US crude fell $2.87 a barrel to $75.76 in afternoon trades, after hitting $74.62, the lowest since September 2007 and down nearly 50 percent since hitting a record over $147 in July. London Brent crude traded down $3.20 to $71.33 a barrel.
European leaders pressed for an overhaul of global financial structures, building on trillion-dollar bank bailouts announced this week. US retailers suffered their biggest monthly drop in sales in more than three years in September, adding to concerns of a potential recession in the world's top consumer.
Slumping demand in the United States and other developed economies, as well as a flight of investors out of oil and into safer havens, has sent oil tumbling from July's record. "The fall in crude futures prices today reflects movement in the stock market, which mirrors fears about a recession that will cut into demand for crude oil," said Joe Possillico, broker for MF Global in New York City. Analysts have scaled back global demand growth estimates, with the Organization of the Petroleum Exporting Countries cutting its forecasts for world demand for crude next year in its latest monthly report.
"Even if governments are successful in calming equity markets and unfreezing credit markets in the near future, the fallout on the real economy from financial market headwinds is expected to be considerable," the producer group said.
Opec is due to hold an emergency meeting in Vienna next month to review the impact of the global financial crisis on the oil market. JP Morgan cut its forecast for average oil prices next year to $74.75 a barrel, citing the weak economic outlook.
"The oil market is caught in the wake of four tsunamis," the US bank said. Traders will scrutinise weekly US inventory data on Thursday for indications on US oil demand. Analysts in a Reuters poll expect increases in crude and oil product products. The data was forecast to show a 1.9 million barrel build in crude stocks, a 600,000 barrel build in distillates and a 2.9 million barrel rise in gasoline inventories last week.
Investors take sell positions with crude seen declining further
MUMBAI: Even as high volatility in equity markets is making investors more riskaverse, commodity investors have spotted a good opportunity in the falling crude oil price. On MCX, commodity traders are taking sell positions in crude oil as the near to mid-term view is that prices could fall further, reports Deepa Krishnan. On Wednesday, crude prices for the MCX November contract declined nearly 5% to Rs 3,740 per barrel. The October contract, which expires on Wednesday, closed more than 5% lower at Rs 3,682. In the international markets, crude oil traded at $76 a barrel levels in early trading sessions in New York, a new low for 2008. "Indians are momentum players, there seems more downside left for crude, prompting the selling," said T Gnanasekhar of Commtrendz Research. The general economic sentiments in the US and fears about whether the US government's plan to inject $250 billion into their banking system would prop up the demand caused oil prices to fall further, analysts pointed out. In the crude oil market, the focus has moved from supply to demand concerns. The global economic slowdown is expected to reduce demand by nearly 15-18%, said Subodh Gupta of Anand Rathi Commodities. Mr Gupta said even if the OPEC meeting scheduled for November 18 hints at cutting supplies, fundamentals indicate higher supplies. And to add to the bleak demand forecasts, OPEC has lowered demand growth for 2009 by 100,000 barrels a day, keeping the projected global growth at 800,000 barrels a day in its monthly report on Wednesday. Some analysts said production cuts by refiners due to falling margins could lead to supply shortage, although the effect of such a move on the prices will be marginal.
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