BLBG: Oil Falls More Than $2 as Global Economic Slowdown Curbs Demand
By Mark Shenk
Nov. 14 (Bloomberg) -- Crude oil fell more than $2 a barrel as the global economic slowdown cut demand in the largest energy- consuming countries.
China Petroleum & Chemical Corp., supplier of more than half the fuel to the Asian nation, is slashing processing rates by 10 percent from July’s record. U.S. retail sales in October dropped the most on record and Europe fell into its first recession in 15 years, reports showed today.
“This is a headline-driven market and that’s giving the sellers plenty of ammunition,” said Peter Beutel, president of energy consultant Cameron Hanover Inc. in New Canaan, Connecticut. “Everyone is looking for recessionary numbers. The retail numbers were even worse than expected.”
Crude oil for December delivery declined $2.48, or 4.3 percent, to $55.76 a barrel at 11:35 a.m. on the New York Mercantile Exchange. Futures touched $54.67 yesterday, the lowest since Jan. 30, 2007. Prices have tumbled 62 percent since reaching a record $147.27 on July 11.
China Petroleum, or Sinopec, will process about 15 million metric tons a month, or 3.65 million barrels a day, starting November, said three refinery officials, who declined to be named because of internal rules. China is the world’s second-biggest oil-consuming country.
Retail sales in the U.S. dropped 2.8 percent in October, the fourth consecutive drop and the biggest since records began in 1992, the Commerce Department said today in Washington. Purchases excluding automobiles also posted their worst performance. The U.S. consumes 24 percent of the world’s oil.
Market Retreat
“We seem to be reacting to every negative economic report,” said Tom Bentz, senior energy analyst at BNP Paribas in New York. “The stock market is now retreating, which is adding to the downward pressure on the oil market.”
Futures also fell as the U.S. stock market declined. The Dow Jones Industrial Average dropped 229.14, or 2.6 percent, to 8,606.11. The Standard & Poor’s 500 Index declined 29.01 points, or 3.2 percent, to 882.28.
The Organization of Petroleum Exporting Countries, supplier of 40 percent of the world’s oil, is “very likely” to recommend a production cut at the end of this month, Iran’s OPEC governor, Mohammad Ali Khatibi, told the country’s state-run Mehr news agency. Iran is OPEC’s second-biggest oil producer.
OPEC will hold a meeting on Nov. 29 in Cairo, according to a spokesman at the group’s Vienna headquarters. It will coincide with a gathering of Arab oil ministers scheduled for that day.
‘Significant Lag’
“OPEC may well announce additional production cuts, but there will be a significant lag effect, with any cuts coming well into next year,” said Paul Crovo, a Philadelphia-based oil analyst with PNC Capital Advisors. Compliance from members may not be in line with announced reductions, producing a “muted impact,” he said.
The group decided at a meeting in Vienna last month to lower the production target for 11 of the group’s members by 1.5 million barrels a day, from 28.8 million barrels a day.
Brent crude oil for January settlement fell $1.85, or 3.3 percent, to $54.39 a barrel on London’s ICE Futures Europe exchange.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
