OIL FELL more than 6 per cent to below $70 a barrel yesterday, touching a 15-month low on rising US inventories and concerns a possible recession would slow demand further.
The Dow Jones industrial average and the SP 500 slipped in a choppy session yesterday as major US banks reported huge losses and other companies painted a grim outlook for the battered US economy.
US crude settled at $69.85, down $4.69, after sliding to as low as $68.57, the lowest level since June 27th, 2007. In London, front month November Brent crude settled at $66.32, down $4.48.
“It’s still a demand story,” said Amanda Kurzendoerfer, commodities analyst at Summit Energy in Louisville, Kentucky.
“We saw some very large builds in crude oil for the second week in a row. This confirms the fact that demand is truly weakening in the United States,” she added.
Crude oil inventories in the US rose 5.6 million barrels last week, far exceeding analysts’ expectation of a 1.9 million barrel increase, as demand in the world’s top consumer continued to fall, the US Energy Information Administration reported.
Petrol inventories rose by seven million barrels, more than double analysts’ forecast of a 2.9 million barrel increase, as overall product demand over the past four weeks dropped 8.9 per cent from year-ago levels.
US crude has fallen from record highs of more than $147 in July, and has dropped almost one-third in value in three weeks, the steepest such decline since it began trading in 1983 amid the mounting threat of a global recession.
Data from the US Federal Reserve showed US industrial production posted the biggest monthly decline since 1974.
“Economic weakness is hitting the stock and oil markets, but the oil price fall is also reflecting a lack of demand. It is very difficult to buy oil if you are having a hard time getting credit lined up,” said Francisco Blanch, head of commodity research at Merrill Lynch.
Analysts have scaled back oil demand growth estimates after a slew of gloomy data that suggests the credit crisis has begun to undermine growth in the US, the world’s top energy consumer.
Opec said yesterday it had brought forward to this day week an emergency meeting to discuss the impact of global recession on oil markets.
Pressure has been mounting within the 13-member group to reduce supplies. There are expectations it may take action to support prices. – (Reuters)
