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Oil prices fall to 3-year low below US$49

Oil prices fall to 3-year low below US$49

Oil prices fell to a 3-year low below US$49 a barrel yesterday in Asia as plunging stock markets, driven down by more bad U.S. economic news, battered investor confidence.
Light, sweet crude for January delivery was down US$0.95 to US$48.47 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.
The December contract, which expired Thursday, fell overnight by US$4.00 to settle at US$49.62 after sliding to US$48.50, the lowest level since May 18, 2005.
"Sentiment is totally bearish, parallel to the stock market," said Gerard Rigby, an energy analyst at Fuel First Consulting in Sydney. "Everyone is just doom and gloom, not seeing any light on the horizon."
Traders are worried that a global recession will undermine energy demand. Already, oil prices have tumbled by two-thirds from their peak of nearly US$150 a barrel in mid-July.
"$50 was a psychological support level," Rigby said. "Since we haven't traded this low for so long, it's hard to find a new support level."
The Organization of Petroleum Exporting Countries (OPEC), which accounts for about 40 percent of global supply, may cut production before its next official meeting on Dec. 17, Rigby said. OPEC President Chakib Khelil has signaled the group may announce output reductions at the meeting, but some members, such as Iran, have called for earlier cuts. OPEC lowered production quotas by 1.5 million barrels a day last month.
"I think OPEC will have to call an extraordinary meeting and cut quotas to try to support the market," Rigby said. "Their last cut had zero impact on the market."