Oil prices sink to 22-month low

Source: Agencies  |   2008-11-14  |     NEWSPAPER EDITION

OIL prices swung wildly yesterday following a lead from Wall Street, which sank 300 points before investors flooded back into the market.

Light, sweet crude for December delivery rosetype:italic US$2.08 to settle at US$58.24 on the New York Mercantile Exchange. Crude earlier dipped as low as US$54.67, a price last seen in January 2007, on reports that the world's biggest economies are in recession and that energy demand has declined to decade-ago levels.

The Dow dropped briefly below 8,000, falling more than 300 points, to retest lows that it hit Oct. 10 before a sharp climb into positive territory. The Standard & Poor's 500 index dropped to 818.69 before staging its own strong rally.

"The main driver is the turnaround in the S&P," said Addison Armstrong, director of market research at Tradition Energy.

There was also chatter about yet another extraordinary meeting by the Organization of Petroleum Exporting Countries to cut production for the second time in less than a month.

"They might actually mean it this time," said Mike Zarembski, senior commodity analyst at OptionsExpress.

"We're still in a downtrend, but even in a downtrend there are up days."

There are serious doubts about OPEC's ability to control prices through production levels. Energy analysts increasingly have come to believe that demand, not supply, is in control of the market.

OPEC slashed production quotas by 1.5 million barrels a day when they met at the end of October.

It had virtually no effect on tumbling crude prices.

Before the rally, crude has fallen 12 percent this week alone under a daily barrage of economic predictions that industries and consumers have cut back on spending. US gasoline prices have fallen nearly 50 percent since hitting a record national average of US$4.11 per gallon (US$1.08 a liter) in July.