Oil hovers near $59 a barrel on global growth pessimism
Sponsored LinksOil prices are hovering near 20-month lows at $59 a barrel in Asia as investors come to grips with the prospect that global growth next year will slow more than originally feared.
That will cut demand for crude products such as gasoline. Light, sweet crude for December delivery was down 31 cents to $59.02 a barrel, after falling as low as $58.55, in electronic trading on the New York Mercantile Exchange by midday in Singapore.
The contract overnight fell $3.08 to settle at $59.33, the lowest closing price since March 2007.
Oil prices have fallen about 60 per cent in four months, plunging from a record $147.27 in mid-July.
Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne, said traders have a pretty good idea that global growth is going to be pretty awful next year and will probably not be much better in 2010.
Investors are pricing in slowing crude demand growth from China, whose economy, the world’s fourth largest, was once thought to be a counterweight to weakening demand from the U.S. and Europe.
U.S. bank Morgan Stanley earlier this week cut its 2009 forecast for Chinese economic growth to 7.5 per cent from 8.2 per cent.
The bank expects Asia outside of Japan to grow 5.5 per cent next year, the U.S. economy to shrink 1.3 per cent and Europe to contract 0.6 per cent.
“China is now seen as less of a backstop to falling demand in developed countries,” Pervan said. “With definitive slowing in China, the market is even more sensitive to negative economic news out of the US and Europe.”
The World Bank said Tuesday it expects developing countries to grow 4.5 per cent next year, down from its previous forecast of 6.4 per cent growth. Developed countries will likely contract 0.1 per cent in 2009, the Bank said.
Investors have brushed off two recent production cuts by the Organization of 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.
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