Oil drops 2%, below $65
After US GDP shrinks
By Maryelle Demongeot
Reuters
First Posted 11:23:00 10/31/2008
Filed Under: Oil & Gas - Upstream activities, Energy & Resources
SINGAPORE -- Oil fell for a second day on Friday, dropping more than 2.0 percent to below $65 a barrel and set for its biggest ever monthly loss after weak US economic data refocused attention on falling demand.
US gross domestic product contracted at an annual rate of 0.3 percent for the third quarter, the sharpest fall in the world's largest oil consumer in seven years, knocking commodities lower across the board on fears of further weakening fundamentals. A rebounding US dollar also weighed.
US light crude for December delivery fell $1.46 to $64.50 a barrel by 0247 GMT, adding to Thursday's $1.54 loss that cut short a brief rally earlier in the week. Oil is now on track for a 35 percent loss this month, its biggest ever.
London Brent crude fell $1.30 to $62.41.
"Concerns that the weak international economic outlook will depress oil consumption remain a negative for the oil price," David Moore, commodity strategist for the Commonwealth Bank of Australia, said in a daily note.
Adding pressure on oil, the US dollar rebounded from lows fetched on Wednesday, making dollar-denominated commodities less attractive for investors.
Recent data showed demand was hit by high prices even before the crisis intensified, with revised US oil consumption in August tumbling 8.4 percent from a year ago to 19.267 million bpd, with demand at its lowest for any month since December 2001, Energy Information Administration data showed.
Oil has more than halved since its record high of $147.27 from July as the economic crisis batters demand in the United States and other major consumers, and saps investor appetite for riskier assets including stocks and commodities.
Signs that OPEC is acting on its decision to cut output by 1.5 million barrels per day (bpd) have failed to lift prices. Nigeria announced a 5.0 percent cut in exports in November and December after Abu Dhab made similar moves. Top exporter Saudi Arabia has yet to inform customers of fresh curbs.
Venezuelan Oil Minister Rafael Ramirez said on Thursday OPEC should cut oil output by one million barrels per day -- possibly before its next scheduled meeting in December -- and should set a minimum price target of $70 or $80 a barrel.
On Thursday, oil and other commodities decoupled from the stock markets which rallied around the world on optimism that interest rate cuts by the US Federal Reserve and other central banks will ease a looming global recession.
But Asian stock markets showed a mixed picture on Friday, with Japan's Nikkei down 2.7 percent but Seoul shares extending the previous session's record 12 percent jump.
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