Oil Falls Below $65

Oil has fallen below $65 a barrel extending a 7 percent drop in the previous session, as heightened fears of a demand-crushing global recession weighed on sentiment.

Growing U.S. fuel stockpiles, which underscored slackening oil demand, dollar strength and a sharp slide in global equities also helped pull oil prices lower. U.S. light crude for December delivery fell 74 cents to $64.56 a barrel by 0935 GMT. U.S. light crude fell by $5.23 to settle at $65.30 a barrel on Wednesday.

London Brent Crude fell 59 cents to $61.28, having earlier fallen to a low of $60.00 a barrel. "Stock markets are taking a bit of a belting and oil's being dragged down by a broader equity and commodity sell-off," said MF Global global analyst Robert Laughlin. "Demand has slowed, but I don't think prices will go much lower without OPEC making further production cuts."

The euro and sterling fell against the dollar, pressured by expectations that the European Central Bank and the Bank of England will cut interest rates on Thursday. Dollar strength tends to lessen demand for dollar-priced commodities.

The initial euphoria of election day in the United States fizzled, as Democrat Barack Obama's first day as president-elect was marked by reports of deep cuts in employment by private employers, bringing worries of a weakening global economy back to the fore.

European equities fell by more than 2 percent in early trade, tracking steep declines in U.S. and Asian shares.
Analysts said traders would be eyeing news of key U.S. economic indicators, including a government report on weekly jobless claims due on Thursday at 1330 GMT and Friday's unemployment data, to gauge how the economy of the world's largest energy consumer is faring.

Reports on Wednesday showed U.S. employers cut 157,000 private sector jobs last month, while the service sector contracted sharply as the worst financial crisis in 80 years hammered the world's largest economy. News that investment bank Goldman Sachs planned to lay off another 3,200 employees, and that bellwether technology company Cisco warned revenue could fall as much as 10 percent added to the gloom.

U.S. gasoline stocks rose by 1.1 million barrels last week, against analyst predictions for a drop, as demand for the fuel fell 2.3 percent over a four-week period to Oct. 31, the Energy Information Administration (EIA)said. The EIA said it expected OPEC production to be cut by 1.1 million barrels a day (bpd) by January, which would represent about 70 percent of the cut of 1.5 million bpd agreed by OPEC last month and would be higher than the usual 50 percent compliance with previous cuts.

However, many analysts think OPEC could move to cut output further if prices fall below $60 a barrel, as member nations struggle to balance their budgets following the near 60 percent collapse in oil prices since July. Prices took some support from reports that an explosion on the Turkish section of the Kirkuk-Ceyhan pipeline had cut its oil flow late on Wednesday. The cause of the explosion was not yet known.

The pipeline was flowing at 480,000 bpd last month, carrying crude from northern Iraq to the Turkish port of Ceyhan on the Mediterranean Sea.

Author: Jo Amey