Oil sank to fresh 20-month lows on Wednesday, extending the previous session’s retreat below $60 a barrel, as fears over the global economic outlook intensified after the World Bank revised down its growth forecasts for developing economies, citing turmoil in financial markets and slower exports.
Nymex December West Texas Intermediate lost $1.23 at $58.10, its lowest level since March 2007, before steadying slightly to trade at $58.51, still 83 cents lower than in the previous session.
ICE December Brent also slid for a second session, down 62 cents at $55.08.
On Tuesday, the World Bank cut its 2009 growth forecast for developing countries to 4.5 per cent, from a previous projection of 6.4 per cent. The bank warned that even this scenario could be optimistic, and added that some developing countries could face negative growth.
The bank also predicted that developed economies would contract 0.1 percent next year, while overall, the world economy would manage only one per cent growth.
Since its record peak of $147.27 in July this year, the price of crude oil has dropped 60 per cent, as the global economic downturn has weighed on demand for energy.
Evidence of a slowdown in emerging markets is especially damaging to commodity prices, as the previously rapid expansion of economies such as China, India and Brazil has worked as an engine for demand growth in metals and energy markets.
Analysts said that a floor for oil prices might eventually be provided by further cuts in output from the Opec oil cartel, coupled with China’s $586bn stimulus package, but cautioned that the effect of these moves would be lagged.
Stephen Schork, editor of the industry Schork report, said: “The same way that no-one had a clue how high prices could go last July, there is no telling how low we can go now.”
Base metals tumbled amid anxiety over weakening demand, with copper at one point touching its lowest level since September 2005, at $3,571 a tonne. It later curbed its losses to trade at $3,605 a tonne.
Aluminium shed 1.2 per cent to $1,927 a tonne, in spite of news of further supply cuts following industry heavyweight Alcoa’s decision to slash 350,000 tonnes of capacity due to weakening demand.
Official data showed the annual rate of US production of aluminium in October was 2.7 per cent lower than in the same month last year, while the Dutch aluminium producer Vimetco on Wednesday said it would cut output in China by 15,000 tonnes, on top of an 80,000 tonnes reduction announced last month.
But traders seemed to shrug off the cutbacks in supply, with the price of aluminium hitting a three year low of $1,919, bringing its fall since July this year to 43.2 per cent.
Gold was slightly lower, inching 0.1 per cent lower to $730.3 a troy ounce, after closing in New York on Tuesday at $731 an ounce.
The price of bullion was under pressure after the president of China’s largest gold miner said the country would produce between 280 and 300 tonnes of the precious metal in 2008, up from 270 tonnes in 2007, due to the opening of new, bigger mines.
Platinum gained 1.1 per cent to $821.5 an ounce after Lonmin, one of the world’s largest platinum producers, said a workers’ strike had halted production at its Limpopo mine. The Limpopo mine normally produces 100 ounces of platinum a day.
