PERTH (Reuters) – Oil fell for a third straight day on Thursday to hit a 22-month low of $55 a barrel as mounting pessimism about the global economy outweighed OPEC's comments that it could cut output again as early as end-November.
OPEC officials, concerned about oil's steep drop from record highs over $147 a barrel per day (bpd) in July, said the cartel could possibly decide by the end of the month to cut production again to raise prices.
But comments from the producer group failed to lift oil prices, as investors focused on near-term demand worries after the U.S. Energy Information Administration (EIA) slashed America's 2008 oil demand outlook and the International Energy Agency (IEA) flagged further reduction in its oil forecast.
U.S. light crude for December delivery was down 95 cents at $55.21 a barrel by 0702 GMT, after having fallen earlier to $54.67 -- the lowest since January 30, 2007.
London Brent crude fell $1.02 to $51.35, off an earlier low of $50.60.
"Oil prices continue to be pressured by fears that weaker international economic growth will depress oil consumption," said David Moore, an analyst at the Commonwealth Bank of Australia.
Oil fell 5 percent overnight, along with a big drop in U.S. stock markets, after the U.S. government shifted its position on how it planned to use its $700 billion bailout fund, which added uncertainty to financial markets and renewed fears of a protracted global recession.
Expectations that U.S. government data to be released on Thursday would show a further build-up of crude and gasoline stocks also weighed on prices, analysts said.
Analysts polled by Reuters ahead of U.S. weekly inventory data forecast crude oil stocks rose 1.2 million barrels last week, while distillate and gasoline inventories were seen rising by 800,000 barrels and 300,000 barrels respectively.
Oil has lost about $91, or 62 percent, from its record high of above $147 struck in mid-July, on growing evidence that recent high energy prices and the financial crisis have dented energy demand in the United States and other industrialized nations.
Demand in the United States, the world's biggest consumer of oil, was expected to fall by more than 1 million barrels per day (bpd) for the first time since 1980 this year, the EIA said.
The EIA also forecast world oil demand to rise by only just 100,000 bpd in 2008 and will be virtually flat in 2009, as it cut its 2009 oil price forecast to average around $63.50 a barrel.
Analysts said a move by IEA to further cut its oil demand growth forecast later on Thursday could heighten fears among investors.
In the latest sign that China's economy is also being hit by the global downturn, data on Thursday showed Chinese annual industrial output slumped to 8.2 percent in October, the weakest reading since late 2001, as manufacturers struggled with a drop in export demand and weakness in the domestic property market.
China also posted its first annual decline in power output during a non-holiday month for a decade, with a 4 percent fall in October.
OPEC President Chakib Khelil told Reuters on Wednesday that Organization of Petroleum Exporting Countries may cut oil supplies again, possibly as early as at November 29 meeting in Cairo, if prices keep falling and the world economy weakens.
"If the prices continue their decline, most probably OPEC will have to take a further decision on a cut in supply," Khelil told Reuters in an interview in Algiers.
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