Oil prices dived to 17-month lows on global recession fears, hitting US$59.02 in London and US$61.30 in New York on Monday before clawing back some lost ground.
“Oil markets seem to be pricing in a deep and long recession that will derail oil demand growth this year and next,” UBS economist Jan Stuart wrote in a research note to clients. “Even though we still think that the credit crunch is exaggerating the real shift in oil demand trends, we have no way to know.”
UBS also slashed its forecasts for average Brent oil prices to US$60 for next year and US$75 in 2010 from previous estimates of US$105 and US$116 respectively.
Oil prices sank this week after data showed that the US economy — the biggest consumer of energy in the world — 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.
“Crude oil fell after the release of the US [growth] figures,” Dresdner Kleinwort analyst Peter Fertig said.
“It is likely to head further down as declining US consumer spending could intensify the fear of falling oil demand. This would also be a drag on gold and other metals,” he said.
Crude prices had risen on Wednesday after interest rate cuts in the US and China boosted expectations of higher demand in the world’s two leading energy consumers, analysts said.
Prices also found some support after the OPEC crude producers’ cartel warned it could cut output further.
By Friday, New York’s main oil futures contract, light sweet crude for delivery in December, had firmed to US$64.50 from US$63.16 the previous week.
Brent North Sea crude for December dipped to US$62.07 from US$62.62 last week.
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