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re: oil prices to rise

  1. 406 Posts.
    Oooops. To fall. See Below.
    Oil Prices May Fall, Say IMF Chief

    20 February 2008
    Posted to the web 20 February 2008

    Constance Ikokwu
    Washington, DC

    Oil prices are expected to dip further as the global economy continues to slow down, thee Director, External Relations Department of the International Monetary Fund (IMF), Mr. Smith has said.

    A drop in oil prices is expected to affect the earnings of countries heavily dependent on oil such as Nigeria where the 2008 budget about to be passed by the National Assembly may be predicated on $59 to $65 per barrel, depending on the benchmark eventually agreed to by both chambers of the legislature.

    Lending further insight into his forecast on oil prices, Ahmed said the fall in oil prices is tied to the decline in demand for the commodity following a possible recession in the US and the impact on the world economy.

    In a briefing with reporters at the Fund's headquarters in Washington D.C., he noted that concerns emanating from economic crisis in the US, the world's largest economy, has already dampened oil prices from its early January highs.

    "Whereas concerns about instability and shortage of supplies spiked the price of the commodity in some cases, sharp increase in supplies amid falling demand will affect the market in the nearest future," he said.

    Rising oil prices in the past few years has also been driven by sustained strong demand growth from emerging markets such as India and China. But demand from the US has been high as well.

    High oil prices resulting from rapid economic expansion is a sign of a healthy condition compared to a price hike caused by lack of supply, Ahmed stated.

    "If oil prices rise because of more robust than expected growth in emerging markets, then clearly, in a sense, that increase will be a sign of good health in the global economy.

    "On the other hand, if it is a supply driven oil price spike, then that would be a serious concern at this point, as it would amplify the adverse growth effect of fighting credit conditions, which are already present in the global economy.

    "While the price of oil is market determined, it is in the interest of the world and members of the Organisation of Petroleum Exporting Countries (OPEC) to sustain "orderly global oil market conditions," he declared.

    Oil prices hit a record $100 per barrel and above in mid-January, while a gallon of fuel in the US inched to a new high of $3 and above. Gas prices have however slid 0.4 per cent to a national average of $2.972.

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