Traders work in the crude oil options pit at the New York Mercantile Exchange on July 6 in New York City

Oil prices plunged Wednesday under US$62 to hit the lowest levels since May, as the gloomy economic outlook and falling stock markets weighed on sentiment ahead of the weekly US energy report.

London’s Brent North Sea crude for delivery in August sank 51 cents to $62.42 per barrel on Wednesday after earlier hitting $62.30 - a level last reached on May 28.

“Crude prices [in New York] have continued to fall and have now declined more than 15 percent from the $73.38 high last week… on continuing anxiety about an economic recovery,” said Sucden analyst Nimit Khamar.

“Market participants continue to be concerned that slower than expected economic recovery will further curb oil consumption.”

European stock markets weakened on Wednesday after Wall Street sustained heavy losses amid fresh worries about the global economy.

In Asia, Tokyo shares plunged 2.35 percent on Wednesday after New York’s Dow Jones Industrial Average had shed 1.94 percent overnight.

Later Wednesday, the US government’s US Energy Information Administration (EIA) will publish its weekly report on American crude oil inventories for the week ending July 3.

Meanwhile in Vienna, OPEC said Wednesday it had revised downwards its medium and long-term forecasts for global oil demand in the wake of the current economic crisis.

In its World Oil Outlook 2009, the Organization of Petroleum Exporting Countries said that under its revised main forecast oil demand would be “less than 106 million barrels per day (bpd) in 2030, down from 113 million bpd.”

OPEC is forecasting global oil demand of 90.2 million bpd in 2015 and 105.6 million bpd in 2030, while the International Energy Agency (IEA) is penciling in 94.4 million bpd and 106.4 million bpd respectively.

Crude oil prices have fallen heavily this week on mounting concern that the battered world economy and weak energy demand was unlikely to recover any time soon.

“The force behind yesterday’s [Tuesday’s] sharp decline in crude was undoubtedly a renewed sell-off in the equity market with limited assistance from a strengthening US dollar,” said ODL Securities analyst Marius Paun.

“However, the defining moment that triggered this shift in momentum from the up to the downside appeared to be last week’s employment report.

“Today’s EIA data is expected to provide limited guidance although any significant surprise has the potential of offering oil investors good trading opportunities.”

Doubts over a global economic bounce were rekindled following the June unemployment report in the United States, which showed bigger-than-expected job losses.

Source: AFP