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Oil prices have lost only 11,4%

Oil prices have lost only 11,4%
Volatility and uncertainty are the two keywords for the situation in the oil market during the first two months of the year.

Volatility and uncertainty are the two keywords for the situation in the oil market during the first two months of the year.

Volatility and uncertainty are the two keywords for the situation in the oil market during the first two months of the year. During this period oil prices in New York have lost 11,41% as they started the year at the level of around $46,5 per barrel, lying now at $41 per barrel, after an impressive rebound at the beginning of the week. These losses are limited if we compare them to the ones sustained from the historical levels of last July. Within that context, oil prices losses are as high as 72%, which is the biggest fall in just 8 months in the history of world oil markets.

During the previous days oil prices rebounded on speculation that Monday"s 10 percent plunge was excessive and a weaker dollar spurred demand for crude as a hedge against inflation. But this is a technical short lived reason that cannot offer a really and long lived support in oil prices.

The real problem for oil producers and crude prices is the deterioration of world economy that hurts demand. Analysts around the world insist that oil prices will recover after the world economy, pointing that a simultaneous recovery could send the fragile economy back to recession.

So the base for the surge of oil prices is the strenghthening of the world economy and especially this of the developing nations like China and India. But this, passes from the recovery of the U.S. economy. Until then, the majority of analysts don"t hesitate to characterize? all OPEC actions to stabilize oil prices ?useless. ?All OPEC measures to stabilize oil prices will not be fruitful until world economy recovers. If the global economy remains weak and no exogenous events hit the crude oil markets, oil prices will remain low,? a senior fellow at the U.S. Cato Institute and supervisor for research on natural resources Jerry Taylor says. Taylor said agreements by the OPEC member states do not necessarily translate into action by OPEC member states. According to him cheating on quotas is widespread and strategic economic advantages follow from the maintenance of excess production capacity. Less production capacity will increase spot prices in the future if and when demand exceeds production capacity.

Under these circumstances, OPEC summit at the March 15 in Vienna, becomes one of more critical gatherings in cartels history. But are oil producers able to give a reliable solution to oil markets problems? ?OPEC has yet to decide whether to cut output further when it meets on March 15 in Vienna and a first step would be to ensure full compliance with existing curbs? the group's president said on Tuesday. "We are going to evaluate the situation and after ... that, some decisions will be taken," Jose Botelho de Vasconcelos, who is also Angolan oil minister, told reporters. "At this moment we can see that there is too much oil in the market, that stocks are high." He said there was "a very strong commitment" to complying with cuts agreed so far, which have totalled 4.2 million barrels per day (bpd) since last September.

A Reuters survey on Monday found OPEC compliance was around 81 percent, close to record levels, but oil prices are struggling to stay above $40 a barrel for U.S. crude, more than $100 below last year's peak of $147.27."In case the cuts are not being carried out in their totality, it will be necessary for countries to comply (with the cuts)," the president said. "Everything will depend on our evaluation."

All these are good news for consumers, as ?for the moment- reduce possibilities for a surge of oil prices. Analyst on energy policy at Cascade Policy Institute Todd Wynn says the OPEC makes decisions based on profit maximization. ?It could boost crude prices, but it depends on the economy and the level of demand at the time. Undoubtedly, lower supply means higher price but it still could fall if demand shrinks more than the decrease in supply?.


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