The global economic engine is not what it used to be, and as a result, most people aren’t consuming like they used to. This translates into lower oil demand and related exchange traded funds (ETFs) may suffer a period of withdrawal as economies recover.
The Labor Department report indicated that company cutbacks have depressed consumer spending, which helped send crude prices down to $69.45 for September deliveries, reports Dirk Lammers for The Associated Press.
The Energy Information Administration predicts U.S. consumption of liquid fuels will drop 4.1% this year. OPEC expects demand to diminish by 1.65 million barrels per day year-over-year, then begin to rise again in 2010. The ailing dollar has also helped bring down the price of crude, which is priced in dollars.
OPEC is concerned with the increased production of oil by its member countries, reports Spencer Swartz for The Wall Street Journal. Overall production quotas rose 105,000 barrels a day last month. Since April, output increased 420,000 barrels a day, almost 2%.
Iraq, currently the only member not restricted by production quotas, is pumping out as much oil as it can manage as it tries to rebuild from the war.