Oil prices fall below US$70 on more supplies

Source: Agencies  |   2008-10-17  |     ONLINE EDITION

OIL prices closed at a new 14-month low beneath US$70 a barrel yesterday, bringing its price to less than half its July record high after the government reported massive increases in US crude and gasoline stockpiles.

Investors took the news as more evidence that a global credit crisis and a shaky economy are curbing demand for oil.

The selloff in crude came despite an announcement by OPEC yesterday that it was moving up by almost a month an emergency meeting to discuss oil's rapid drop in value, including whether or not a production cut is needed. The Organization of Petroleum Exporting Countries will now meet October 24 at its headquarters in Vienna, Austria, instead of November 18.

Oil market traders ignored the statement, convinced that prices are headed lower.

Light, sweet crude for November delivery dropped US$4.69, or 6.2 percent, to settle at US$69.85 a barrel on the New York Mercantile Exchange, the lowest settlement prices since August 23, 2007. Earlier prices dipped to US$68.57, a level not seen since June 27, 2007.

Crude has now fallen 52.5 percent since surging to a record US$147.27 on July 11. Some energy analysts have predicted oil could fall as low as US$50.

Yesterday's declines accelerated after the US Energy Information Administration said in its weekly report that crude stocks rose by 5.6 million barrels last week, well above the 3.1 million barrel increase expected by analysts surveyed by energy research firm Platts.

The EIA also says gasoline stock rose by 7 million barrels last week, more than double the build analysts had expected.

Demand for gasoline over the four weeks ended October 10 was 5.2 percent lower than a year earlier, averaging nearly 8.8 million barrels a day, the EIA said.

"This report is playing right into the market's deepest fears, that the economy is slowing down and that demand is going to be nonexistent," said Phil Flynn, energy analyst at Alaron Trading Corp in Chicago.