Oil Drop — Quicker Than I Thought

I thought we were getting to $33 oil, I just didn’t think it would happen so fast. Oil is trading at $33 and change, down $3.67 as I write this. Traders are blaming a lower demand outlook from OPEC, but I think it’s a combination of deflation, demand destruction and too much oil in storage, as I mentioned in yesterday’s post.

From the Bloomberg story:

OPEC said that demand for its crude will decline 4.2 percent this year as the recession in the U.S., Europe and Japan curbs fuel use. Consumption of OPEC supplies will shrink 1.4 million barrels to 29.5 million barrels a day, according to a monthly report released today. U.S. fuel demand fell 6 percent last year, the biggest drop since 1980, as prices touched records and the economy contracted, the industry-funded American Petroleum Institute said today.

In Other News …

Oil Collapse Forces Gulf Nations to Run Deficits, Cut Foreign Investment Tumbling oil prices are forcing many of the richest Persian Gulf states to record budget deficits and limit a critical source of foreign investment for poorer Arab countries.

Gold mine production down but costs up 24% world-wide Producers’ total cash costs rose by 22% year-on-year to an average of $472/ounce for the nine months of 2008, while total production costs were also up by 22% at $591/ounce. The figures for the third quarter of 2008 alone record an increase of 25% year-on-year in cash costs and a 24% in production costs.

S.Africa gold output falls 8.7 pct yr/yr in Nov. South African gold output has fallen since state-owned power utility Eskom 1/8ESCJ.UL 3/8 suffered a near collapse in the electricity grid last January.

Four Bad Bear Markets Update

When looking at this chart, be aware that the Great Depression crash is based on the DOW; the three others are for the S&P 500.Sean’s note: The S&P as of yesterdy was down 45.2% in the current bear market (and up 12% from its November low). I think we’re going back to visit the November low.

Food Prices Overcooked Given Corn’s Decline, Fuel Group Says: Chart of Day Food prices should be lower, given the decline in commodities such as corn and crude oil the past six months, according to Robert Dinneen, president of the Renewable Fuels Association. 

China Passes Germany to Become Third-Biggest Economy Gross domestic product expanded 13 percent from a year earlier, more than a previous estimate of 11.9 percent, to 25.731 trillion yuan ($3.38 trillion), the statistics bureau said on its Web site today. That topped Germany’s 2.424 trillion euros ($3.32 trillion), using average exchange rates for 2007.

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