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Crude Oil Falls as Waning Demand Outweighs Prospect of OPEC Cut
Oct. 22 (Bloomberg) — Crude oil fell for a second day as weakening fuel demand outweighed prospects of a production cut by OPEC at a meeting this week.
U.S. gasoline demand has declined for the past six months and China’s economy has slowed amid a global financial crisis. OPEC, supplier of more than 40 percent of the world’s oil, will decide on Oct. 24 to lower output by 1 million barrels a day, according to a Bloomberg survey.
“Demand for oil is the focus of people’s minds at present and it doesn’t get better,” said Robert Laughlin, senior broker at MF Global Ltd. in London. “A lot of eyes remain focused on China, which is currently experiencing a very public economic slow down.”
Crude oil for December delivery declined as much as $3.28, or 4.5 percent, to $68.90 a barrel in electronic trading on the New York Mercantile Exchange, and traded at $69.42 a barrel at 9:42 a.m. London time.
The November contract expired yesterday, after declining $3.36 to settle at $70.89 a barrel. Prices, which have tumbled 53 percent from the record $147.27 on July 11, are down 21 percent from a year ago.
`Chronic Mismatch’
U.S. gasoline demand dropped 6.4 percent last week from a year ago, the 26th consecutive weekly decline, a MasterCard Inc. report yesterday showed.
“There’s a chronic mismatch between demand and supply,” said Michael Ivanovitch, president of MSI Global Inc. “There’s very little growth in the U.S. and Europe.”
The Organization of Petroleum Exporting Countries may disregard pleas from consuming nations on the brink of recession by cutting output by at least 1 million barrels this week, a Bloomberg News survey showed.
Thirty of 33 analysts surveyed yesterday and today forecast that OPEC will decide to cut output by 1 million barrels a day or more at the meeting in Vienna which was brought forward from November. That’s more oil than Australia consumes. OPEC also may signal plans for an additional reduction of at least 500,000 barrels by early 2009.
Trim Supplies
Iran, OPEC’s second-largest producer, said it favors a cut of between 2 million and 2.5 million barrels a day. Ministers from Algeria, Libya, and Qatar have said OPEC, which provides 40 percent of the world’s oil, will need to trim supplies.
Saudi Arabia, which dominates OPEC proceedings as the group’s largest producer, has yet to comment on its intentions.
OPEC forecasts an excess of supply at the end of the year and start of 2009, the group’s Secretary General Abdulla el- Badri told reporters yesterday in Moscow. El-Badri said that OPEC will try to balance the market, though it may not be able to achieve this goal on its own.
The U.S. Energy Department will probably report today that oil and gasoline supplies rose last week, a Bloomberg News survey showed. Crude-oil inventories climbed 2.65 million barrels in the week ended Oct. 17, according to the survey. It would be the fourth-straight weekly gain.
“The most critical data point to watch is U.S. implied petroleum demand. This has weakened substantially over the last months,” Credit Suisse Group said in a research note today. An increase in inventories would be negative and “risks are skewed to the downside in our view at least until the OPEC meeting.”
Brent crude oil for December settlement fell as much as $2.96, or 4.3 percent, to $66.76 a barrel on London’s ICE Futures Europe exchange. It was at $67.12 a barrel at 9:13 a.m. local time. Prices have fallen 20 percent in the past year.
October 22, 2008