WTI oil price may drop lower to test $70 mark this week

WTI oil futures are trading flat on Monday and may well test the $70 mark again in the short term at least, as uncertain markets and grim oil demand weigh on the price of crude.

US Light crude oil futures for September 2010 delivery was at $73.76 a barrel, 08.15 GMT on the NYMEX, after initially gaining, then selling off again.

Currently, crude oil inventories around the world are close to record levels, with the IEA reporting they are over 61 days of demand.

Higher or Lower Oil Prices for 2010?

But the risk or reward ratio for a bet on oil prices at $90 + a barrel in Q4 of 2010 is starting to look pretty thin. Crude oil prices peaked at $83 a barrel in early August and in spite of another bullish report last Monday, were down $9 (or eleven percent) by the end of last week.

So the risk of an oil price collapse to $70 or lower is increasing and if that happens, then clearly OPEC would move to quickly cut oil production again.

OPEC Basket Oil Prices are Lower

OPEC has pegged the value of its reference basket of 12 crude oils at $73.03 a barrel last Thursday, this was before the drop off at the end of last week. OPEC devised a new basket pricing oil after OPEC member countries complained that the old basket overstated the value of the group’s output.

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