Oil prices sink below US$66 a barrel amid worries about slumping demand

Source: Agencies  |   2008-11-6  |     ONLINE EDITION

OIL prices dipped below US$66 a barrel yesterday as investor sentiment once again seemed to shift to the growing global economic malaise and its potential impact on energy demand.

A day after oil staged an Election Day rally, even indications that OPEC was acting on an earlier pledge to pull 1.5 million barrels of crude a day from the market failed to support prices.

Light, sweet crude for December delivery fell US$5.23 to settle at US$65.30 a barrel on the New York Mercantile Exchange. In London, December Brent crude fell US$4.57 to settle at US$61.87 on the ICE Futures exchange.

Prices fell despite a rally in Asian stock markets after the US presidential election was settled, with Barack Obama becoming the first black to win the White House.

Oil prices surged above US$70 a barrel for the first time in nearly two weeks Tuesday, mirroring global stock markets that strengthened in the US, Asia and Europe.

That one-day rally, however, "did not eliminate pervasive fears of a protracted global economic slowdown," Addison Armstrong, director of market research at Tradition Energy, said in a note yesterday morning.

Oil prices have tended to mimic US equities markets of late, and yesterday was no different. The Dow Jones industrial average fell 400 points.

"What happens when you're in a bearish market that's trying to make a bottom is you do a sort of Texas two-step," said Peter Beutel, oil analyst at Cameron Hanover in New Canaan, Connecticut. "Oil goes up for a day or two, and the rug gets pulled out. It goes up for another day or so and the rug gets pulled out. The tide appears to be trying to change from an overwhelmingly lower trend to one that's sideways to higher."

On the supply front, US crude inventories remained stable after rising the previous five periods, while gasoline stockpiles rose unexpectedly, according to government data released yesterday.