CRUDE OIL fell to a 17-month low in New York as plunging stock markets heightened concern that a global recession will slash fuel consumption. Energy prices also dropped as the dollar rose to the highest in more than 2½ years against the euro, dimming the appeal of commodities as a hedge.
The Organization of Petroleum Exporting Countries (Opec) may make an additional output cut if its decision last week to lower production fails to bolster prices, said Mohammad Ali Khatibi, Iran's representative to the group, according to the country's state-run Mehr news agency.
"Everyone is watching stock-market tickers and not Opec," said Michael Lynch, president of Strategic Energy Economic Research in Winchester, Massachusetts. "We want to see the full effect of the recession on demand, and until that happens prices will trend lower."
Crude oil for December delivery fell $1.20, or 1.9 per cent, to $62.95 (€50.62) a barrel at the close of floor trading on the New York Mercantile Exchange.
Futures touched $61.30, the lowest since May 9th, 2007. Prices, which have tumbled 57 per cent since reaching a record $147.27 on July 11th, are down 31 per cent from a year ago.
"With all of the stock markets going down, there's going to continue to be downward pressure," said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd in New York.
"There's not a lot that can be done to stop this downward spiral right now."
Investors looking for protection against the dollar's decline earlier this year helped lead crude oil, gold, corn and gasoline to records. The euro fell as much as 2.3 per cent to $1.2334, the weakest since April 2006, from $1.2623.
Oil is heading for a 37 per cent drop this month, the steepest since at least 1988 in New York, as Opec cut oil production for the first time in almost two years.
The 13 Opec nations agreed to reduce supply by 1.5 million barrels a day starting in November.
Market analysts now say Opec is likely to cut production again.
- (Bloomberg)
