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Oil plummets below $83 on global slowdown fears

(Agencies)
Updated: 2008-10-10 21:03

What was initially a seizure in credit markets has now become a real threat to economic growth around the world, causing an energy watchdog to slash its forecasts for oil demand over the next two years.

The International Energy Agency cut its forecast for oil demand by 240,000 barrels per day this year and by 440,000 barrels per day in 2009. It also said the credit freeze is hurting the supply side of the oil industry,"with independent producers and, potentially, several Russian operators seen as particularly at risk.".

But with economic growth in danger, oil investors are mostly focused on demand issues, even overlooking signs that the Organization of Petroleum Exporting Countries may cut production.

OPEC said Thursday it will hold an extraordinary meeting Nov. 18 to discuss how the widening global financial crisis is affecting oil prices.

On Thursday, the head of Libya's national oil company, Shukri Ghanem, called on oil producing nations to cut output.

"OPEC is trying to jaw-bone the price up, but they'll have to come into the market because no one is going to be believe just jaw-boning with the market sliding so quickly," Pervan said. "The market is so demand focused, it doesn't even care what happens to supply."

OPEC's decision last month to cut production by 520,000 barrels a day failed to halt the losses, which have accelerated in recent days.

Oil prices have fallen about 44 percent since soaring to a record $147.27 on July 11.

"We haven't seen the bottom of this yet," Pervan said. "We thought $75 would be a floor but if the market mood doesn't change, $50 to $60 a barrel is not out of the question."

In other Nymex trading, heating oil futures fell 10 cents to $2.32 a gallon, while gasoline prices dropped 8.33 cents to $1.94 a gallon. Natural gas for November delivery fell 18.1 cents to $6.64 per 1,000 cubic feet.

In London, November Brent crude fell $4.46 to $78.20 a barrel on the ICE Futures exchange.

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