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Oil Price to Continue Its Falling Trend

The international crude oil price will continue its downward trend until reaching a comparatively high level of above US$50 per barrel, according to an analysis issued by the National Development and Reform Commission (NDRC) Monday.

Having surged to a record high of US$69.81 per barrel in August, the international oil price displayed a falling trend over the last two and a half months.

The price of crude oil on the New York Mercantile Exchange (NYMEX) closed at US$56.34 per barrel Thursday, US$13.47, or 19.3 percent, lower than at the highest point.

One of the major factors behind the price fall is the declining demand, says the NDRC report, issued on the official website of the commission, which echoes the latest prediction of the International Energy Agency (IEA).

The IEA, in its latest report, adjusts its prediction for global daily oil demand growth in 2005 to 1.2 million barrels, 70,000 barrels less than its earlier estimate and that in 2006 to 1.66 million barrels, 90,000 barrels less.

The rising crude oil storage in the United States is another factor affecting the international oil price, said the report.

An oil and oil products report issued by the US Department of Energy on earlier this month said that American commercial crude oil storage rose by 4.5 million barrels to 323.6 million barrels during the week from October 29 to November 4, the fifth week of consecutive growth. Meanwhile, the storage of gasoline rose by 4.2 million barrels to 201.1 million barrels.

Lukewarm demand for fuel oil as a result of comparatively higher temperature in the east of the United States this winter also restrained the rise in the prices of fuel oil and crude oil.

Estimates show that demand for fuel oil in the United States, the world's biggest oil consumer, would drop by 42 percent this winter.

The US government released 30 million barrels of strategic petroleum reserve when Hurricane Katrina hit the country this September and has said publicly for several times that the government will use more strategic reserve if oil prices surge to another height or supply becomes tense.

The US move is another favorable factor for the oil price to go downward, said the NDRC report.

Moreover, the oil production capacity in the Gulf of Mexico affected by the hurricane is undergoing recovery, with half of its crude oil output, 1.5 million barrels per day, having recovered, said the report.

Last Monday saw the exchange rate of the US dollar to the euro rise to the highest point in two yeas and the US dollar to yen rate rise to the highest in the past 27 months.

The report said that the rising exchange rate of the US dollar will be favorable to restraining further surge of oil price.

Funds in the oil futures market have turned to short selling from a long position for the eighth consecutive week, further enhancing the downward trend of the international oil price, said the report.

According to statistics, by November 4, funds of short sale have rose to 4,204,000 shares, the highest in two years.

(Xinhua News Agency November 22, 2005)

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