WTI Light Sweet Crude futures climbed more than 4% in July. The NYMEX oil prices hit a monthly high of $78.95/bbl. Futures prices traded higher since the beginning of August. Oil prices jumped to $83/bbl on the NYMEX, up more than 12% since the beginning of the third quarter. However, the trend could not sustain and prices fell to two-month lows by the end of August, down more than 13%. The buildup in inventory and weakening hurricane threats pulled back oil prices from the monthly highs attained in August. High price volatility, with an upward bias, was seen in oil prices during September.
Integrated oil and gas majors Exxon Mobil(XOM), Chevron(CVX), ConocoPhillips(COP), BP(BP), and Total(TOT) gained around 8.3%, 19.4%, 17.0%, 42.6%, and 15.6%, respectively, during the third quarter.
