Global National Oil Companies Look for Oil to Drop to $40 a Barrel

National oil companies from around the world said in a recent meeting in Beijing that prices would probably fall to around $40 a barrel, according to Fu Chengyu, chief executive of China National Offshore Oil Corporation.

Fu added that the tone of the meeting was one on the verge of panic, as the reality of what is happening with oil is setting in.

Commenting on the idea of OPEC to cut back more on production, Fu said that it probably won't have any significant impact on the price of oil. The major reason for that is the economic climate around the world, which is making oil nowhere near the priority of consumers, who have cut back on travel and vacationing, and are spending only on necessities.

Another outcome of this is oil companies will cut back on investing in new projects, as the current and eventual price of oil can't sustain them.

Most extraction projects were initiated assuming a minimum price of $60 a barrel to break even, and up to $90 a barrel.

“When most of the oil companies budgeted their projects, they were using $70, $80, even $100 a barrel for their cash flow calculations,” Fu said. “For those projects that have started, certainly they will try to complete them, but for those projects that have not started yet they will delay or cancel. Simply, they don’t have enough cash to do all of those that they budgeted.”

OPEC Could Cut Production by 1 Million Barrels in Cairo

Fighting to stave off oil plunging below $50 a barrel, OPEC may cut production another 1 million barrels a day.

Expectations are at the next OPEC meeting on November 29 they will definitely cut production again, the question is only by how much. The 1 million barrels a day figure is expected by most analysts; although some have said it could be anywhere from 500,000 a day to 3 million barrels a day.

The problem from OPEC's standpoint is it's one thing to announce production cuts, it's another thing to implement them, as supply cut announcements from September and October are still in the process of being put into action.

Iran is calling for cuts between 1 to 1.5 million barrels a day.

Oil futures closed Friday's session down to $57.04 a barrel for December delivery on the Nymex.

Will Global Oil Demand Contract in 2009?

A number of energy analysts are asserting that global oil demand for 2009 will contract for the first time in 26 years.

If this were to happen, it would pretty much depend upon the depth the economic crisis goes and reaches.

The major emerging market economies (BRIC) are expected to decline in growth from between 2 percent to 3.5 percent, but will still remain in the positive, if projections are accurate.

More significant as far as oil contraction goes, is whether demand in the U.S. can fall to the point where it becomes a factor. with oil and gas prices falling so much in the recent months, it's difficult to see this continuing to the point of it going into negative territory.

Still, it's unknown at this time how deep the economic crisis will go, and there is definitely the possibility oil demand could contract with BRIC slowing down.

It remains to be seen if the increase in domestic gasoline demand in the U.S. last week is an anamoly, or if it's the beginning of increased use.