Oil Falls $2 as Demand Concerns Outweigh OPEC


Oil prices fell more than $2 to below $87 a barrel on Thursday as expectations that the financial crisis could further slow demand outweighed calls by some OPEC members to cut output to prop up prices.

The producer group announced it will hold an emergency meeting on November 18 in Vienna to discuss the impact of the financial crisis on oil markets, which has helped knock prices from a record peak over $147 a barrel in July.

U.S. crude traded $2.45 lower to $86.50 a barrel by 2:29 p.m. EDT, after hitting a fresh 10-month low on Wednesday. London Brent crude fell $1.72 to $82.64 a barrel.

U.S. gasoline and crude stocks rose sharply last week as demand in the world's biggest consumer continued to slow due to the economic crisis and high fuel costs, the EIA reported on Wednesday.

The Dow Jones and the S&P 500 stock indexes fell on Thursday on persistent fears that the widening credit crisis will tip the global economy into recession.

Analysts said that, despite Wednesday's coordinated rate cut by global central banks and other moves to calm investors, there remained abundant signs credit markets were gridlocked.

Further pressure on energy prices has come as investors, who earlier this year piled into oil and other commodities as a hedge against inflation and the weak dollar, sought to put cash into safer havens.

The slumping economy has prompted analysts to revise downward their global oil demand growth targets for next year, with the EIA this week dropping its 2009 projection by 140,000 barrels per day.

In addition, No. 2 consumer China -- one of the engines behind the six-year rally in oil prices -- is expected to halt auto fuel imports for the second month in a row in October, according to a Reuters poll.

OPEC members Nigeria, Qatar, Libya and Iraq this week floated the idea of a cut in the group's oil output amid the slowing demand outlook.

Gold fell for the first time this week on speculation that a global economic slump will reduce demand for commodities. Silver gained. Gold futures for December delivery fell $20, or 2.2 percent, to $886.50 an ounce on the Comex division of the New York Mercantile Exchange. The price rose to a record $1,033.90 on March 17.


TradingEconomics.com, Bloomberg
10/9/2008 12:46:59 PM