LONDON (Reuters) – Oil dropped to a 22-month low under $55 on Thursday as evidence piled up global recession would have a deep impact on demand and news OPEC might take more emergency action did only a little to halt the sell-off.
U.S. crude futures was down a cent at $56.15 by 1136 GMT, recovering from a session low of $54.67 — the weakest level since January 30, 2007.
London Brent crude fell 25 cents to $52.12.
The International Energy Agency on Thursday in a monthly report slashed its global oil demand forecast for next year and said this year’s increase in consumption had been the slowest since 1985.
It predicted demand would next year expand by only 350,000 barrels per day (bpd) — down 340,000 bpd from its forecast in last month’s report.
Faced with the prospect stocks will swell as consumers stop buying, pushing prices even lower, the Organization of the Petroleum Exporting Countries said it was considering an emergency meeting on November 28 in Cairo.
Only last month, it agreed to cut output by 1.5 million bpd at emergency talks in Vienna.
Oil has lost more than 60 percent of its value since hitting an all-time high above $147 a barrel in July.
The average price so far this year is still only just below $90 a barrel, but OPEC is focused on the price it receives for its oil. The OPEC basket on Wednesday dropped below $50 a barrel for the first time since January last year.
The sell-off has accelerated as the global economic crisis has driven traders to take their money out of riskier assets such as oil, which has been strongly correlated to falls on wider financial markets.
Equities markets also declined again on Thursday, with the FTSEurofirst 300 down nearly two percent.
Later on Thursday, the focus for the oil market will shift to the latest U.S. inventory data for release at 1600 GMT, a day later than usual because of a public holiday in the United States on Monday.
A Reuters poll of analysts predicted the data would show crude stocks rose by 1.2 million barrels last week, while distillate and gasoline inventories were expected to have grown by 800,000 barrels and 300,000 barrels respectively.
Earlier this week the U.S. government’s Energy Information Administration predicted fuel demand in the United States, the world’s biggest energy consumer, would drop this year by more than 1 million bpd, the steepest decline since 1980.
Many analysts previously said demand from the world’s second biggest fuel burner China would offset declines in U.S. consumption.
But in the latest sign China is also feeling the impact of the global economic downturn, data on Thursday showed Chinese annual industrial output had fallen to 8.2 percent in October, the weakest reading since late 2001.