Weak Demand Triggers Dip in Oil Prices

October 03 00:00 2011

New York, October 3 (RainbowNewsLine.com) – Europe’s continuing debt crisis and the weak US economy are pointers towards a slack demand for oil and as such oil prices have tumbled to near $78 a barrel. Benchmark oil for November delivery dropped $1.17 to $78.03 a barrel in electronic trading in New York Mercantile Exchange at early afternoon Bangkok time.
On Friday, benchmark oil had dropped $2.94, or 3.6 percent, to settle at $79.20 per barrel in New York. This has been the lowest level since Sept. 29, 2010. In London, Brent crude was down S1.41 to $101.35 per barrel on the ICE Futures Exchange. Since personal incomes of Americans are showing a decline, they are likely to curb spending on consumer items and fuel. As such, it is expected that oil prices could continue to fall.

Another reason for the oil prices to drop is the slump in Asian stock markets on Monday and a surge in the value of the dollar. Since crude is generally traded in dollars, any rise of the dollar makes it more expensive for buyers with other currencies, thereby reducing demand.

Continuing economic troubles for the US heading into October, which is usually a slow month in oil business, could affect demand for oil. Another reason is that the summer driving season is over and there is still time for the heating demand to pick up.