OIL prices fell below US$56 (S$85) a barrel on Monday as news that Japan fell into recession highlighted investor fears that a global economic slowdown will hurt crude demand.
By midday in Europe, light, sweet crude for December delivery was down US$1.23 to US$55.81 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell US$1.20 Friday to settle at US$57.04.
Oil cuts unlikely: Opec head
ALGIERS (Algeria) - MORE oil output reductions aren't likely this month because Opec members haven't yet fully enforced previous quotas and the organisation needs more data before it reaches a decision, the cartel's president said on Sunday.
Mr Chakib Khelil's comments came as Iran called for a new output cut of at least 1 million barrels per day, in addition to the 1.5 million cut decided by the Organisation of Petroleum Exporting Countries (Opec) on Oct 24 to try to sustain slumping prices.
China's oil demand falls sharply amid global crisis: top producer
BEIJING - CHINA'S demand for oil is falling sharply and inventories are surging as the global economic downturn is gradually being felt, said China National Petroleum Corp (CNPC).
Production at the nation's top oil producer has been affected 'adversely' as the international financial crisis has continued to take its toll on the country, according to a statement on the company's website.
In London, January Brent crude fell US$1.17 to US$53.07 on the ICE Futures exchange.
Japan, the world's second-largest economy, said on Monday it slid into a recession for the first time since 2001 after gross domestic product contracted at an annual pace of 0.4 per cent in the third quarter after a shrinking 3.7 per cent in the second quarter. Japan now joins the 15-nation euro-zone in a recession, defined as two straight quarters of GDP contraction.
'Markets are very worried about the international economic outlook, about oil consumption,' said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. 'As data is released in the US, Europe and other countries, investors get a reminder of the economic problems in the developed world.'
Oil prices have tumbled about 62 per cent since peaking at nearly US$150 a barrel in mid-July.
'With the world's largest economies slowing down remarkably, oil demand outlook is worsening,' said JBC Energy in Vienna, Austria.
Comments Sunday from Opec President Chakib Khelil, downplaying the possibility that the group could cut production at a meeting this month, also weighed on prices.
On Saturday, Iran called on the Organisation of Petroleum Exporting Countries to reduce output quotas by up to 1.5 million barrels a day a meeting later this month. But Mr Khelil said Opec, which accounts for about 40 per cent of world crude supply, hasn't yet fully enforced previous quotas and the group needs more data before it decides to cut production.
Iran's call for more cuts is a 'wish,' Mr Khelil said. Opec, which cut quotas by 1.5 million barrels a day last month, plans to meet for an emergency session on Nov. 29 in Cairo, Egypt, and will meet again in Oran, Algeria, on Dec 17.
'The short-term trend for oil prices is possibly still to the downside,' Mr Moore said. 'But as the Opec cuts start to take surplus out of the market, this tightening will eventually give support to the oil price.'
Oil prices were down despite a weaker US dollar as investors seemed more affected by falling global stock markets.
By midday in Europe, the FTSE 100 index of leading British shares was down 1.3 per cent, Germany's DAX was lower by 1.5 per cent and the CAC-40 in France was off 1.6 per cent.
Investors often buy oil futures as a hedge against inflation and a weaker dollar and sell when the dollar gains.
The euro rose to US$1.2672 Monday from US$1.2602 on Friday while the dollar fell against the Japanese yen to 96.38 yen from 97.57 yen on Friday.
In other Nymex trading, gasoline futures fell 2.21 cents to US$1.217 a gallon. Heating oil dropped 1.78 cents to US$1.814 a gallon while natural gas for December delivery rose 5.8 cents to fetch US$6.37 per 1,000 cubic feet. -- AP
