Oil prices plummeted to a one-year low below US$83 a barrel yesterday in Asia as investor fears of a severe global economic downturn sparked a panicked sell-off of equities and crude.
Light, sweet crude for November delivery was down US$4.00 to US$82.59 a barrel in electronic trading on the New York Mercantile Exchange by mid-afternoon in Singapore, the lowest since last October. The contract overnight fell US$1.81 to settle at US$86.62.
“The whole market has lost confidence in everything,” said Mark Pervan, senior commodity strategist with ANZ Bank in Melbourne. “Everyone is worried about global growth, and oil is the front line commodity for that. There’s just a lot of panic and fear in the market.”
Investors were unimpressed by interest rate cuts by the US and other central banks this week to unclog credit markets and promote lending. A credit crisis that began last year in US subprime mortgages has spread across the globe, forcing governments to spend hundreds of billions of dollars to bail out banks, brokerages and insurance firms.
Japan’s benchmark Nikkei 225 index plunged 9.6 percent yesterday, while the Dow Jones industrial average fell more than 7 percent on Thursday to its lowest in five years.
“The problem is no one really knows how far and deep this will go,” Pervan said. “But we can see from the size of the rescue packages, this is a really serious deal. This isn’t a normal bear market.”
Investors even ignored signs that OPEC may cut production. OPEC said on Thursday that it would hold an extraordinary meeting on Nov. 18 to discuss the widening global financial crisis and oil prices.
On Thursday, the head of Libya’s national oil company, Shukri Ghanem, called on oil producing nations to cut output.
“OPEC is trying to jaw-bone the price up, but they’ll have to come into the market because no one is going to be believe just jaw-boning with the market sliding so quickly,” Pervan said. “The market is so demand-focused, it doesn’t even care what happens to supply.”
OPEC’s decision last month to cut production by 520,000 barrels a day failed to halt the losses, which have accelerated in recent days.
Oil prices have fallen about 44 percent since soaring to a record US$147.27 on July 11.
“We haven’t seen the bottom of this yet,” Pervan said. “We thought US$75 would be a floor but if the market mood doesn’t change, US$50 to US$60 a barrel is not out of the question.”
In other Nymex trading, heating oil futures fell US$0.0891 to US$2.33 a gallon, while gasoline prices dropped US$0.0863 to US$1.94 a gallon. Natural gas for November delivery fell US$0.224 to US$6.60 per 1,000 cubic feet.
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