PRICE PLUNGE AMID ECONOMIC TURMOIL
The turmoil on Wall Street in the wake of the U.S. sub-prime crisis is far from conclusion. Global financial markets tumbled again after the historical "Black Monday" on Sept. 15 when the fourth biggest U.S. investment bank, Lehman Brothers, filed for bankruptcy. Adding to the woes,financial giant Merrill Lynch was taken over by Bank of America, while leading insurer AIG needed an85 billion U.S. dollar bailout from the U.S. government to keep afloat.
This was accompanied by a tumbling price for crude oil. Light, sweet crude for October delivery fell below the 100 U.S. dollars per barrel level to hit 95.71 U.S. dollars on the New York Mercantile Exchange (NYMEX) on Sept. 15, a 35 percent drop from the record 147.27 U.S. dollars of July 11.
"An ebbing world economy and declining demand for crude oil has dragged down the price, while a stronger greenback and weaken speculation also led to the result," said Jiang Xinmin, an expert with the National Development and Reform Commission, the country s economic regulator.
"Speculators are prone to sell off oil if demand is expected to fall in the future. They will shift to speculate in some other commodities and financial products. This will further help a fading price," he explained.
Professor Dong Xiucheng of the Beijing-based China University of Petroleum said the world's big investment banks were the major speculators and participants in the futures markets. They had contributed much to the surging oil price.
"However, this wave of financial crisis is expected to play the role of an alarm bell, which will warn them to give up excessive and abnormal speculation in crude oil markets in future."
Jiang predicted the price would very likely stay bellow 100 U.S. dollars a barrel for a long period. "Crude prices will come back to reflect the world economic situation."
