Oil fell more than 2 per cent this morning to trade below $58 a barrel for the first time in 20 months as expectations of weaker energy demand more than offset news of reductions in supply.
The move extended a fall of 5 per cent yesterday and analysts said the mood in the market was so bearish that prices could keep falling towards $50 a barrel.
News that OPEC could cut supplies by an additional 1 million barrels per day (bpd) when it meets in Algeria next month did little to prevent the downward spiral that has knocked 60 per cent off oil's value from a record high of over $147 in mid-July.
US crude for December delivery hit a low of $57.90, down $1.43 by 9.03am, before rallying to around $58.40 at 9.30am. In the previous session, the market settled down $3.08 at $59.33 a barrel, its lowest settlement in 20 months.
London Brent crude shed $1.20 to $54.51 a barrel.
"Fear that the global recession is worsening day by day is driving this market down," said Rob Laughlin, senior oil analyst at brokers MF Global. "Demand for oil is deteriorating week by week."
Analysts expect the International Energy Agency (IEA) to downgrade its forecasts for demand in its monthly oil market report to be published tomorrow.
“It's bearish news all around. I expect the IEA to further revise down the energy demand forecasts," said Tobias Merath, head of commodities research at Credit Suisse in Singapore.
"Even the new set of industrial production numbers due from China and Japan this week should be having a bearish undertone."
China's industrial production growth slowed to about 8 per cent in the year to October, the first time it has been in single digits since the end of 2001, an official familiar with the data said earlier this week.
The official data is due on In a research note, Credit Suisse added the US Department of Energy would probably cut its one-year WTI price forecast when its publishes its Short Term Energy Outlook tomorrow.
Reuters