Oil was near $83 a barrel after a fall to its lowest in 12 months today, depressed by expectations global demand growth will shrink if the credit crisis pushes the world economy into recession.
Economic weakness spurred the International Energy Agency (IEA) to cut its forecasts for world oil demand growth for 2008 to its lowest rate since 1993.
US light crude for November delivery was $3.59 down at $83.00 a barrel by 12.33pm. It touched a session low of $81.13, its lowest since October 2007.
Prices have dropped nearly 45 per cent from a peak of $147.27 in July. London Brent crude was down $3.47 a barrel at $79.19, below $80 for the first time in a year.
The IEA, which advises 28 industrialised nations, cut its world demand growth forecast for 2008 to 0.5 per cent - the lowest in percentage terms since 1993.
The agency said the impact of global economic weakness was most acute in developed countries, while developing countries were showing "a degree of resilience."
The Organization of the Petroleum Exporting Countries has called an emergency meeting in Vienna on November 18th to discuss the impact of the global financial crisis on the oil market.
"OPEC appears to be scrambling to put in another, firmer floor at $80," said Jonathan Kornafel, Asia director of US based options trader Hudson Capital Energy.
"The market may still overshoot on the downside regardless of what OPEC does, as financial flows continue to pour out of commodities," he added.
Commodities have tumbled along with global stock markets, which suffered heavy losses in Asia. The Nikkei index plunged nearly 10 per cent. European shares were down nearly 7 per cent.
Investors, who earlier this year piled into oil and other commodities as a hedge against inflation and the weak dollar, now want safety.
Reuters