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Many destabilizing factors continue for oil
Over a three month period OPEC have cut production by 4.2 million barrels per day or 12% of their capacity. This 4.2 million barrel reduction equates to an 80% compliance by all OPEC members. Reports indicate Saudi Arabia, the world’s largest oil exporter, will reduce drilling activity by 20% this year.
Many analysts are predicting that OPEC will agree to an additional one million per day reduction. Crude production in Mexico will likely fall by 14% compared to last year, despite Mexico’s efforts to reverse this down fall in production.
The IEA predicts that global oil demand will fall this year by 980,000 bbl/day but increase by 1,000,000 bbl/day in 2010. The current economy and low energy prices have resulted in the postponement or cancellation of over $100 billion worth of oil projects in the past six months.
To the chagrin of both oil companies and oil producing countries their efforts to stabilize energy prices are being thwarted by numerous destabilizing economic factors.
By John Voros and Roger McKnight
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