Oil Below $60

World oil prices sank below 60 dollars in Asian trade Friday, with the market gripped by worries energy demand would be hit by a global economic downturn, dealers said.

New York's main contract, light sweet crude for December delivery briefly traded below the 60-dollar level at 59.97 dollars, its lowest level since March 2007, but later regained some ground to trade at 60.52 dollars.

The New York contract closed Thursday 4.53 dollars lower at 60.77 dollars.

Brent North Sea crude for December delivery was off 81 cents to 56.62 dollars a barrel from Thursday's close of 57.43 dollars.

Fears of a sharp global downturn intensified after the International Monetary Fund said Thursday that advanced economies would contract in 2009 for the first time since World War II.

In sharp downward revisions to its last economic projections made less than a month ago, the IMF said advanced economies would now shrink by 0.3 percent in 2009. The organization had previously predicted a 0.5 percent growth.

Oil prices have plunged from record highs above 147 dollars a barrel in July on worries that slowing global growth, especially in the United States, would hit energy demand.

The United States is the world's biggest energy user.

"The big issue that remains a drag on investor sentiment is the parlous state of the global economy," said analysts from State Street Global Markets, the investment research and trading arm of US financial services provider State Street Corporation.

"This slowdown will spare no part of the globe," they said in a report.

On Thursday, the European Central Bank (ECB) and the Bank of England (BoE) were the latest to slash interest rates in a bid to shore up flagging economies following similar moves by Asian central banks and the US Federal Reserve.

The ECB cut its main lending rate by half a percentage point to 3.25 percent while the Boe slashed its key lending rate by a record 1.5 percentage points to 3.0 percent -- the lowest level in more than half a century -- as Britain heads towards recession.

Analysts said the sharp interest rate cuts by the BoE could indicate things were even worse than previously thought.

"The fear is now that the situation could be much more dire than first perceived," said Joshua Raymond, market strategist at City Index.

The British economy is on the verge of a recession after contracting in the third quarter for the first time since 1992. The European Commission forecast this week a similar fate awaited the 27-nation European Union by year's end.

Meanwhile, the International Energy Agency said Wednesday that it expected the price of oil to rebound above 100 dollars and eventually reach 200 dollars by 2030.

In a report on the global energy outlook, the agency said the price would average 100 dollars a barrel from 2008 to 2015.

Author: Jo Amey