Oil prices continue lower

October 9, 2008
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, SINGAPORE, October 9 – Oil prices continued lower Thursday on fears of slowing world energy demand despite government efforts to bail out the ailing global financial system, analysts said.

New York\’s main contract, light sweet crude for delivery in November, fell 63 cents to 88.32 dollars a barrel after a drop of 1.11 dollars to 88.95 dollars Wednesday at the New York Mercantile Exchange.

Brent North Sea crude for November dropped 46 cents to 83.90 dollars a barrel on top of a 30-cent fall to 84.36 dollars Wednesday in London.

Jason Feer, a vice-president with energy market analysts Argus Media, said there is an "ongoing realisation that no matter how much money they pump into the financial system, they may save it from meltdown but it\’s pretty clear at this point that that\’s not going to be enough to prevent a pretty significant drop in global oil demand."

Oil prices have already plunged from record highs above 147 dollars, reached in July, because of demand worries, dealers said.

Prices have continued to fall despite measures including a US government plan to buy up to 700 billion dollars worth of tainted mortgage-related assets at the root of the global crisis.

On Wednesday Britain said it would make 50 billion pounds (87 billion dollars) of taxpayers\’ money available to buy shares in banks, providing them with fresh capital in a bid to prevent a banking system collapse.

The world\’s major central banks also announced coordinated half-point cuts in key interest rates in an extraordinary bid to unblock gridlocked credit and calm market turbulence.

"I think it\’s becoming pretty clear that once the financial crisis eases you\’re going to see a pretty long, harsh recession," Feer said in Singapore.

Latest weekly data from the United States Department of Energy (DoE) showed demand in the world\’s biggest energy consumer continued to weaken.

The DoE said US crude oil inventories rose by 8.1 million barrels in the week ended October 3, far more than market expectations of a 2.3-million-barrel gain.

Gasoline stockpiles rose by 7.2 million barrels instead of the 1.1 million expected, and over the past four weeks, oil consumption averaged 18.7 million barrels per day, down 8.6 percent from a year ago.

Prices had picked up on Tuesday after Libya, an OPEC member, called on crude producers to cut output to protect their incomes.

"I would guess that OPEC is going to step in," Feer said.

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