CRUDE OIL prices yesterday plunged to a five-month low amid a broad sell-off in commodities as traders refocused on concerns about slowing global economic growth spreading beyond the US into Europe, Japan and even emerging markets.
The drop in oil prices to a low of $105.40 a barrel - down almost 30 per cent from July's all-time record of $147.27 - pushed Wall Street stocks higher, with energy-intensive industry shares, such as airlines, soaring.
The American Stock Exchange airline index was up 10 per cent at lunchtime yesterday. The broad SP 500 index was up 0.9 per cent at 1,293.99 and had eased back from a rise of 1.6 per cent in early trade.
Among the main SP sectors energy stocks were down 3.7 per cent. The ISEQ index closed up 2.8 per cent, with both Aer Lingus and Ryanair recording gains.
The slide in the oil price from its peak early this summer was briefly stopped last week as Hurricane Gustav approached the oil-rich Gulf of Mexico, stirring memories of the disruption caused by Hurricanes Rita and Katrina in 2005.
But as oil companies yesterday reported only minor damage by the weaker than expected storm traders focused on slower oil demand in key regions.
Oil led a broader sell-off in commodities, with the Reuters-Jefferies CRB index, a global benchmark for raw materials, falling to a 6½-month low, down about 18 per cent from July's peak.
The drop in commodities prices will be welcomed by central banks which are fighting high inflation and weak growth.
The oil price relief, however, could prove short-lived as Iran yesterday stepped up efforts to persuade fellow Opec oil cartel members, which meet next week in Vienna, to cut output in the hope of halting the recent slide in oil prices.
Iran, one of the more influential members of the group and traditionally a price hawk, wants countries to cut their output back to official production levels to shore up the extra supply left on the market by a fall in demand, especially from the US, where high petrol prices and the credit crunch have changed drivers' habits.
If the other 12 members of Opec agree with Iran's position at next week's meeting in Vienna this would reduce world oil supply of almost 88 million barrels a day by 500,000 to 1 million barrels a day, probably from October.
Gholam Hossein Nozar, Iran's oil minister, said that the market was oversupplied.
"Oil supply must be well-proportioned, with demand and control over Opec's excess oil supply an issue that must be discussed," Mr Hossein Nozar was quoted as saying by Iran's state news agency.
However, it is far from certain that Saudi Arabia will agree with Iran's position. Opec's most powerful member increased its production to more than 9.5 million barrels a day in July after coming under pressure from the US and other consuming countries. - (Financial Times Service)
