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Oil’s price plunge to $40 prices this week will force producers to contemplate more cost-cutting measures at a time of great austerity.
The decline continued Thursday with futures sliding as much as 1.4 per cent in New York, trading near US$40 a barrel, after losing 4.3 per cent on Wednesday.
West Texas Intermediate for September delivery, which expires Thursday, declined as much as 59 cents to $40.21 a barrel on the New York Mercantile Exchange, and traded at $40.30 at 11:30 a.m. London time. The contract slid $1.82 to $40.80 on Wednesday, the lowest close since March 2009. The more-active October futures lost 59 cents to $40.68.
The plunge began Wednesday after the U.S. Department of Energy slashed US$6 off its average oil price estimate this year to US$49 per barrel, citing increases in global oil inventories.
“We get down to US$40 level, companies will have a hard time just to sustain their businesses,” Kyle Preston, analyst at National Bank Financial Inc. said in an interview.