Crude hits 22-month lows as economic woes mount

13 November 2008 09:03  [Source: ICIS news]

SINGAPORE (ICIS news)--Crude fell more than $1/bbl, pushing prices to fresh 22-month lows on Thursday, with NYMEX light sweet crude slipping below $55/bbl amid growing concerns over the global economy. 

 

At 16:34 hours Singapore time (0834GMT), December NYMEX light sweet crude futures were trading at $55.15/bbl, down $1.01/bbl on Wednesday’s settlement level, after hitting $54.67/bbl, levels not seen since January last year.

 

At the same time, December Brent on London’s ICE futures were trading at $51.02/bbl, down $1.35/bbl from Wednesday’s settlement price after earlier falling to a low of $50.60/bbl. This is also the lowest level since January 2007.

 

The December ICE Brent contract expires at the close of business on Thursday.

 

Crude extended losses made over the previous two sessions as concerns continued to grow over the health of the global economy with news that Germany had fallen into recession. Stock markets in Asia slumped on Thursday following losses of more than 4% overnight on Wall Street.

 

Meanwhile, the US Energy Information Administration (EIA) in its Short Term Energy Outlook released on Wednesday, drastically reduced its 2008 US oil demand forecast to around 19.6m bbl/day, down 1.1m bbl/day or 5.4% from the 2007 average. This is the first time since 1980 that US consumption has been expected to decline by more than 1m bbl/day.

 

The EIA also forecast that global consumption in 2008 will increase by just 100,000 bbl/day in 2008 and remain flat in 2009.

 

There are expectations that the International Energy Agency (IEA), which will issue its monthly report on Thursday, will further reduce its global demand forecasts.

 

With prices continuing to fall, OPEC members are considering holding an emergency meeting on 28 November in Cairo to discuss further production cuts. At its previous meeting on 24 October in Vienna, OPEC agreed to cut output by 1.5m bbls/day from 1 November. However, that move has thus far failed to stem the slide in prices.

 

Meanwhile, the EIA will release US weekly inventory data later on Thursday. The data is expected to reveal further builds in crude stocks and product stocks. Crude is forecast to rise by around 1.2m bbl while, distillates and gasoline stocks are forecast to increase by 800,000 bbls and 300,000 bbls, respectively.

 

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By: James Dennis
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