The price per barrel of oil has fallen to below $40 and ended the day at $39.73.

Demand for oil is still continuing to fall due to the world economic crisis. I thought again that the price had hit a threshold at around $45 and the idea of $25 per barrel put forward by Merrill Lynch seemed way off, but is looking ever more likely!

This new low price has happened despite output cuts by Opec of some 2.2 million barrels per day earlier this month in order to hold up the price for the Opec members.

With China cutting its interest rates again this week to 5.31% due to economic problems hitting their country, which is leading to lower demand for oil which is putting further downward pressure on the oil price, after such high demand earlier this year which pushed the price up to a record $147 a barrel.

The price of Nymex crude has fallen to below $50 per barrel today finishing at $49.62.

Opec is considering cutting production by another 1.5 million barrels a day in order to prop up the price. But with the stocks of oil in the US piling up and increasing by more than expected the dollar price of oil is not looking to go up for some time.

With world economies shrinking and many reporting to be in recession the demand for fuel is reducing and therefore putting further downward pressure on the price of oil. Also, with China facing possible unrest, as unemployment increases due to weak demand for their products due to the world slowdown, where no so long ago China was one of the driving forces behind the oil price rise.

Oil prices are continuing their turbulent ride with Brent Crude falling to just over $50 a barrel earlier this week.

Nymex crude fell to just under the $55 a barrel mark, which represents a fall of 62.5% from the high of $147 a barrel in July 2008! The Nymex barrel price has recovered slightly today by around 2.42% to $57.52. With oil inventories on the rise in the US because of the economic down-turn and with the demand from China being weaker than originally predicted by investors, the price per barrel is expected to remain low for a while.

US Energy Department oil reserves for November 2008 – Oil reserves

This week Alistair Darling is asking banks to support business customers in these difficult times and not just when times are good. The Chancellor has said that it is vital to support small businesses through the downturn and announcing an extra £4 billion of support.

As a part of the multi-billion pound bailout deal put forward to the UK’s leading banks by the government was a condition that they restore the level of funds available to small businesses to those of 2007 levels.

World interest rates

This week also saw the Chancellor Alistair Darling re-stating his support for the Bank of England, despite criticism that it had been focusing too much on inflation. The Chancellor confirmed that there is no reason to change the Bank’s main goal of keeping inflation to close to the 2% target. The change in words or in the way the message has been sent to the Bank of England is about the discretion over the horizon over which inflation is brought back to this target level.

We watch and wait to see what the Bank of England does next week with interest rates where we see countries around the world have again been cutting their rates. We saw the US Federal Reserve cut interest rates from 1.5% to 1% on Wednesday of this week and Japan cut their rates from 0.5% to 0.3%.

It is of no surprise that the US is cutting interest rates when it was confirmed by figures from the Commerce Department that the US economy shrank at an annualised rate of 0.3% between July and September. Consumer spending, which makes up two-thirds of the US economy, also shrank by 3.1%, which is the first contraction since 1991.

The chance of a interest rate cut in Europe is more likely where inflation for October across the 15 nations that share the euro fell to an annual rate of just 3.2%. The rates presently sit at 3.75% and are expected to be cut by a half-point to 3.25%.

The motor industry

It is good to recognise the good news out there with Volkswagen going against the economic slowdown and reported increased profits. VW’s net profit rose 28% to €1.2 billion ($1.6 billion; £950 million) in the period July to September. Their sales have been boosted by three out of the four BRIC emerging market economies, China, Russia and India, which has off-set lower demand in Europe and the US.

As a contrast to this Japanese carmaker Suzuki issued a profit warning this week and the company blamed the fall in sales down to India, which is one of their key market. The strong yen and higher material costs have not helped their figures where they have said that their net profits will probably fall 25% to 60 billion yen ($612 million; £379 million) in the year to the end of March.

Trouble for pension fund trustees

There is a double whammy for pension funds right now with falling stock markets reducing fund values. But pension scheme trustees are being warned that they should not be too quick to start demanding extra cash from companies at this time which might put too much pressure on those companies at a very difficult time. A longer term view is needed and when the economy is straining with a huge turn-down if pension trustees were to start asking for extra funds might be enough to tip some companies over the edge.

News on the banks front – Barclays bank has secured £7.3 billion of extra investment cash from the Middle East this week. The money is being raised on the whole from state investment funds and royal families of Qatar and Abu Dhabi and unlike some of the other top banks of the UK, Barclays will not be accepting a cash injection from the government. A bank that has been troubled by the world banking crisis HBOS has been approached by a mystery bidder at a time when the UK government has given the green-light for the takeover of the company by Lloyds TSB.

Alitalia appears to be near to a rescue deal being agreed, but as with all the rescue deals posed so far the unions have been putting obstacles in the way. In this latest deal five out of the nine unions are still not backing this new deal, which does seem bizarre because unless the company can secure additional finance, should this deal not go through, the company will go bankrupt. Investment group Cai has said that the deal will still go ahead, despite the lack of agreement with the trade unions.

