Oil falls to lowest in 17 months on fears of a global recession

Oil falls to lowest in 17 months on fears of a global recession

London: Crude oil fell to its lowest since May 2007 in New York as plunging stock markets heightened concerns that a global recession will slash energy demand.

The Organization of Petroleum Exporting Countries (Opec), supplier of 40% of the world’s crude, may need to make an additional production cut if its 24 October decision to lower output fails to stabilize prices, AFP said, citing an interview Iran’s Opec representative Mohammad Ali Khatibi gave on state television.

“Fear is the word," said Robert Laughlin, a senior broker with MF Global Ltd in London. “Concern about the depth of a global recession and the length of any recovery is now causing alarm across world markets."

Crude oil for December delivery fell as much as $2.85 (Rs142.79), or 4.4%, to $61.30 a barrel in after-hours electronic trading on the New York Mercantile Exchange. That’s the lowest since 9 May 2007. It was at $61.82 at 12.22pm in London. Brent crude oil for December settlement fell as much as $3.03, or 4.9%, to $59.02 a barrel on London’s ICE Futures Europe exchange. That’s the lowest since 22 February 2007.

The MSCI World Index lost 3.1% to 845.07 at 11.19am in London, having shed more than a quarter of its value this month as subprime-related credit losses topped $680 billion. Equity indexes in China and the Philippines tumbled more than 6%, heightening anxieties that recession may spread to Asia, growth centre for oil demand.

Hong Kong’s Hang Seng Index sank 13% after money market rates rose, and the Philippines’ benchmark gauge plunged 12%, triggering a temporary trading halt.

“I expect prices are not likely to stop falling," said Go Endo, a Fuji Futures Co. commodity strategist in Tokyo. “Opec may not wait until the next meeting in December. They will probably hold an extraordinary meeting to cut production further."

Oil is heading for a 41% drop this month, the steepest since New York futures started trading in 1988, even after Opec agreed to cut oil production for the first time in almost two years. The 13 Opec nations decided to reduce supply by 1.5 million barrels a day starting from November. Prices have dropped 56% from the record $147.27 a barrel reached on 11 July as stock markets declined.

Global oil demand may decline for the first time in 15 years in 2008 and stagnate next year, the Centre for Global Energy Studies had said on 20 October. Bloomberg

Alexander Kwiatkowski in London and Angela Macdonald-Smith in Sydney contributed to this story.