Monday, November 3, 2008

Oil Falls Almost 6 Percent Monday, as Demand Drives Prices Down

OPEC, other oil producers and oil companies, at this time must sit on the sidelines and watch, as oil prices are being driven by only one thing at this time, and that is demand; and demand is continuing to decline.

What is driving demand is fears of consumers on the condition of the economy, and that has them holding their cash close to their chests.

Confirming this even more was the level of factory activity in the U.S., which has been the key indicator on the demand for oil. That dropped sharply in October, down to its lowest levels in 26 years.

With the Institute for Supply Management saying factory activity in the U.S. dropped to 38.9 for October, it underscored the deep cutbacks experienced in the sector. Anything under 40 is considered a very weak performance. The month of September came in at 43.5.

For the last several weeks, U.S. demand for oil has fallen off by about 2 million barrels a day.

Crude in the U.S. fell 6 percent to $63.91 a barrel, a drop of $3.90. London Brent Crude fell even more, finishing the session at $60.49 a barrel, a decline of $4.84 a barrel.

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