Commodity Trading on the International Market-OPEC oil output cut to force prices up |19 December 2008

It is slashing 2.2 million barrels per day (bpd) from its current supply. Opec made two other cuts since September, meaning it has cut a total of 4.2 million bpd in four months.

Despite the record cut, oil prices continued to fall as United States data provided fresh evidence of falling demand.

US light, sweet crude for January fell as low as $39.94 a barrel, its first time below $40 since July 2004.

The falls were blamed on US inventories figures, which showed that demand for petrol in the four weeks to 12 December was down 2.7% from the same period last year.

The price later recovered slightly to trade on the New York Mercantile Exchange at $40.31, which was down $3.29 from Tuesday's close.
 
There are indications that Opec is aiming at a price of $75 a barrel. "Given the still-substantial risks to demand and ongoing scepticism on Opec compliance, it could take some time before prices recover materially above $50 to $55 per barrel," said Gordon Gray from Collins Stewart.

Oil prices have fallen by more than $100 a barrel from the peak above $147 that they reached in July.

World confidence drops, bad news

Confidence in the world economy fell in December as a recession spread beyond the United States and growth weakened in China and Latin America, a survey of Bloomberg users on six continents showed.

The Bloomberg Professional Global Confidence Index slipped to 6.1 from 6.6 in November. A reading below 50 means pessimists outnumber optimists. The index, which is a year old, reached an all-time low of 4 in October.

“Confidence is still very shaky,” said Alvin Liew, an economist at Standard Chartered Plc in Singapore, who took part in the survey. “Some countries are already in recession and 2009 will be even more challenging.

Shrinking economies in the U.S., Europe and Japan are forcing policy makers to push interest rates toward zero and try to resuscitate consumer and business spending by buying bonds directly and guaranteeing loans. In China and Brazil, a collapse in exports and commodity prices is undermining economies once considered a bulwark against a global downturn.

The survey of 2,991 Bloomberg users in 10 countries was conducted between December 8 and December 12. Since the November survey, U.S. jobless claims surged to a 26-year high, recessions were confirmed in Japan and the euro region, and Chinese exports fell for the first time in seven years. “It’s bad news on top of bad news,” said Lindsey Piegza, an economist at FTN Financial in New York. Confidence in the banking and financial system has been eroded. The global crisis has cost banks almost $1 trillion so far in writedowns and losses.

International commodity briefs

• Pakistan's rice exporters boycott government tender

• Credit difficulties cause delay to Mexican ethanol project
 
• Argentine biodiesel exports slump after loophole closed

• New Zealand company cancels plans to build biofuels unit
 
• Pig feed in Taiwan laced with banned drug ractopamine
 
• China culls chickens after outbreak of H5N1 bird flu
 
• China buys Brazil raw sugar despite stockpile
 
• Scientists claim cocoa butter in chocolate can be replaced
 
• Nigerian cocoa grind hit by financial crisis
 
• Indian tea prices likely to increase further in 2009
 
 

Crude oil prices

As at 18/12/08

Nymex Crude Future 39.82 US dollars per barrel
Dated Brent Spot       42.63 US dollars per barrel