Oil slides to $57 on gloomy data from markets

London: Oil slipped to around $57 a barrel on Friday after the US stock market opened lower and as figures showed much of Europe had entered recession.

Benchmark US crude futures for December fell to a low of $56.45 (Dh207), down more than 3 per cent or $1.79, before recovering to $57.46 a barrel by 1510 GMT. The contract closed $2.08 higher on Thursday.

London Brent crude for January, the new front month, lost $1.03 to $55.21.

The Dow Jones industrial average opened more than 1 per cent lower on the growing evidence of a deepening economic downturn. US stocks rose more than 6.6 per cent on Thursday.

Data yesterday showed the euro zone economy contracted 0.2 per cent in the third quarter, officially confirming the 15-nation bloc is suffering its first recession since the common European currency was adopted.

The figures had been widely anticipated by the market but confirmed that consumers and industries alike were tightening their belts and reducing their use of energy.

"We are moving up and down with the stock market because it is our barometer of economic confidence," said Harry Tchilinguirian, senior oil market analyst at BNP Paribas.

Output cut

Expectations that Opec will cut output again late this month also lent support but analysts said it was premature to conclude the market had hit a bottom, pointing to high US oil stockpiles and slowing world oil demand growth.

"The latest oil movements data suggests Opec are still reining in production," Robert Laughlin, senior oil analyst at brokers MF Global, said in a note to clients.

"For the four weeks ending November 29, Opec member exports should fall by 60,000 bpd according to tanker traffic. It's highly likely this trend will continue until a serious bout of cold weather hits the West and maybe spurs some demand."

The price of oil has dropped almost two-thirds in value since its July peak of $147.27, and on Thursday touched $54.67, its lowest since January 30, 2007.

Iran's Opec governor said yesterday the Islamic Republic would back any decision by the group for a further production cut when it meets later this month in Cairo.

"The current oil market condition is worrying," Mohammad Ali Khatibi was quoted as saying in the semi-official Mehr News Agency.

He was speaking a day after an Iranian oil official told Reuters members of the Organisation of the Petroleum Exporting Countries would meet in the Egyptian capital on November 29.

Opec cut output by 1.5 million barrels per day when it met last month.

"If until the date of the meeting the oil price continues to fall, a production cut will definitely be put on the agenda," Ali Khatibi said.

Oil project investment worldwide could also be hampered by continuing low prices, the head of the International Energy Agency said yesterday, creating serious concerns about supply growth when the global economy reverses its current slowdown.

"There are concerns that as [oil] prices fall, national oil companies and oil majors may backtrack high-cost and difficult projects," Nobuo Tanaka told an energy industry symposium in Tokyo.