Oil prices pull back as investors eye falling demand

Source: Agencies  |   2008-10-28  |     ONLINE EDITION

OIL prices waffled yesterday, touching their lowest levels in nearly a year and a half but also showing some strength after a surprisingly upbeat home sales report gave investors a glimmer of hope that the housing market might rebound and help ease the economy's many problems. Crude finally ended the day falling less than a dollar.

Oil dropped as low at US$61.30 a barrel in early trading before rising in response to the Commerce Department report that sales of new single-family homes rose by 2.7 percent in September to a seasonally adjusted annual rate of 464,000 homes. Economists had expected sales would drop from August.

Any positive news about the US economy is welcomed by investors, and the home sales report lifted Wall Street off its lows. Stock prices were fluctuating and tending toward the downside in late afternoon.

"It seems oil is following the equities markets at this point, and has been for the past couple of weeks," said Peter Beutel, oil analyst at Cameron Hanover in New Canaan, Connecticut.

But just as the stock market was unable to hold on to gains, oil pulled back. The weakness of the economy has traders convinced that demand for energy will continue to flag one set of data, in this case, the home sales number, won't be enough to lift the markets from their slump.

Light, sweet crude for December delivery fell 93 cents to settle US$63.22 a barrel in trading on the New York Mercantile Exchange after dropping to its lowest point since May 2007. At its low of US$61.30, crude was down 58.4 percent from its record of US$147.27 on July 11.

In London, November Brent crude fell 64 cents to settle at US$61.41 a barrel on the ICE Futures exchange.

Earlier in the day, prices fell as traders' focus on the economy had them brushing off OPEC's sizable production cut late last week.