Despite strong GDP Growth, Energy Prices Sink Lower
Oil Market Summary
for 01/25/2010 – 01/29/2010
Crude oil futures slipped below $73 a barrel for West Texas
Intermediate late Friday as a temporary boost from strong GDP figures failed to
last and let prices sink to a one-month low.
Earlier in the week,
China,
weak refinery demand and slumping tech stocks all conspired to keep energy
prices low, with prices oscillating around $73 a barrel.
U.S.
gross domestic product grew at a seasonally adjusted 5.7% annual rate in the
fourth quarter, the Commerce Department reported on Friday, its fastest pace in
six years. The previous quarter had registered growth of 2.2% and the year-ago
period saw a downturn of 5.4%. For 2009 as a whole, GDP contracted by 2.4%, the
worst record since 1946.
But analysts did not expect U.S. GDP growth to continue at
the same pace in the current quarter, and concerns remained about
China’s
growth after authorities clamped down on bank lending.
Capacity utilization at
U.S.
refineries stayed near the 20-year low reached the previous week (not counting
hurricane-related shutdowns), and inventories of distillates continued to rise.
The dollar, which had firmed earlier in the week after
President Obama’s State of the Union message and the confirmation of Ben
Bernanke for a second term as chairman of the Federal Reserve Board, rose to a
six-month high after the GDP news, keeping downward pressure on oil prices. The
euro, hurt by
Greece’s
debt problems, dipped below $1.39 by Friday afternoon.
While most analysts remain cautious about economic
prospects, Morgan Stanley put out an upbeat report on energy prices,
forecasting that inventories would start to fall sharply in the second half of
the year or OPEC would increase production on the back of stronger economic
growth, particularly in emerging markets. The bank predicted a price of $95 a
barrel for crude by the end of this year, $100 for 2011, and $105 for 2012,
well ahead of consensus estimates.
The Morgan Stanley analysts noted that demand for gasoline
alone in
China and
India
continues to grow despite economic sluggishness.
In Davos, too, oil executives talked their book, making the
case that there is simply no substitute for oil and the world economy needs
more energy.
Oil prices emerged from the week somewhat battle-tested,
analysts said, having withstood a sharp drop in prices of copper and other base
metals on Thursday, as well as weak equities and a strengthening dollar. But
weak demand continued to weigh on the market.
This article was written by
Darrell Delamaide for Oilprice.com who focuses on Fossil Fuels, Alternative
Energy, Metals, Oil Prices and Geopolitics. To find out more visit their
website at: http://www.oilprice.com
