By Mark Shenk
Oct. 22 (Bloomberg) -- Crude oil fell more than $4 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 at least 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 $4.31, or 6 percent, to $67.87 a barrel at 9:50 a.m. on the New York Mercantile Exchange. Futures touched $67.75, the lowest since June 27, 2007. Prices, which have tumbled 54 percent since reaching a record $147.27 on July 11, are down 22 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.
China's gross domestic product increased 9 percent in the third quarter from a year earlier, the weakest pace in five years, as the slowdown in the U.S. and other markets saps demand for Chinese products. China is the world's biggest oil consumer, after the U.S.
Asian Growth
``I think the economic news from Asia is knocking the last leg from under the bulls,'' said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. ``We're now getting evidence that China isn't immune to the financial crisis after all.''
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.
``The projections of a deep economic slowdown are scary,'' said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. ``Demand for every segment of the oil barrel is going to take a hit.''
Industrial Slowdown
``The industrial slowdown will reduce use of diesel, people will cut back on discretionary driving, hitting gasoline demand, there will be less travel, hitting jet fuel demand, and there will be less shipping, which hits bunker-fuel demand,'' Mueller said.
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.
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 $3.56, or 5.1 percent, to $66.16 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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Wednesday, October 22, 2008
Crude Oil Falls to 15-Month Low on Weakening Demand for Fuels
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