Oil prices slumped below $27 a barrel Wednesday, September 19, for the first time since last week's terrorist horror in the United States, in a market increasingly more concerned about demand than supply.
A barrel of Brent North Sea reference crude for November delivery fell as low as $26.60 a barrel, having closed on Tuesday at $27.27. London prices shed more than a dollar a barrel on both Monday and Tuesday. In New York, October-dated light sweet crude slumped 80 cents on Wednesday to $26.90 a barrel.
Crude prices have now given back all the gains racked up in the aftermath of the September 11 assault on the World Trade Center and Pentagon. Analysts say the reason is that theoretical concerns over supply have been eclipsed by very real fears over demand.
A supply glitch could occur if US retaliation sets the Arab oil-producing world against the oil-importing West. But the contingency remains distant both in terms of time and likelihood, analysts say.
"At the moment military action is seen as being weeks away, and people are unsure even if there is military action whether to be concerned about it," said Lawrence Eagles, an energy expert with the GNI brokerage. "It's too tenuous at this stage to take into account in the oil price, whereas demand is a reality," Eagles told AFP.
Demand is certainly a reality for airlines and aircraft construction companies, which are feeling the pinch from dwindling demand in the wake of last week's atrocity. Dealers surprised by Wednesday's continued market slump blamed it on bleak prospects for the aviation industry, which was nagging at demand for jet fuel and exerting a knock-on pressure on crude.
Boeing dealt the latest blow to the industry when it said up to 30,000 jobs were to be axed, while airlines on both sides of the Atlantic are calling for support to help them through the turbulence whipped up by the terror attack.
"Airlines are obviously bracing themselves, and aircraft construction companies like Boeing basically feel that there is going to be a major downturn in air travel and of course that means a significant reduction in demand for jet fuel," said Tony Machacek, a dealer with the Prudential Bache brokerage.
"If it is the case that we are going to see a significant downturn in airline travel then that is going to have an effect generally on demand for oil," he said. Figures from the American Petroleum Institute meanwhile showed that crude stocks fell modestly last week, despite expectations of sharper drops, reinforcing the impression of a well-stocked market. ― (AFP, London)
by Marie Wolfrom
© Agence France Presse 2001
© 2001 Mena Report (www.menareport.com)
