NEW YORK - OIL fell over 2 per cent a barrel on Friday after the collapse of a $14 billion (S$20.8 billion) rescue plan for US automakers caused heavy losses across global financial markets.
US bank Goldman Sachs predicted oil could drop as low as $30, off highs over $147 (S$219.7) a barrel in July, as the credit crunch puts a strangle-hold on the world economy.
US crude oil for January delivery was down $1.03 at $46.95 a barrel by 12.50 pm EST (1.50 am Singapore time) after earlier falling below $44 a barrel. London Brent crude was down 55 cents at $46.84.
'The auto bailout plan dying in the Senate is weighing on all markets,' said Mr Tom Bentz, analyst at BNP Paribas Commodity Futures Inc. 'Yesterday's late pullback is looking like another failure on the upside.'
US stocks cut earlier losses on the possibility that the White House or US Treasury might come through with an aid package for the automakers.
The plight of the big US auto firms - General Motors, Chrysler and Ford - illustrates the severity of the global economic downturn that has hit demand for oil.
US Department of Transportation figures released on Friday showed that US motorists drove 9 billion miles fewer in October than a year earlier, down 3.5 per cent.
Sales at US retailers fell for a fifth straight month in November - the longest decline in at least 16 years - as consumers felt the squash of the credit squeeze.
'The collapse in world oil demand in the fourth quarter of 2008 as the global credit crunch intensified now threatens to push oil prices below $40 a barrel in the near term,' Goldman Sachs said in a research note.
'The impact of the global economic recession has swung the oil market from pricing demand destruction in 2008 to pricing supply destruction in 2009,' it added.
Opec Goldman Sachs, which earlier this year had predicted $200 per barrel oil, virtually halved its 2009 price forecast for US crude to $45 and said the price could fall to $30 in the short term, hitting a trough in the first quarter.
The bank said a cut of an extra 2 million barrels per day was needed from Opec, which meets next on Dec 17 in Algeria.
French bank BNP Paribas cut its 2009 price forecast to $53 a barrel from $75 previously.
Opec's President Chakib Khelil has called for more 'severe' supply cuts at next week's meeting.
Russia's President Dmitry Medvedev said the country was ready to work with Opec on possible oil output cuts.
Japan's Nippon Oil said it expected Opec to agree to cut 1.5 million to 2.0 million bpd next week.
'Chances for a 2.5-million-barrel-per-day cut are possible, but that would put increased criticism on OPEC amidst the economic slowdown, so I think the likely cuts are up to 2 mln bpd,' Mr Kazuyoshi Takayama, Nippon Oil's general manager, told reporters in Tokyo. -- THOMSON REUTERS
