Tags: opec | oil | price | drop

OPEC Bracing For Sharp Oil Drop

By    |   Monday, 27 Jul 2009 01:58 PM

OPEC, the oil cartel, is bracing for a sharp drop in crude prices in coming weeks because huge fuel reserve continue to grow.

This concern is causing some OPEC members, who produce 40 percent of the world’s oil, to push for more output reduction.

Yet any further cuts may not have much market credibility because some OPEC members, among them Angola, Iran and Venezuela, already break cartel limits, The Wall Street Journal reports.

The wide difference in prices between future and current heating oil prices combined with low interest rates has led traders to buy distillates, store them, and enter into contracts to sell them in the future for a higher price.

While U.S. refineries have cut back crude oil processing, they may do so even more in order to reduce inventories and increase profit margins.

Despite a rise in crude oil prices, gasoline prices fell more than 7 cents a gallon over the past two weeks, despite a rise in crude oil prices, a recent Lundberg Survey found.

"The price would have risen instead of falling ... if not for profit-margin losses for refiners and retailers," survey publisher Trilby Lundberg told CNN Money.

"Both refiners and gasoline retailers failed to pass through the higher oil prices and instead took cuts in their own margins."

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OPEC, the oil cartel, is bracing for a sharp drop in crude prices in coming weeks because huge fuel reserve continue to grow.This concern is causing some OPEC members, who produce 40 percent of the world’s oil, to push for more output reduction.Yet any further cuts may not...
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2009-58-27
Monday, 27 Jul 2009 01:58 PM
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