Petroleum cartel cuts 2009 growth forecast for global oil demand By Myra P. Saefong & Polya Lesova, MarketWatch SAN FRANCISCO (MarketWatch) -- Crude-oil futures fell below $75 per barrel Wednesday to touch their weakest level in more than a year after a group of key oil producers cut their oil-demand forecast for next year, fueling concerns that the global financial crisis will lead to a sharp slowdown in economic growth and further declines in oil consumption. "Evidence of slowing demand can be seen everywhere," said John Kilduff, an analyst at MF Global, in a note to clients. Crude for November delivery fell $3.80, or 4.8%, to $74.83 a barrel in electronic trading on Globex. It touched a low of $74.62, the lowest intraday level for the contract since early October 2007, and the weakest intraday mark for a front-month contract since early September of last year. The contract had dropped 3.2% to finish at $78.63 a barrel Tuesday on the New York Mercantile Exchange. On Wall Street, U.S. stocks headed lower with the Dow Jones Industrial Average down more than 3%. See Market Snapshot. And "crude prices tracked financial markets lower amid concerns over weakening economic growth," said analysts at Sucden Research. Demand growth for next year has been revised lower by 100,000 barrels a day, putting projected global growth at 800,000 barrels a day, the Organization of the Petroleum Exporting Countries said in its monthly oil market report published earlier Wednesday. "In 2009, the reduced economic growth outlook is expected to continue impacting oil demand," OPEC said. "Hence, oil demand in the USA will be lower than initially expected, at least in the first half of the year. The likely spillover to other economies will affect oil demand elsewhere to some degree." Earlier this month, OPEC said that it will hold an extraordinary meeting Nov. 18 to discuss the global financial crisis, the world economic situation and the fallout on the oil market. "Falling energy prices, particularly gasoline, will be boon to recovery, just as the reverse situation represented a hindrance," said Kilduff. "Hopefully, OPEC understands this and does not suffer a self-inflicted blow by tightening production quotas at a time when their consumers are laid out flat." 'Low' price pain But on Wednesday, the oil minister for OPEC Iran, an OPEC member, said low oil prices will hurt investment in production capacity expansion projects, Reuters reported. "I think the low price is a real damage to the future of production," Minister Gholamhossein Nozari was quoted as saying. He also said that OPEC should try to achieve a balance between supply and demand at its Vienna meeting next month, the report said. In its monthly report, OPEC said it sees continued weakness in demand from developed countries and it sees growth in non-OPEC supply exceeding total world demand growth, points out James Williams, an economist at WTRG Economics. "If we use this as an indicator of what OPEC will do at its upcoming meeting, there will be many members calling for a cut to prevent even lower prices," he said. "With the futures market near $75 per barrel, OPEC's basket price will be bumping $70 -- that number will put tremendous pressure on many members." Glimpse ahead at supply data Traders will have to wait until Thursday for petroleum supply data from the U.S. Energy Information Administration due to Monday's Columbus Day holiday. They'll be released Thursday at 11 a.m. EDT. Analysts at MF Global expect the data to show that crude supplies rose 3.75 million barrels for the week ended Oct. 10. They also expect to see weekly buildups in motor gasoline of 2.1 million barrels and in distillates of 1.1 million barrels. On average, industry analysts surveyed by Platts are looking for an increase of 3.1 million barrels, each, for crude and gasoline supplies as well as an increase of 850,000 barrels for distillates. Against this backdrop, November reformulated gasoline fell 7.3 cents, or 3.9%, to $1.8123 a gallon on Globex, and November heating oil shed 4.3 cents to $2.2167 a gallon. The average U.S. retail price for a gallon of regular gasoline fell to $3.125 Wednesday, from $3.163 a day earlier, according to AAA's Daily Fuel Gauge Report. Prices are down 19% from a month ago. Meanwhile, futures prices for natural gas traded Wednesday at levels not seen since September of last year. The EIA will release its data on natural-gas supplies in storage as usual on Thursday at 10:35 a.m. EDT. Analysts at Global Insight expect expanded supplies of 85 billion cubic feet for the week ended Oct. 10. November natural-gas futures were down 12 cents to $6.607 per million British thermal units after trading as low as $6.56. Natural-gas prices are likely "approaching the low point with nothing to make it move for now," said Beth Sewell, a managing partner at Quantum Gas & Power Services. "I suspect we'll see a rally when there's frost on the pumpkin." Tracking the commodities market as a whole, the Reuters/Jefferies CRB Index , a benchmark gauging the prices of major commodities, fell by 2.1%. Gold futures edged higher for the first time in five trading sessions. See Metals Stocks.

Source