By DIRK LAMMERS – 29 minutes ago SIOUX FALLS, S.D. (AP) — Oil prices dropped below $57 a barrel Wednesday as a Bank of England warning about the risk of deflation stoked fears of stagnating global growth. Light, sweet crude for December delivery was down $2.49 at $56.85 a barrel on the New York Mercantile Exchange. Oil prices have plunged more than 60 percent in four months, falling from a record $147.27 in July. Phil Flynn, an analyst at Alaron Trading Corp., said London's expectation that inflation will fall below its target of 2 percent next year plays into a strong dollar; when a country's inflation rate falls, it is less likely to raise interest rates, a move that would support its currency against the dollar. Crude is bought and sold in dollars, and when the dollar rises against foreign currencies, investors often buy the greenback and sell oil. Flynn said investors are adjusting to a new reality that involves a slowing global economy with a strong dollar, weak commodities and a fear of deflation, or a general decline in prices. They're also grappling with the prospct that global growth next year will slow more than originally feared, cutting demand for gasoline and other crude products. "We're seeing a massive readjustment on a historic scale," he said. "We've never gone through anything quite like this." Trader and analyst Stephen Schork noted that the reaction to China's planned economic stimulus package earlier this week and the subsequent oil price fluctuations were symptomatic of the market's nervous state. "It is important to remember that price is a function of the crowd's emotional input to a given fundamental event." he said in a research note. "Thus, those traders who thought it was a good idea to pay $65 Sunday night were probably the same traders who had to sell (at) $59 yesterday afternoon." Investors have brushed off two recent production cuts by the Organization of the Petroleum Exporting Countries, and prices have continued to fall amid talk of a third quota output reduction next month. Qatar's prime minister, Sheikh Hamad Bin Jassim Bin Jabr Al-Thani, said Tuesday that "fair" oil prices of between $70 to $90 per barrel would ensure that expensive oil exploration could continue and help to avert price spikes in the future. "The market has become so demand focused that obvious support mechanisms, like OPEC cutting supply, don't have the same impact," said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. He expects prices to fall to $45 a barrel during the first quarter of next year. Flynn said he expects the oil market will find a bottom of around $50 a barrel or slightly lower before prices slowly work their way back up. "At some point, prices will go back up, but the big questions is when, and that's when the economy bounces back," he said. Rising demand in the developing world and surging production costs prompted the International Energy Agency Wednesday to nearly double its forecast for the price of a barrel of oil in 2030 to just over $200 in nominal terms, compared to its forecast last year of $108 a barrel. Measured in constant dollars, the agency pegs oil at $120 a barrel in 2030, up from last year's forecast of $62. Over 2008 to 2015, the IEA predicts the price to average $100. The IEA in its World Energy Outlook predicted global energy demand will rise 1.6 percent per year on average between 2006 and 2030, but it expects demand for oil to rise from 85 million barrels per day currently to 106 million barrels per day in 2030 — 10 million barrels per day less than projected last year. Flynn said commodities are going through a classic boom-to-bust cycle, and he thinks the agency wants to make sure that people don't overreact to the slowdown. "I think the fear of the International Energy Agency is that we're going to forget how tight supplies can be when the world economy's on fire and go back to kind of a complacent role in energy and create the stage for the next energy crisis years down the road," he said. Investors will be watching for signs of slowing U.S. demand in the weekly oil inventories report to be released Thursday by the U.S. Energy Department's Energy Information Administration; the report is delayed a day this week because of the Veterans Day holiday Tuesday. The petroleum supply report was expected to show that oil stocks rose 1.1 million barrels last week, according to the average of estimates in a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos. The Platts survey also showed that analysts projected gasoline inventories rose 850,000 million barrels and distillates increased 1 million barrels last week. In other Nymex trading, heating oil futures slipped by more than 7 cents to $1.86 a gallon, while gasoline lost more than 4 pennies to fetch $1.26 a gallon. Natural gas for December delivery fell 27.5 cents to $6.43(AP) — per 1,000 cubic feet. In London, December Brent crude fell $1.23 to $54.48 a barrel on the ICE Futures exchange.

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