Oil below $100 will prompt OPEC cuts: Credit Suisse
Written on September 3, 2008
Oil’s sharp two-month decline is likely to end soon as producer cartel OPEC will probably cut production once prices dip below $100 a barrel, the head of commodities research for Credit Suisse said on Wednesday.
Production curbs should keep prices between $100 and $110 for the rest of this year, while grain markets should rally as traders look past positive short-term weather conditions towards the bigger longer-term risks to world food supplies, Tobias Merath told Reuters in an interview.
“On oil, I think the bulk of the correction is behind us,” Merath said. “We think it can test $100 or drop slightly below it in a couple of weeks, but it should not remain below $100 on a sustained basis.”
Oil has tumbled more than $6 since Friday, touching its lowest in five months after early signs that a weakened hurricane Gustav caused little damage to U.S. oil installations. On Wednesday, U.S. crude fell 52 cents to $109.19 a barrel, extending its nearly $40 slump since its July 11 record high of $147.27.
Merath said weaker demand for crude oil from the United States and OECD countries in recent months has offset higher demand from emerging markets, keeping overall consumption flat.
“At the same time, OPEC countries are producing quite a bit of oil since March and that is apparently working quick payday loan. But the moment oil drops below $100, they will be quick to cut back production,” he said. “We expect a recovery in oil prices in 2009. We expect prices to hover between $115 and $120 in 2009.”
The OPEC next meets on September 9 in Vienna. Most commentators have predicted it would leave formal output targets unchanged, but there have been calls from within the group to rein in production above official ceilings.
FOOD CRISIS NOT OVER YET
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