The streets have been empty and shoppers have chosen to stay inside, at least for sometime now. No one wants to buy new cars and everyone wants to travel less. United States, the world’s biggest Oil guzzler is going through its worst ever phase as its economy shrinks and subsequently so does the demand for fuel. Oil inventories soared in the month of January week after week and sent Oil prices tumbling.

Not much has happened on the Oil front except the unrelenting news of falling demand and rising crude Oil inventories. The average Oil price this month has increased only slightly at $45/barrel from its previous month average of $42/barrel. Does a price rise of $3/barrel really help?
Demand worries persisted as bad economic data, deepening financial crisis and a rapidly rising rate of the jobless added pressure to Oil prices. It is time that the Organization of Petroleum Exporting Countries understand that falling demand is here to stay and lowering output over and over again is not really going to make significant changes in Oil prices after a point of time. Guess that point has come.
January saw crude Oil market begin with a tumultuous start as Oil prices shot up in the first week as Israel and Hamas began a bloody war. Oil in the first week rose capping the biggest weekly gain since 1986 on concern Israel’s counter attack on Palestine would prompt Middle East countries to stop Oil supply to the rest of the world. Russia added fuel to fire when it cut Gas supplies to Ukraine accusing Ukraine of stealing gas from their pipelines.
All these geopolitical tensions rubbed on the right side (depending on which side you are) of Oil prices giving it a momentary boost.
------ OPEC looking vulnerable
The worsening world economy is anticipated to have a strong impact on Oil demand in 2009 especially in the OECD (Organization for Economic Co-operation and Development) countries.
The OPEC forecast calls for a contraction in the first half of the year, resulting from a huge decline in OECD Oil demand showing an average decline of 1.3 million barrels/day, year-on-year.
World Oil demand growth will be boosted by China, the Middle East and other Asian Oil guzzlers estimated at 0.6 thousand barrels/day or 78 percent of total non-OECD forecast Oil demand growth next year. The deteriorating economies in OECD countries are estimated to reduce total world Oil demand by 0.15 million barrels/day or 0.2 percent for 2009 to average 85.7 million barrels/day.
(Source: commodityonline.com)