After falling into the high $40s, oil prices closed out the week about where they started, at $52 a barrel. The struggle continues between bad economic news combined with pessimistic economic forecasts vs. investor optimism that the end of the economic downturn is in sight.
Comments to the effect that OPEC production cuts can no longer control the oil market continue to surface. On Thursday the Secretary General of OPEC said, “I think we can live with prices of around $50 for the time being. The world economy is in a very bad condition.” This is a major concession to the reality that higher priced oil could exacerbate the global economic situation and that for the time being, oil exporters need to tighten their belts. Last week the head of the IEA likened the collapse in oil prices to a trillion dollar stimulus package that will either restart the world economy or at least slow the pace of the recession.
Tanker tracker Oil Movements reiterated that it expects OPEC exports (excluding Angola and Ecuador) to decline by another 960,000 b/d before the middle of April. China reported that its crude imports in January and February declined by 9.5 percent.
New forecasts that the global GDP will continue to contract suggest that the IEA will be lowering its projection for global oil demand this year. Analysts’ projections for oil prices continue to vary widely. Some believe that falling demand and increasing unemployment will soon have prices testing lows below $35 a barrel. Others are more impressed by OPEC production cuts and see prices moving higher in the near future.