More on oil price volatile

Oil prices finished the week slightly higher on the week ending at $67.59, as we see results from the oil giants at record levels. For example, US oil group Chevron has seen its latest profits more than double when it reported its third-quarter results to September showing a net profit of $7.89 billion (£4.9 billion), which is up from $3.72 billion for the same period last year.

Exxon Mobil has also made record profits after reporting that it made a profit of $14.83 billion (£8.97 billion) between July and September, representing a rise of 58% on the same period last year. Oil firm Royal Dutch Shell has also reported excellent profits as a result of record oil prices with a jump of 71% in its third-quarter profits to $10.9 billion (£6.6 billion). BP reported earlier that its profits during this same period more than doubled to $10bn.

British Prime Minister Gordon Brown has called for oil price stability and has made a special trip to the Middle East in order to ask the Gulf states to help stabilise prices with the aim to help tackle the global economic crisis. The UK prime minister held talks with Saudi ruler King Abdhullah at the King’s Palace in Riyadh being joined by his Energy Secretary Ed Miliband.

On the jobs front we see more redundancies

American Express has revealed plans to reduce its workforce by around 7,000, representing a cut of about 10%. This together with a freeze on some salaries to reduce costs and a suspension to pay rises for management next year are part of a $1.8 billion (£1.1 billion) cost cutting exercise.

On the housing sector

There has been a slight change on the number of mortgages approvals for house purchases in the UK in September. According to the Bank of England 33,000 home loans were approved in September representing a small rise of 1,000 compared with the record low of the previous month. It is thought that this rise in mortgage approvals is partly due to the government raising the stamp duty threshold to £175,000 in early September.

However, despite the above improvement there is trouble on the repossession front with the number of people losing their homes climbing sharply. The number of repossessions in the second quarter of the year was 11,054, which is up by 71% over the same period last year.

End of the week saw:
Stock exchanges:
FTSE 100: 4,377
DOW: 9,325
S&P: 967
Nikkei: 8,577

Currencies
UK Sterling £ to US Dollar $ 1.61620
UK Sterling £ to Euro € 1.2727
UK Sterling £ to Aus $ 2.44394
US Dollar $ to Euro € 0.787465

Commodities
Crude oil – $67.59
Gold – $725

Oil prices have continued to fall on Monday, despite last week’s 1.5 million-barrel-a-day cut in production from oil producers’ cartel Opec.

US light sweet crude for delivery in December dropped to a 17-month low of $61.30 a barrel before recovering somewhat to trade at $62.42.

London Brent crude fell below $60 a barrel before recovering to $61.32.

The falls have been blamed on worries about how much a global economic slowdown will hit demand for oil.

“The mood is fairly negative reflecting worry about the international economic outlook,” said David Moore at Commonwealth Bank of Australia.

“If there is further weak economic data in the US or Europe, prices could come under more downward pressure.”

News reported by The BBC

The end of the week saw the price of oil at just $71.75 per barrel having dipped below $70 earlier in the week.

The price has risen towards the end of the week on the back of OPEC bringing forward its emergency meeting by three weeks to next week. Analysts are expecting the cartel to cut output at this meeting, which would boost prices.

It is dificult to say where the price will go after this – will the world slow down keep a downward pressure on the oil price depsite the reduced output or will the price stabalize now.

Good news on the oil reserves though from Cuba, where they are claiming to have 20 billion barrels in of-shore fields, which is twce their original estimates. If the estimates of these reserves is correct, Cuba’s oil reserves would be nearly as much as the reserves in the US, which is around 21 billion barrels.

You can see the worlds oil reserves here

It seems crazy that only in June of 2007 the Independent reported:

“In recent years the once-considerable gap between demand and supply has narrowed. Last year that gap all but disappeared. The consequences of a shortfall would be immense. If consumption begins to exceed production by even the smallest amount, the price of oil could soar above $100 a barrel. A global recession would follow.”

The price of oil has jumped by more than $16 to $120.92 a barrel, the biggest one-day gain on record.

There is uncertainty about how the government’s financial bail-out plan will work, causing investors to switch to perceived safe havens such as oil.

Others believe that the US government’s bail-out plan will help the economy, increasing demand for oil.

Concerns also persist about supply as production in the Gulf of Mexico is still affected by Hurricane Ike.

However, analysts said the US rescue package was key.

“[It] has changed sentiment in the oil market,” said analyst Paul Harris from Bank of Ireland.

At one point during trading, the price of oil rose by more than $25. The volatility in the price has been exacerbated by the fact that the contract for the supply of oil in October expires on Monday.

The contract for oil to be delivered in November was not up as sharply. It rose by $6.62 to $109.37 in New York.

Last week oil traded as low as $91 a barrel. It had fallen from the peak of $147 a barrel it reached in July.

News reported by The BBC

Oil prices have fallen further amid concerns that a slowdown in the global economy will dent demand.

