Oil falls below US$63 a barrel

Source: Agencies  |   2008-10-29  |     ONLINE EDITION

OIL prices fell yesterday a day before the government releases its weekly crude inventory report that recently has shown in stark numbers how much Americans are cutting back on energy costs.

Although oil prices typically decline in the fall, analysts expect the prices to continue falling, perhaps as low as US$50 a barrel, before they hit bottom.

U.S. crude stockpile increases have been greater than expected every week in October, which has led to rapid selloffs in the oil markets.

Oil prices have shadowed the direction of Dow Jones industrial average for weeks, but that was not the case Tuesday.

With the Dow up 670 points in late afternoon trading, light, sweet crude for December delivery fell 49 cents to settle at US$62.73 a barrel on the New York Mercantile Exchange, the lowest closing price since May 15, 2007.

In London, December Brent crude lost US$1.12 to settle at US$60.29 a barrel on the ICE Futures exchange.

Demand is off about 7 percent compared with last year, said Fred Rozell, retail pricing director at Oil Price Information Service. The US Department of Transportation reported the biggest monthly decline in miles driven since World War II on Friday.

"We are going to see a pretty sizable recession here," said Rozell.

Consumer pullbacks are showing up in the US crude inventory reports released each Wednesday, with unexpected builds catching investors off guard.

Prices have continued to fall despite an announcement last week that OPEC would cut oil production by 1.5 million barrels a day. The Organization of Petroleum Exporting Countries, which controls about 40 percent of global crude oil production, has not ruled out another cut when it meets in December.

OPEC members warned yesterday that low oil prices have created a crisis situation that threatens key investment in production.