Economic Calendar

Wednesday, October 22, 2008

Crude Oil Falls to 15-Month Low on Weakening Demand for Fuels

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By Mark Shenk

Oct. 22 (Bloomberg) -- Crude oil fell more than $3 a barrel to a 15-month low as weakening fuel consumption outweighed prospects of a production cut by OPEC at a meeting this week.

The global financial crisis, which helped send U.S. fuel use to the lowest since 1999, is spreading to emerging markets. OPEC, supplier of more than 40 percent of the world's oil, will decide on Oct. 24 to lower output by 1 million barrels a day, according to a Bloomberg survey.

``The market is more concerned about slowing demand than OPEC right now,'' said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. ``Any OPEC cut will probably be outpaced by the rate demand is falling.''

Crude oil for December delivery declined $3.50, or 4.9 percent, to $68.68 a barrel at 9:05 a.m. on the New York Mercantile Exchange. Futures touched $68.48, the lowest since June 27, 2007. Prices, which have tumbled 53 percent since reaching a record $147.27 on July 11, are down 21 percent from a year ago.

Argentina's planned seizure of $29 billion of private pension funds stoked concern the nation is heading for its second default in a decade. President Cristina Fernandez de Kirchner's decision hurt markets already reeling from slumping commodity prices and slower growth.

U.S. gasoline demand dropped 6.4 percent last week from a year earlier, the 26th consecutive weekly decline, a MasterCard Inc. report showed yesterday.

Fuel demand in the U.S. averaged about 18.6 million barrels a day during the four weeks ended Oct. 10, the lowest since June 1999, according to an Energy Department report last week. The department is scheduled to release its report on U.S. supply in the week ended Oct. 17 at 10:35 a.m. today in Washington.

Higher Inventories

The report will probably show that crude oil inventories climbed 2.65 million barrels in the week ended Oct. 17, the fourth-straight weekly gain, according to the median of responses in a Bloomberg News survey.

The Organization of Petroleum Exporting Countries may disregard pleas from oil-consuming nations on the brink of recession and cut output this week, a Bloomberg survey showed.

Thirty of 33 analysts surveyed yesterday and today forecast that OPEC will lower production by 1 million barrels a day or more at the meeting in Vienna, which was brought forward from November. That's more oil than Australia consumes. OPEC also may signal plans for an additional reduction of at least 500,000 barrels a day by early 2009.

Brent crude oil for December settlement fell $2.79, or 4 percent, to $66.93 a barrel on London's ICE Futures Europe exchange.

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.




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