Crude oil fell to a 21-month low on speculation that the International Energy Agency will cut its global demand estimate tomorrow and the U.S. will report that stockpiles gained.
The IEA is ``more than likely'' to lower its oil-demand forecast for next year in its next monthly oil report, according to Executive Director Nobuo Tanaka. The U.S. Energy Department cut its oil-demand and price forecasts today. A department report tomorrow may show that crude-oil supplies rose last week.
``It's hard to see what will stop this slide,'' said Tom Bentz, senior energy analyst at BNP Paribas in New York. ``It's more of the same. The market is moving on continuing economic concerns.''
Crude oil for December delivery fell $3.09, or 5.2 percent, to $56.24 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures touched $55.94, the lowest since Jan. 31, 2007. Prices have tumbled 62 percent since reaching a record $147.27 on July 11.
The IEA, which coordinates energy policy in 28 developed countries, will cut its forecast for growth in global demand for a third month from 700,000 barrels a day in its monthly report tomorrow, according to four former analysts at the agency.
``People are already looking forward to tomorrow's IEA report, and it appears that the demand numbers will be revised dramatically downward,'' said Nauman Barakat, senior vice president of global energy futures at Macquarie Futures USA Inc. in New York. ``Demand growth will probably be revised down from 700,000 barrels to about 300,000'' barrels a day.
The U.S. government reduced its forecast for oil prices next year by 43 percent as the economic slowdown cuts energy demand. West Texas Intermediate crude oil, the U.S. benchmark, will average $63.50 in 2009, down from $112 estimated in October, the Energy Department said in its monthly Short-Term Energy Outlook, released today in Washington.
Global oil consumption will average 85.89 million barrels a day this year, up 80,000 barrels from 2007, according to the report. The estimate is down 250,000 barrels from the forecast a month ago. Demand will average 85.93 million barrels a day in 2009, down 990,000 barrels from last month's forecast.
The Organization of Petroleum Exporting Countries, which announced a 1.5 million barrel-a-day supply cut last month to stanch the price drop, may meet again before its next scheduled meeting in December if futures keep declining, Shokri Ghanem, Libya's top oil official, said. OPEC oil ministers and officials are currently holding talks by telephone, he said.
``If the IEA report tomorrow shows flat demand, you can be sure that OPEC will get together before the next scheduled meeting and make further cuts,'' Barakat said.
OPEC President Chakib Khelil said the group may announce another output cut before its next planned meeting, Reuters reported. Members of the group produce more than 40 percent of the world's oil.
``If OPEC had wanted to make a statement, they should have made a cut of at least 3 million barrels,'' said Sean Brodrick, natural resource analyst with Weiss Research in Jupiter, Florida. ``Adherence to quotas is always questionable as well. They will have to make further cuts and say how they intend to make them.''
Prices of $80 a barrel are needed to make investment in new supply economic, the IEA's chief economist, Fatih Birol, said at a conference in London today.
``We are already seeing projects be canceled because of the fall in prices,'' Brodrick said. ``I wouldn't be surprised if we see prices surge above $100 again next year because of the canceled projects and a pickup of demand,''
Energy prices also dropped as falling global stock markets signaled that the economic slump may deepen. The Standard & Poor's 500 Index declined 32.25 points, or 3.6 percent, to 866.70. The Dow Jones Industrial Average fell 274.47, or 3.2 percent, to 8,419.49.
U.S. crude-oil stockpiles probably increased 1 million barrels in the week ended Nov. 7 from 311.9 million the week before, according to the median of 13 analyst estimates before the Energy Department report.
The department is scheduled to release its weekly report tomorrow at 11 a.m. in Washington. The report is being delayed by a day because of yesterday's Veterans Day holiday.
Brent crude oil for December settlement declined $3.36, or 6 percent, to $52.35 a barrel on London's ICE Futures Europe exchange. Futures touched $52.08, the lowest since Jan. 19, 2007.