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Monday, October 13, 2008
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Crude oil plummets below US$80 a barrel on global slowdown fears |
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Written by THE ASSOCIATED PRESS
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Monday, 13 October 2008 |
A refinery plant is seen in Freeport, Texas. Several chemical plants in the area are threatened by Hurricane Ike which is expected to strike the Texas coast this weekend. (THE ASSOCIATED PRESS/Eric Gay)
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NEW YORK - Oil prices plummeted below US$80 a barrel Friday as fears of a severe global economic slump provoked a panicked sell-off.
Light sweet crude for November delivery was down $6.52 at US$80.07 a barrel on the New York Mercantile Exchange after briefly dipping under $80.
"The whole market has lost confidence in everything," said Mark Pervan, commodity strategist with ANZ Bank in Melbourne.
"Everyone is worried about global growth, and oil is the front-line commodity for that. There's just a lot of panic and fear in the market."
What began as a seizure in credit markets has become a threat to economic activity around the world, causing an energy watchdog to slash its forecast for oil demand.
The International Energy Agency cut its outlook for oil demand by 240,000 barrels per day this year and 440,000 barrels per day in 2009.
It also said the credit freeze is hurting the supply side of the oil industry, "with independent producers and, potentially, several Russian operators seen as particularly at risk."
But with economic growth in danger, oil traders are focused on demand destruction, even overlooking signs that the Organization of Petroleum Exporting Countries may cut production.
OPEC said Thursday it will hold an extraordinary meeting Nov. 18, amid calls from Libya and others for output cuts to support prices.
However, OPEC's decision last month to cut production by 520,000 barrels a day failed to halt the price slide, which has steepened in recent days.
"The problem is no one really knows how far and deep this will go," Pervan said. "This isn't a normal bear market."
Oil prices are down 45 per cent from the record US$147.27 a barrel on July 11.
"We haven't seen the bottom of this yet," Pervan said.
"We thought $75 would be a floor but if the market mood doesn't change $50 to $60 a barrel is not out of the question."
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Last Updated ( Monday, 13 October 2008 )
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