Oil Drops as Global Economic Slowdown Curbs Fuel Consumption

By Christian Schmollinger

Nov. 14 (Bloomberg) -- Crude oil fell in New York after energy-consuming countries cut fuel demand as the global economy slows.

China Petroleum & Chemical Corp., which supplies more than half the fuel to the world's second-largest oil consumer, is slashing processing rates by 10 percent from July's record, company officials said today. China's fixed-asset investment growth has slowed, the statistics bureau said today, signaling a slowdown in the world's fourth-biggest economy is deepening.

``Demand is much less than people have anticipated and the supply-demand balance is getting weaker,'' said Tetsu Emori, a fund manager with Astmax Ltd., Japan's biggest commodities asset manager, in Tokyo.

Crude oil for December delivery dropped as much as 69 cents, or 1.2 percent, to $57.55 a barrel on the New York Mercantile Exchange. It was at $57.60 a barrel at 4:06 p.m. Singapore time. The contract earlier rose as much as $1.72, or 3 percent, to $59.96 a barrel. Prices have tumbled 61 percent from a record $147.27 on July 11.

Oil is set to fall 5.5 percent this week, the second week of decline.

China Petroleum, or Sinopec, will process about 15 million metric tons a month, or 3.65 million barrels a day, starting November, said three refinery officials, who declined to be named because of internal rules.

China's Spending

China's spending on factories and real estate, or fixed- asset investments in urban areas, rose 27.2 percent in the first 10 months from a year earlier, the statistics bureau said. That was less than the 27.6 percent gain through September and the 27.4 percent estimate of economists surveyed by Bloomberg News.

Oil traders made their biggest bet yet that the Organization of Petroleum Exporting Countries, producer of 40 percent of the world's oil, will fail to prevent crude prices from plunging below $30 a barrel.

Trades in crude-oil options contracts that would allow the holder to sell oil for February delivery at $30 a barrel reached 1,407 on the New York Mercantile Exchange yesterday, making the contract the day's second-most active, exchange data show.

U.S. crude-oil stockpiles rose 22,000 barrels to 311.9 million barrels last week, the Energy Department said yesterday. Inventories were forecast to climb 1 million barrels, according to the median of 13 responses in a Bloomberg News survey.

OPEC Decision

OPEC is scheduled to meet in Cairo on Nov. 29. Non-Arab members of the cartel, such as Venezuela, Iran and Angola, will be invited to take part in talks about the oil market afterwards, OPEC President Chakib Khelil told Algerian radio yesterday.

OPEC decided at a meeting in Vienna last month to cut the production target for 11 of the group's members by 1.5 million barrels a day, from 28.8 million barrels a day.

``The production cut means that spare capacity will be increased,'' said Astmax's Emori. ``So this should be a bearish factor longer-term even if it is bullish for the very short- term.''

Brent crude oil for January settlement fell as much as 87 cents, or 1.6 percent, to $55.37 a barrel on London's ICE Futures Europe exchange. It was at $55.62 a barrel at 4:08 p.m. Singapore time. The contract earlier rose 56 cents, or 1 percent, to $56.80 a barrel.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.