Oil Market Outlook
Written by Writer on Monday, October 13th, 2008
The oil market last week slid under the weight of falls in global equity markets despite attempts by governments and central banks worldwide to curb the deepening financial crisis. The Dow Jones industrial average tumbled below 9,000 points for the first time since 2003 last Thursday, while West Texas Intermediate fell as much as $16 a barrel from a week earlier, to settle at a 13-month low of $77.70 on Friday.
The US Energy Department reported that fuel demand during the past four weeks averaged 18.7 million barrels a day, the lowest since 1999. At the same time, larger-than-expected increases in crude and gasoline stocks weighed down oil prices in the past weeks. The dollar’s appreciation against the euro, fuelled by the deteriorating European economies relative to the US, exerted further pressure on oil.
Opec has called for an emergency meeting on Nov 18, well ahead of the scheduled session in December. It has signalled a potential output cut after oil prices plummeted below $90 and continue to slide.
In the coming week, crude prices are likely to keep plunging due to weaker fuel demand caused by the financial crisis that is cutting deep into the US and European economies. The slump in stock markets, with no end in sight, will continue to drag crude prices down along with them.
Gasoline prices in Singapore continued their downward trend, falling more than $9 to close at around $89 a barrel on Friday following global crude losses. Tight supply and firm import demand, however, lent support to prices. Indonesia, the biggest regional importer, sought extra barrels of gasoline to build up stocks as national holidays ended and to cover supply shortfalls from a planned refinery turnaround this month. As well, upcoming refinery maintenance and peak summer demand in Australia will require more gasoline imports soon.
Looking forward, gasoline prices will be pressured by the weak global economic outlook and the continuing decline in US consumption. But market tightness and sustained strong demand from Indonesia through November will help limit any sharp price falls in Asia.
Diesel prices in Singapore last week extended their losses in a bearish market. Lack of incremental demand from major regional importers sent prices down to around $85 a barrel _ falling almost $20 from a week earlier. Meanwhile, arbitrage outflows to move excess barrels to Europe were seen as uneconomical in light of the recent slump in European diesel prices and high freight costs. This left middle distillate stocks in Singapore at extremely high levels.
The market outlook for diesel is likely to remain bearish as the weakening worldwide economy slows requirements. In the meantime, more supplies are anticipated to come from India and China at the end of the year, leaving the region with a supply surplus.
Prepared by Thai Oil Plc
Bangkok Post
