Oil Drops for Second Day to Near 20-Month Low on Demand Outlook

By Christian Schmollinger

Nov. 12 (Bloomberg) -- Crude oil fell for a second day in New York, trading near a 20-month low, on speculation the International Energy Agency will cut its 2009 oil-demand forecast because of slowing economic growth.

The IEA, which coordinates energy policy in 28 developed countries, will reduce the estimated growth in global demand for a third month in a report today, according to four former IEA analysts. Energy prices also dropped because of weaker equity markets and a rising U.S. dollar. Spot gold prices are down today and copper fell 6 percent yesterday.

``The market works on emotions and fundamentals and both are still pointing to lower prices,'' said Stephen Schork, president of energy analysts Schork Group in Philadelphia, in an interview with Bloomberg Television. ``We do know that we are in a recession and demand is pulled back greatly.''

Crude oil for December delivery fell as much as 78 cents, or 1.3 percent, to $58.55 a barrel in after-hours electronic trading on the New York Mercantile Exchange. It was at $58.92 a barrel at 9:01 a.m. Singapore time.

Yesterday, oil lost $3.08, or 4.9 percent, to $59.33 a barrel, the lowest settlement since March 20, 2007, after earlier dropping as low as $58.32. Prices have tumbled 60 percent since reaching a record $147.27 on July 11.

The IEA already has cut its 2008 forecast about 1.3 million barrels a day in seven revisions this year. Last week it published a summary of its annual World Energy Outlook, slashing its 2030 projection by 9.4 percent to 106 million barrels a day.

OPEC Cuts

The Organization of Petroleum Exporting Countries cited falling demand for its Oct. 24 decision to reduce production by 1.5 million barrels a day. OPEC ministers will discuss the market situation when they meet next on Dec. 17 and may agree to another supply cut then, the group's president, Chakib Khelil, said on Nov. 8 in Algiers.

U.S. crude-oil supplies probably rose for a seventh week as imports rebounded, a Bloomberg News survey of analysts showed. Stockpiles probably increased 750,000 barrels in the week ended Nov. 7 from 311.9 million the week before, according to the median of 12 analyst estimates before an Energy Department report.

Gasoline stockpiles probably increased 200,000 barrels from 196.1 million barrels the week before, according to the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, rose 1 million barrels from 127.8 barrels the week before, the survey showed.

The department is scheduled to release its weekly report tomorrow at 11 a.m. in Washington. The report is being delayed by a day because of yesterday's Veterans Day holiday.

Brent crude oil for December settlement decreased $3.37, or 5.7 percent, to settle at $55.71 a barrel on London's ICE Futures Europe exchange, the lowest settlement since Jan. 29, 2007.

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