Oil hits 22-month low below $55, demand sinks

[TheLancinator]

Oil hits 22-month low below $55, demand sinks
By Barbara Lewis


LONDON (Reuters) – Oil dropped to a 22-month low under $55 on Thursday as evidence piled up global recession would have a deep impact on demand and news OPEC might take more emergency action did only a little to halt the sell-off.

U.S. crude futures were 19 cents firmer at $56.35 by 1158 GMT, recovering from a session low of $54.67 -- the weakest level since January 30, 2007.

London Brent crude fell seven cents to $52.30.

The International Energy Agency on Thursday in a monthly report slashed its global oil demand growth forecast for next year and said this year's increase in consumption had been the slowest since 1985.

It predicted demand would next year expand by only 350,000 barrels per day (bpd) -- down 340,000 bpd from its forecast in last month's report.

Faced with the prospect stocks will swell as consumers stop buying, pushing prices even lower, the Organization of the Petroleum Exporting Countries said it was considering an emergency meeting on November 28 in Cairo.

Only last month, it agreed to cut output by 1.5 million bpd at emergency talks in Vienna.

"The only thing supporting the market is the possibility of OPEC cuts at the end of the month, but the production cuts would probably only be in step with falls in demand," said Christopher Bellew of Bache Financial.

"The economic picture is terrible and the IEA only confirmed that."

BREAK-NECK FALL

Oil has lost more than 60 percent of its value since hitting an all-time high above $147 a barrel in July.

The average price so far this year is still only just below $90 a barrel, but OPEC is focused on the price it receives for its oil. The OPEC basket on Wednesday dropped below $50 a barrel for the first time since January last year.

The sell-off has accelerated as the global economic crisis has driven traders to take their money out of riskier assets such as oil, which has been strongly correlated to falls on wider financial markets.

Equities markets also eased on Thursday, with the FTSEurofirst 300 down nearly one percent.

Later on Thursday, the focus for the oil market will shift to the latest U.S. inventory data for release at 1600 GMT, a day later than usual because of a public holiday in the United States on Monday.

A Reuters poll of analysts predicted the data would show crude stocks rose by 1.2 million barrels last week, while distillate and gasoline inventories were expected to have grown by 800,000 barrels and 300,000 barrels respectively.

Earlier this week the U.S. government's Energy Information Administration predicted fuel demand in the United States, the world's biggest energy consumer, would drop this year by more than 1 million bpd, the steepest decline since 1980.

Many analysts previously said demand from the world's second biggest fuel burner China would offset declines in U.S. consumption.

But in the latest sign China is also feeling the impact of the global economic downturn, data on Thursday showed Chinese annual industrial output had fallen to 8.2 percent in October, the weakest reading since late 2001.

[Harpoon]

*Buys HumVee and floors it*

[Meursault]

I wonder how much longer I should wait until I have the oil tank for the heating filled up?

[TheLancinator]

I can't imagine that it's going to fall that much farther....it's down nearly $100/barrel now

[Meursault]

who knows, I suppose we're seeing the opposite extreme of the frenzied price hike: the bubble burst and in light of the economic downturn many market players think consumption will decline. Plus, even though they publicly commit to cutting production, I bet a lot of OPEC members are secretly cranking up the tap so they can compensate for the lower price by selling more. Mr. Chavez and Mr. Ahmedinejad don't seem the type of guy who will readily accept that they have to cut back on their pet projects.

[Harpoon]

It's crazy how US economics dominate the world economy..

[Meursault]

it's all a huge network where everyone is connected to everyone else, only the intensity of the connections varies.

[Harpoon]

If I were a country that wasn't the United States I would isolate myself economically from them and try and build my own economy..

[Meursault]

what good would that be? No country can produce all of the products that we've gotten accustomed to having at our disposition. That's why foreign exchange is so useful: If you do it right, it allows you to stop wasting effort on things you're not good at and focus on the things where you're among the leaders. I am still convinced that every country involved in global economic exchange will benefit in the long run, the amount of wealth they can obtain depends on how cleverly they manage things.

It seems the US didn't do it right for a while now, because you're left with a shitload of debts and a much smaller manufacturing base than 20 years ago, in exchange for dirt cheap chinese socks and TV sets.

So the thing to do now is to figure out what exactly went wrong and how we can improve that instead of everyone re-introducing national trade barriers.

[Harpoon]

We should bomb Mitsubishi...

[Meursault]

how ungrateful...if the japanese hadn't bought your junk bonds and currency, the crisis would have come years before now.

[Shotgun Styles]

Originally Posted by TheLancinator

I can't imagine that it's going to fall that much farther....it's down nearly $100/barrel now

Our economy hasn't hit the wall yet. That won't happen until probably April of next year. Until then oil will continue to bleed value as Americans become more and more frugal.

If the unemployment rate jumps, the bottom will drop out of oil again and we could see 40 bucks a barrel or less. We're talking $1.89 a gallon gas again here in the States.

[Harpoon]

We are busier than 3 mother fuckers here at work..

Shotgun ... We are already at 1.83 and 1.89.

http://www.nbc12.com/Global/category...av=menu128_1_4

[deepsepia]

Originally Posted by Meursault

It seems the US didn't do it right for a while now, because you're left with a shitload of debts and a much smaller manufacturing base than 20 years ago, in exchange for dirt cheap chinese socks and TV sets.

That's what economic theory would suggest should happen.

The big US problem was financing a war with borrowed money. We've seen this exact same story before: Vietnam.

[TheLancinator]

Originally Posted by Shotgun Styles

Our economy hasn't hit the wall yet. That won't happen until probably April of next year. Until then oil will continue to bleed value as Americans become more and more frugal.

If the unemployment rate jumps, the bottom will drop out of oil again and we could see 40 bucks a barrel or less. We're talking $1.89 a gallon gas again here in the States.

It's already $1.88 here...