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Crude oil tumbles to 16-month low before OPEC meeting

Published: 22/10/2008 05:00

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Crude oil tumbled more than 5 U.S. dollars a barrel to a 16-month low Wednesday as the falling energy consumption outweighed the near-certain production cut by OPEC this week.

Light, sweet crude for December delivery slid 5.43 dollars to settle at 66.75 dollars a barrel on the New York Mercantile Exchange (NYMEX). Futures dropped to 66.175 dollars a barrel during the trading, the lowest price since June 14, 2007.

In London, Brent crude shed 5.20 dollars to settle at 64.52 dollars a barrel on the ICE Futures Exchange.

Crude oil has declined about 55 percent from its July record high of 147.27 dollars a barrel due to investors’ increasing concerns that a global economic recession could force consumers and businesses to further cut back on energy consumption.

Continuing weak demand

Oil’s Wednesday slide was mostly prompted by the greater-than-expected increase in the U.S. fuel inventories. According to the weekly report of U.S. Energy Department Energy Information Administration (EIA), crude stockpiles jumped by 3.2 million barrels in the week ended Oct. 17, marking a fourth straight increase in the crude inventory.

Meanwhile, gasoline supplies rose by 2.7 million barrels, and stockpiles of distillates, which include diesel fuel and heating oil, increased by 2.2 million barrels. All numbers have far exceeded the market’s previous forecast.

To make it even worse, the EIA report also revealed that the U.S. domestic gasoline consumption for the past four weeks averaged 8.8 million barrels a day, 4.3 percent down from the same period last year. Consumption of distillate fuel averaged 3.9 million barrels a day, 5.8 percent lower.

“Oil continued to tumble as market participants continue to embrace the sentiment that the U.S. and global economy is entering a recession. The result would be a net reduction in demand for the commodity,” Wall Street Strategies’ senior research analyst Conley Turner told Xinhua, “In fact, the report by the U.S. government this morning of a build in fuel supplies on served to underscore that sentiment.”

VietNamNet/Xinhuanet

Update from: http://english.vietnamnet.vn//international/2008/10/809899/

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