19 January 2009 | Jake Kanter
The price of oil faces further instability as the economic downturn continues to "sharply erode" demand for the commodity, according to the Organisation of the Petroleum Exporting Countries (Opec).
According to the group's Monthly Oil Market Report, it will take time for the market to achieve what it sees as an "acceptable level" of stability. Opec predicted that demand will contract by 0.2 million barrels a day in 2009 because of "considerable uncertainty" over how long the economy will take to recover.
In December the organisation reduced production levels by a record 2.2 million barrels a day, making total production 24.845 million barrels a day. It marked a total reduction of 4.2 million barrels a day over the last four months (Web news, 19 December 2008).
The group said reduced supply had alleviated the "downward slide" on prices, despite the market remaining volatile. The average oil price in December was $38.60 (£26.28), while January's average price to date has been $42.22 (£28.74). The Opec crude oil basket price was $42.17 (£28.70) today.
Earlier this month the Ernst & Young ITEM Club - an economic forecasting arm of the organisation - predicted that low oil prices could provide a "substantial" boost for the UK economy over the next three years. It said if world oil prices remain about $40 (£27) a barrel, the UK's GDP could increase by as much as 0.7 per cent by 2011 (Web news, 6 January 2009).