Crude oil prices are up slightly this week
By Tom Stundza -- Purchasing, 2/27/2009 5:28:00 PM
Crude oil prices have increased this week from just under $38/barrel on Monday to $45 on Thursday and around $43 today, according to the Energy Information Administration as talk of production restrictions have resurrected supply concerns. However, since the February average had been $38 until the four-day surge, James Cordier, founder of OptionSellers.com, cautions it is unlikely oil prices will move much higher with the economy still mired in recession.
“Economic growth is still expected to be quite dismal and that is what is going to keep prices in check,” Cordier tells CNNMoney.com. Also, oil prices are still more than $100 down from their peak of $147 of last July because there has been a sharp reduction in energy use during this recessionary period. Oil’s slippage today dropped when government data showed the world’s biggest economy shrank at an annual pace of 6.2% in the fourth quarter, the most since 1982. Crude also fell as the dollar strengthened, reducing the appeal of commodities priced in the U.S. currency.
“We still have an oversupply in the market and we have low demand,” Sintje Diek, an HSH Nordbank analyst in Hamburg tells Bloomberg. “For the coming months, the situation will not really change.”
Also, futures today are close to spot: Crude oil for April delivery fell to $42.60 a barrel on the New York Mercantile Exchange at noon today.
It still is unclear whether the reduction in supply by the Organization of Petroleum Exporting Countries (OPEC) is having an impact on short-term prices .OPEC agreed on Dec. 17 to reduce oil supplies starting Jan. 1 to bolster prices. The 11 cartel members with quotas--that’s all except Iraq--cut output 3.8% to 25.3 million barrels a day in mid-February, according to consultant PetroLogistics Ltd. of Geneva.
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