Oil prices continued to slide on Monday amid a rapidly deteriorating outlook for global demand, prompting fresh calls for Opec to cut supply when the cartel meets in Cairo later this month.
Nymex December West Texas Intermediate dropped as low as $55.60, but later traded $1 lower at $56.02 a barrel. ICE January Brent lost 89 cents to $53.35 a barrel.
Several members of the oil producers' cartel are scheduled to convene on November 29 for a regular meeting of Arab ministers, but the gathering is now likely to be broadened to include most or all members of the cartel.
Iran's Opec governor, Mohammad Ali Khatibi, said on Monday that he expected all Opec members to attend the consultation, adding that ministers would be able to approve a production cut in Cairo, even though the meeting is officially only a "consultation".
Iran is hoping the cartel will cut production by 1m-1.5m barrels a day, in order to address the imbalance in demand and supply.
But the president of Opec, Chakib Khelil, insisted on Sunday that the November meeting would only be a preliminary session to "formulate recommendations", which would then be discussed at the cartel's scheduled meeting in Algeria on December 17.
The decline in oil prices came as data from US commodity market regulators showed that speculators on Nymex had made their most aggressive bet on falling oil prices since November 2005.
Data from the Commodities Futures Trading Commission (CFTC) revealed that net shorts in crude oil had risen by around 40,000 contracts in the week up to November 11.
Ed Meir of MF Global in New York said: "After collapsing by more than $90 a barrel since July, funds are just now getting comfortable ramping up their net short positions, best evidenced by the latest CFTC readings, which show the biggest net short exposure by non-commercials (speculators) in some three years".
Meanwhile base metals tracked oil downwards, as two leading banks downgraded their price forecasts for commodities due to the sharp deterioration in global demand.
Copper sank 3.3 per cent to $3,675 a tonne, though this was still 3.8 per cent higher than its three year low of $3,520 on November 13.
Macquarie on Monday cut its 2009 forecasts for base metals prices by over 30 per cent, citing the "worsening global economic outlook."
The Australian investment bank slashed its price forecast for copper in 2009 by 43 per cent, while also reducing its forecasts for aluminium by 31 per cent, zinc by 40 per cent, lead by 29 per cent and nickel by 42 per cent.
Aluminium, zinc, lead and nickel each dropped between 2.3 and 2.9 per cent, at $1,892 a tonne, $1,165 a tonne, $1,307 a tonne and $10,800 a tonne respectively.
Elsewhere, analysts at UBS said the credit squeeze had led to an "unprecedented slowdown in demand for commodities, particularly in emerging markets", with the growing surpluses in commodity markets pushing prices lower.
UBS forecast that demand conditions would only begin to normalise in 12 to 18 months' time, with steel, copper and oil particularly under pressure.