US light, sweet crude fell $4.56 to settle at $91.15 a barrel in New York while Brent crude was down $5.02 to settle at $89.22 in London.

Oil prices fell $5 a barrel on Monday as global stock markets sank and news emerged that US refineries had not been damaged as expected by Hurricane Ike.

The oil price has fallen from highs of above $147 a barrel in July.

“If the economic turmoil continues, demand will continue to drop,” said Jonathan Kornafel, of options trader Hudson Capital Energy.

“It’s a bit of panic in the markets,” he added.

Market worries

Oil prices continued to fall despite reports of an attack on a Royal Dutch Shell pipeline in Nigeria.

A key market concern on Tuesday was the future of insurance giant AIG, which some feared could be the next financial giant to fold.

“AIG has more to do with the oil price right now than the Saudis do,” said Larry Grace, an analyst with Kim Eng Securities.

If more firms go bust, there are fears that gaining credit will be even harder, hitting both large firms and individuals.

If this happens then consumers are likely to seek ways to tighten their belts more, such as reducing their petrol consumption.

News reported by The BBC

Opec has told its members to strictly limit their production to agreed quotas as Brent crude dipped below $100 a barrel for the first time since April.

After talks in Vienna, Opec president Chakib Khelil said the measures to curb over-production amounted to a cut of 520,000 barrels a day within 40 days.

North Sea Brent fell $4.54 to $99.04 on Tuesday before rising to $100.34, while US Brent fell $3.08 to end on $103.26.

Prices have sunk from a record of more than $147 a barrel seen in July.

The price has since fallen by nearly 30% as a global economic slowdown has reduced demand for oil.

Supply has also been increased in recent months by some Opec members – principally Saudi Arabia.

Meanwhile, Indonesia has said suspended its membership of Opec.

“The conference regretfully accepted the wish of Indonesia to suspend its full membership in the organisation and recorded its hope the country would be in a position to rejoin the organisation in the not too distant future,” Opec said in a statement.

Compromise

After the late-night talks in Vienna, the group announced it had decided to “strictly” comply to the production ceilings agreed in September last year, which amount to 28.8m barrels a day excluding Indonesia and Iraq.

It linked the falling price of oil to falling economic growth, a stronger US dollar, easing geo-political tensions and greater supply.

Supply has also been increased in recent months by some Opec members

“All the foregoing indicates a shift in market sentiment causing downside risks to the global oil market outlook,” a statement said.

The effect of the measures, according to Algerian Oil Minister Chakib Khelil, who chaired the meeting, will be a cut of about 520,000 barrels a day.

“Actions [to curb output] will be taken by members as soon as they can, that means in the next 40 days,” he said.

Opec members will re-assess the situation when the meet again at the end of the year.

The BBC’s Bethany Bell in the Austrian capital says the move is a compromise meant to avoid new turmoil in the oil markets, but it also reflects Opec’s attempts to stop the recent falls in global prices.

News reported by The BBC

Crude oil prices have fallen sharply, after oil facilities in the Gulf of Mexico were spared by Hurricane Gustav.

US crude fell to a five-month low of $105.46 a barrel before closing down $5.75 at $109.71 while London’s Brent crude fell $1.07 to close at $108.34.

While still high in historical terms, crude is now significantly below the record $147 a barrel hit in early July.

Analysts said the fall in global demand for oil caused by economic weakness in the US and Europe was another factor.

The sharp fall in prices initially led to a strong rally on US stock markets although this later petered out.

The Dow Jones opened more than 240 points higher in early exchanges but this enthusiasm quickly petered out, leaving the benchmark index down about 30 points by mid-afternoon.

This reverse came in the wake of less positive economic news, with closely-watched reports indicating that activity in US factories contracted last month while construction spending fell by 0.6%.

“The speculators, hedge funds, and other investors are getting out of this market on a major scale” Jim Ritterbusch, oil analyst

Figures from the Institute for Supply Management for factory activity were weaker than expected, prompting one economist to say the US was on the “precipice of a recession”.

“It tells us that the manufacturing sector remains essentially stalled,” Mr Resler added.

Hurricane Gustav weakened as it hit the US Gulf of Mexico coast south-west of New Orleans and was downgraded to a tropical storm after hitting Fourchon, a port in Louisiana.

Initial checks by some US refiners reported no damage from Gustav, which had originally been classed as the biggest threat to the sector since devastation from Hurricane Katrina in 2005.

Falling demand

Fears of lower global demand for oil also pressured crude prices.

Oil traders speculated that slowing global economic growth would dampen demand for crude, even in booming China and India.

“The magnitude of this pullback suggests the market is fully focused on demand destruction,” said oil analyst Jim Ritterbusch.

“The speculators, hedge funds, and other investors are getting out of this market on a major scale.”

Opec, the association of oil producing countries, holds its regular meeting next week in Vienna, amid speculation some of its members – such as Iran and Venezuela – would like it to tackle falling oil prices.

Opec members produce about 50% of the world’s oil supply.

News reported by The BBC