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Oil prices take another tumble

LONDON - Oil prices fell heavily again on Friday as the prospect of a shrinking global economic growth and weakening energy demand weighed on the market, analysts said.

London’s Brent North Sea crude for December delivery lost 2.06 dollars to 61.65 dollars a barrel in electronic trade.

New York’s main contract, light sweet crude for December shed 1.85 dollars to 64.11 dollars a barrel.

Crude prices sank on Thursday after official data showed that the American economy -- the biggest consumer of energy in the world -- contracted in the third quarter of 2008.

The market was also dampened by news that the US government’s Energy Information Administration (EIA) downgraded its August estimate for US oil demand.

“Sentiment turned bearish as the government figures revealed that the US economy shrank,” said analysts at the John Hall Associates consultancy in London.

“Weakening demand remains the key driver with the release of monthly data for August revealing that US demand ran well below year ago levels.”

Official data showed Thursday that the US economy contracted at a 0.3 percent annualized pace in the third quarter as a global credit crunch saw consumers and businesses cut back on spending.

The decline, not so steep as the 0.5-percent annualised drop expected by private economists, comes amid mounting expectations of a sharp falloff in the US economy amid the worst banking and financial crisis in decades.

“Crude futures were lower (on Friday), under pressure from renewed demand concerns ... after the EIA revised down its August US oil demand estimate by 8.4 percent year on year, showing its worse reading since 2001,” added Sucden analyst Nimit Khamar.

This week, crude oil fell as tumbling stock markets and recession fears darkened the outlook for energy demand.

Prices had plunged Monday to 59.02 dollars in London and 61.30 dollars in New York -- which were the lowest points for around 17 months.

Oil futures are down by more than 50 percent since July’s record highs above 147 dollars per barrel.

The market briefly surged higher Wednesday after interest rate cuts in the United States and China boosted expectations of higher demand in the world’s two leading energy consumers, analysts said.

The US Federal Reserve slashed interest rates by a half-point to 1.0 percent.

Prices found limited support after the OPEC crude producers’ cartel warned it could cut output further.

OPEC Secretary General Abdalla Salem El-Badri said Tuesday it could slash output again if prices keep falling. OPEC produces 40 percent of the world’s crude oil.

At an emergency meeting in Vienna last week, OPEC ministers agreed to reduce output by 1.5 million barrels a day to 27.3 million bpd from November 1 in an attempt to prevent prices falling further.