BLBG: Oil Falls on Concern OPEC Cut Won't Be Enough as Demand Slumps
By Alexander Kwiatkowski and Christian Schmollinger
Oct. 24 (Bloomberg) -- Crude oil fell on speculation a potential OPEC output cut will fail to stave off price declines as global economic growth slows and fuel demand wanes.
OPEC is expected to slash at least 1 million barrels a day of production when it meets today in Vienna, according to a Bloomberg News survey. Iran's Oil Minister said yesterday a 2 million-barrel reduction was needed. Stock markets dropped around the world on deepening concern about the global economic slump.
``A cut of 1 or 1.5 million barrels a day is not going to impress when we are seeing panic in European and Asian stock markets,'' said Robert Laughlin, senior broker at MF Global Ltd. in London. ``They are not going to halt the decline.''
Oil for December delivery dropped as much as $1.21, or 1.8 percent, to $66.63 a barrel on the New York Mercantile Exchange and was at $66.70 a barrel at 8:37 a.m. London time.
Prices are down 23 percent from a year ago and 6.5 percent this week, heading for a fourth straight weekly decline. That's the longest losing streak since January 2007.
Brent crude oil for December settlement fell as much as $1.07, or 1.6 percent, to $64.85 a barrel on London's ICE Futures Europe exchange. It was at $64.87 a barrel at 8:38 a.m. local time.
Oil has dropped from the record $147.27 a barrel in New York on July 11 as slowing economic growth curbs demand.
China, the world's fastest-growing energy consumer, said Oct. 20 its economy expanded at 9 percent in the third quarter, the slowest pace in five years. Concern a deepening global slump will damp profits has pushed the MSCI World Index 4 percent lower this week.
U.S. fuel demand fell 8.5 percent from a year ago, the Energy Department said Oct. 22.
Meeting Today
OPEC leaders are scheduled to meet in Vienna today at 9:30 a.m. local time. The OPEC price basket, an average of 11 crude grades sold by the group, was at $60.82 a barrel, the lowest since March 2007.
The group should cut production by 2 million barrels a day to ``balance'' the market, Iranian Oil Minister Gholamhossein Nozari said yesterday. Saudi Arabian Oil Minister Ali al-Naimi declined to express his support for a possible cut. Saudi Arabia and Iran are the group's two biggest producers.
The last time OPEC lowered quotas was at a December 2006 meeting in Abuja, Nigeria. The 500,000 barrel-a-day cut took effect in February 2007, expanding an earlier reduction reached in October. The cuts were reversed later in 2007 as prices rose.
Stock Prices Fall
Oil prices also fell as stock markets in Europe and Asia slumped. The MSCI World Index lost 2.7 percent to 886.17 at 8:25 a.m. in London. The index has declined 44 percent in 2008 as credit-related losses and writedowns topped $660 billion in the worst financial crisis since the Great Depression.
Crude oil's historical volatility for the past 30 days climbed to 94 percent this week. Prices fell 10 percent from the start of the week to Oct. 22 and have risen 3.3 percent since.
``There are so many unknowns at the moment that from day to day the market seems to be focusing on different things,'' said Toby Hassall, an analyst at Commodity Warrants Australia. ``There was a strong rally in the U.S. dollar, and the OPEC meeting has thrown some spice into the mix as well.''
To contact the reporter on this story: Alexander Kwiatkowski in London at akwiatkowsk2@bloomberg.netChristian Schmollinger in Singapore at christian.s@bloomberg.net.
