DairyCo

OPEC Conference highlights price volatility

Published 23 December 11

With Agricultural businesses being significantly affected both directly (diesel, electricity) and indirectly (fertiliser production, transport) recent energy supply and oil market discussions are of particular interest to farmers.

The OPEC Conference on 14 December noted that the heightened price volatility witnessed during 2011 is predominantly a reflection of increased levels of speculation in the commodities markets rather than a result of supply and demand.  Planned austerity measures in many economies are likely to contribute to lower economic growth, although world oil demand is forecast to increase slightly during the year 2012.  This rise is expected to be partially offset by a projected increase in non-OPEC supply.

OPEC members agreed to maintain the current production levels of 30 million barrels per day but, if necessary, to take steps (including voluntary downward adjustments of output) to ensure market balance and price levels that do not create unsuitable investment conditions. The OPEC basket price on Friday 16^th December stood at $103.57 a barrel.

Whilst there was an increase in gas and electricity prices for week ending 9 December, prices week ending 15 December continued the overall downward trend.