Oil prices have slumped this week amid the growing debt crisis in Europe and weak demand from the United States.
On Friday, oil for November delivery had fallen to $78.44 per barrel on the New York Mercantile Exchange, reported Forbes.
Brent crude on the London-based ICE Futures fell to $104.04.
In the past week, crude prices have fallen a total of 10%, following the trend in the equity markets. The Dow Jones dropped 3.4% and the S&P 500 dipped 3%, said Bloomberg Businessweek.
The U.S. dollar strengthened against the euro this week, making crude more expensive for nations using other currencies.
And as China’s industrialization slows, their demand for commodities including oil is expected to follow suit.
Several days ago the International Monetary Fund weakened the global growth forecast, just one more hit to investor confidence and even global economic confidence.
On Friday, a group of countries controlling 85% of the world’s economy, calling themselves the Group of 20, made the decision to aim to restore economic stability worldwide, said Forbes.
This pledge briefly helped market confidence, but this was short-lived as so many other factors countered the reason for hope.
Yet not everyone is so gloomy. Goldman Sachs (NYSE: GS) has not changed their estimate that Brent crude will average at $130 for 2012.
As they said in a report, reprinted by Forbes:
“It is only a matter of time before inventories and OPEC spare capacity become effectively exhausted, requiring higher oil prices to restrain demand.”
JP Morgan shared similar sentiments. Analysts believe that Brent crude will be at $115 per barrel in 2012 for the same reasons listed by Goldman Sachs, reported CNBC.
Meanwhile, however, it is a fact that oil prices are down. And it is also a fact that this is hurting oil company shares.
According to Bloomberg Businessweek, major oil companies are feeling the losses. Chevron (NYSE: CVX) fell 4.6%, ConocoPhillips (NYSE: COP) and BP (NYSE: BP) both dropped 3.5%, and ExxonMobil (NYSE: XOM) dipped 3%.
Smaller companies are hurting even more, the article reported. Hess (NYSE: HES), for example, fell as much as 8.1%.
Oil company profits are hurt by these falling prices. The cycle needs to stop soon.
That’s all for now,