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Oil market watch: crude slips below $45 a barrel

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Oil market watch: crude slips below $45 a barrel

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The bear trend resumes, with oil prices dropping below $45 a barrel.

On Wednesday, oil prices had got off to a weak start, tumbling to their lowest level in three and a half years – more than $100 a barrel below their mid-year highs – as old worries resurfaced. For one thing, Opec may not be reducing oil output as much as promised. For another, the world economy is so bad that there just isn’t enough demand around.

There was a brief recovery late in the day on Wednesday,  after US oil stocks unexpectedly fell.

But it didn’t last long. Analysts such as UBS brushed aside the significance of yesterday’s surprise stock draw-down. The bank says a slim decline of half a million barrels of crude “is no trend-break”. There is plenty of evidence that more oil is being put into storage. And demand for crude from refiners isn’t robust enough to mop up the spare crude.

Meanwhile, companies continue to feel the pain of low oil prices.  Schlumberger has said its 2008 profits would fall short of expectations because of the slow-down in spending by its clients.

The next rung down is $40 a barrel. Six months ago, that would have seemed preposterous. But who would bet against it now?

Tom Nicholls

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