Crude Oil Falls to 19-Month Low as IEA May Cut Demand Forecast

Nov. 11 (Bloomberg) — Crude oil fell below $59 a barrel in New York for the first time since March 2007 on speculation the International Energy Agency will lower its 2009 oil-demand forecast as slowing economic growth cuts fuel consumption.

The IEA, which coordinates energy policy in 28 developed countries, will reduce the estimated growth in global demand for a third month in a report tomorrow, according to four former IEA analysts. The euro-area economy will probably contract 0.7 percent next year, Morgan Stanley said in a report.

“It all comes back to the economy and how deep folks think the recession will be,” said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Massachusetts. “Demand is poor and should get worse as the recession deepens.”

Crude oil for December delivery declined $3.32, or 5.3 percent, to $59.09 a barrel at 10:40 a.m. on the New York Mercantile Exchange. Futures touched $58.83, the lowest since March 20, 2007. Prices, which have tumbled 60 percent since reaching a record $147.27 on July 11, are down 39 percent from a year ago.

“The view of the market is very pessimistic,” said Addison Armstrong, director of market research for Tradition Energy in Stamford, Connecticut. “The only news I foresee that can move prices higher is a cold spell, which would boost heating oil demand, and that would have only limited impact.”

The IEA already has cut its 2008 forecast about 1.3 million barrels a day in seven revisions this year. Last week, it published a summary of its annual World Energy Outlook, slashing its 2030 projection by 9.4 percent to 106 million.

OPEC Concerns

The Organization of Petroleum Exporting Countries cited falling demand for its Oct. 24 decision to reduce production by 1.5 million barrels a day. OPEC ministers will discuss the market situation when they meet next on Dec. 17 and may agree to another supply cut then, the group’s president, Chakib Khelil, said on Nov. 8 in Algiers.

“This is a tough time for OPEC because of the demand picture,” Mueller said. “Every time they cut production they are building up spare capacity. There’s also a risk that they may make cuts and prices still won’t rebound.”

Global stock markets declined as Credit Suisse Group AG said developed economies are headed for the worst recession since 1945. The Standard & Poor’s 500 Index declined 29.27 points, or 3.2 percent, to 889.94. The Dow Jones Industrial Average fell 250.50, or 2.8 percent, to 8,620.04.

“Prices are lower because of sagging global equities as well as the view that China’s stimulus package is insufficient to prop oil demand in the face of a prolonged global economic slowdown,” Armstrong said.

On Nov. 9, the Chinese government pledged spending to sustain economic growth through 2010 and switched to a “relatively loose” monetary policy. China is the world’s fourth-biggest economy and the second-biggest consumer of oil.

U.S. Inventories

U.S. crude-oil supplies probably rose for a seventh week as imports rebounded, a Bloomberg News survey of analysts showed. Stockpiles probably increased 750,000 barrels in the week ended Nov. 7 from 311.9 million the week before, according to the median of 12 analyst estimates before an Energy Department report this week.

Gasoline stockpiles probably increased 200,000 barrels from 196.1 million barrels the week before, according to the survey. Supplies of distillate fuel, a category that includes heating oil and diesel, rose 1 million barrels from 127.8 barrels the week before, the survey showed.

The department is scheduled to release its weekly report on Nov. 13 at 11 a.m. in Washington. The report is being delayed by a day because of today’s Veterans Day holiday.

Brent crude oil for December settlement decreased $3.32, or 5.6 percent, to $55.76 a barrel on London’s ICE Futures Europe exchange. Futures touched $55.37, the lowest since Jan. 30, 2007.

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