Crude prices see biggest fall in 18 months

Crude oil prices have witnessed the biggest weekly decline in 18 months amid the ongoing euro zone debt crisis and a sell-off in the global equity market.

Oil prices declined from a high of around $86 earlier this month to $75 per barrel at the New York Mercantile Exchange. However, Brent crude has been resilient. The near-month June Brent contract on the London’s ICE futures exchange was trading well over $81 a barrel.

Experts in India are still bullish on crude oil prices. “Crude oil prices will be range-bound between $75-85 a barrel in the near future. I personally do not see them falling or rising sharply from these levels,” said Sarthak Behuria, an oil industry veteran and advisor, Petronet LNG. S K Srivastava, director general of hydrocarbons, also expects crude oil to stabilise in a price band of $75-85 per barrel.

“This is a momentary decline. The long-term trend points to higher prices, since consumption is rising sharply in China and India, which together account for over 40 per cent of world population. However, since a huge degree of speculation also works, it is difficult to give a timeline,” said R S Sharma, chairman and managing director, Oil and Natural Gas Corporation, the country’s biggest producing company.

To check the level of speculation in oil and energy trading, the US commodity futures regulator, the Commodity Futures Trading Commission, did a survey recently. The suggestion was that excessive speculation was the primary factor behind the crude oil market’s surge above $147/barrel in 2008. According to a report from Platts, the premier energy market observer, ‘CFTC would impose position limits in four major energy markets – natural gas, crude oil, heating oil and gasoline – and create a limited risk management exemption for swap dealers.” This is aimed at curbing excessive speculation.

The International Energy Agency on Wednesday said global oil demand growth would be slightly lower than earlier estimates. The agency revised its global oil demand growth forecast by 50,000 barrels per day to 1.62 million bpd from its estimate last month.

The overall picture is broadly unchanged, IEA said. “Emerging and developing economies, led by Asia, are set to remain the key driving force of the global recovery, expanding collectively by 6.4 per cent, almost three times as fast as the OECD. Nonetheless, as made clear by Greece’s financial travails, the economic recovery is at risk of drowning in an ocean of public debt, at least in some OECD countries,” the agency said on Wednesday.

In an earlier report, IEA said six large non–OECD countries – China, Saudi Arabia, Russia, Brazil, Iran and India – are expected to account for almost three–quarters of global oil demand growth in 2010.