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Oil falls to $62 on gloomy global economic outlook

Oil falls to $62 on gloomy global economic outlook
AP
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First Published: Tue, Oct 28 2008. 06 58 PM IST
Updated: Tue, Oct 28 2008. 06 58 PM IST
Singapore: Oil prices fell to 17-month low around $62 a barrel Tuesday in Asia on investor concerns a global economic slowdown could worsen, further undermining demand for crude.
Light, sweet crude for December delivery fell 87 cents to $62.35 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore after trading as low as $61.75. The contract fell overnight 93 cents to close at $63.22, the lowest settlement since 29 May, 2007.
“It’s quite a severe slowdown that’s been priced in already,” said Jonathan Kornafel, Asia director for market maker Hudson Capital Energy in Singapore. I thought in June and July the only way we would get below $80 was if there was a macroeconomic collapse, and it seems that that’s what we’re seeing.”
Oil investors have been taking a cue from a plunge in global stock markets that suggests major economies are headed for a significant recession over the next 12 months. Oil prices have fallen 58% since reaching a record $147.27 on 11 July.
The Dow Jones industrial average fell 2.4% Monday after credit ratings agency Moody’s Investors Service downgraded General Motors Corp.’s credit rating further into “junk” status, citing a sharp contraction of the US auto market. The Standard & Poor’s 500 index fell 3.2%.
In early trading Tuesday, Asian stock markets were mixed, with key indices in Japan and Australia down but Hong Kong and Thailand gaining after both of those markets fell more than 10% Monday.
“If the credit market remains tight and the recession worsens, we could certainly go into the $50 and even below $50 but that would be an overshoot to the downside,” Kornafel said.
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First Published: Tue, Oct 28 2008. 06 58 PM IST