Daily Independent (Lagos)
Adeola Yusuf
13 January 2009
Lagos — The dwindling demand for oil at the global market on Monday sank prices below $39 just as the Nigerian National Petroleum Corporation (NNPC) disclosed that Nigeria's over 1.8 million barrels per day (bpd) production has been jerked up by about 250,000bpd.
With the full resumption of operation at the Agbami oil field, an official of the corporation who pleaded for anonymity in a telephone interview with Daily Independent stated that the oil field alone could fetch Nigeria about 250, 000 bpd.
"The floating storage vessel for oil at the site is the largest in the world and makes the access of the fine oil simple, for offshore drilling," he said.
On the dwindling demand for oil at the global market, the official who stated that this was caused by the current global recession expressed "optimism that the storm would soon be over."
Meanwhile, light, sweet crude for February delivery was down $2.03 to $38.80 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange.
The contract on Friday fell 87 cents to settle at $40.83.
"Given that we are likely to see quite a few rather poor fourth quarter earnings reports, downward pressure will continue to be exerted on oil," Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore.
"Worries about the macroeconomic outlook will continue to constrain oil.
"Although still far away from their December 19 closing of $33.87, oil prices fell 17 percent last week, weighed by fears that rising U.S. unemployment will undermine crude demand.
The U.S Labor Department said Friday that employers slashed 524,000 jobs in December and 2.6 million jobs for all of 2008.
The nation's unemployment rate jumped to 7.2 per cent, the highest since 1993.
"It seems that demand worries continue to dominate market psychology and not even the tensions in the Middle East, OPEC production cuts or the gas row between Russia and Ukraine were able to pull up prices." said Vienna's JBC Energy in a research note.
Economic worries outweighed factors that would normally boost the market - Mideast tensions, signs that OPEC was implementing large-scale production cuts and the Gazprom-Ukraine gas dispute.Still, those bearish factors were expected to keep further price erosion in check.
"We have these other factors that will support oil," Shum added. "Most likely, we won't see a big downward spiral despite the poor earnings reports."
Prices of futures contracts for later this year suggest investors expect oil to recover.
The March contract trades near $46 a barrel while the April contract trades above $49.
"The expectation is that pricing will regain strength, and it's not a question of if but when," Shum said.
In other Nymex trading, gasoline and heating oil futures slid by more than 3 cents to $1.08 and $1.45 a gallon, while natural gas for February delivery remained steady at $5.52 per 1,000 cubic feet.
In London, February Brent crude fell $1.86 to $42.56 a barrel on the ICE Futures exchange.
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