Current Oil Prices Kept Low by Struggling Global Economy

A set of signals that the world economy is having difficulties escaping its mired state maintained the downward trend of current oil prices.

The crude price per barrel of the U.S. benchmark for delivery in November was 88 cents, or 1 percent, lower to $89 during the opening of today’s electronic trading on the NYMEX. In Europe’s earlier trading, the price reached a low of $88.25 per barrel before slightly rebounding during the opening of U.S. trading.

The current oil price decline was mostly caused by indications of a weak world economy. The 2012 growth outlook of developing economies in the Asia-Pacific region was reduced by the World Bank to 7.2%, down from its projection of 7.6% last May.

The bank pointed to poor global demand caused by the weak recovery of the United States and the ongoing recession of Europe. Moreover, the bank reduced its GDP growth prediction for China from 8.2% in May to 7.7%.

Oil traders are used to the instability of oil as an important commodity in the economy. However, volatility has been strangely extreme in the midst of more than the typical uncertainty regarding the political and economic situations in some parts of the world. And when oil rates go up, they are quickly reflected in higher gasoline prices.

The crude price per barrel grew 4 percent last week after a 4 percent fall during the previous week. Traders have been attempting to measure the demand strength for global oil while simultaneously observing the developments around Syria for any indications of supply interruptions from the Middle East.

In the past week, the crude price per barrel fell by over 2 percent as traders complained that U.S. jobs are not growing quickly enough to increase fuel demand significantly. The contract settled lower by $1.83, for a price of $89.88 per barrel.

In London, the current oil price of Brent reflected a 91-cent drop to $111.11 per barrel.

The broad gap between contracts on the Nymex and Brent, currently more than $22, was credited to increased U.S. production and inventory risks in the Middle East and Europe.

Commerzbank analysts said that the oil output of the United States was at its peak level not seen since December of 1996, while worries regarding the possible extension of the conflict in Syria to neighboring nations and shipment delays in North Sea crude were boosting the price of Brent.

In the month of September, the total number of jobs created in the United States met the expectations of economists, although it does not indicate strong employment growth. According to the Labor Department, the rate of unemployment declined to 7.8 percent, the first time it reached below 8 percent in almost four years.