Oil prices have been moving lower today in reaction to bearish inventory data from the Energy Department. Going into today’s inventory report, analysts had been looking to see a rise of 1.25 million barrels and were stunned to see the actual reserves rise by 4.3 million barrels.
In reaction to today’s report, prices have dropped down to $90.18, down $1.72 on the day, and for a brief period were trading under the psychological $90 mark down to a low of $89.26.
While prices falling from their recent run to $100 is definitely a good thing for all of you out there that are fearing inflation, it would be wise not to read too much into this move, or better yet, do not expect to see prices retreating too much further south.
According to the International Energy Agency, world demand continues to accelerate. It estimates that global consumption will run at an average of around 87.8 million barrels a day. At this rate, 2008 will see a demand growth rate of 2.3 percent, and with powerhouse countries like China and India developing an ever increasing thirst for oil these figures will only continue to move higher into the end of the decade.
One thing that could result in lower demand is a slowdown on the U.S. economy. George Bush has been pleading his case in the Middle East over the past week for OPEC nations to lift their daily quotas at the oil cartel’s next meeting. Bush has stated that the current high oil prices could lead to slowdowns in not only America, but all oil consuming countries.
Bush went on to explain to OPEC that any sort of slowdown would lead to consuming countries buying less oil and gas, so that it would be in their best interest to help America avoid a recession by giving us some price relief. Whether or not OPEC pay attention to Bush’s pleas remains to be seen.
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