LONDON: Oil fell more than 4 per cent to below US$57 a barrel yesterday, its lowest level for 20 months, on expectations of weaker energy demand and as global stock markets headed downwards.
The fall in oil prices prompted Opec officials to say they might decide to cut oil production further in an attempt to adjust the balance between output and demand.
US crude for December delivery hit a low of US$56.73, down US$2.60 and its lowest point since March 20 2007, before rallying to US$56.92 by 1550 GMT.
London Brent crude shed US$2.27 to US$53.44 a barrel.
The bearish tone was set by the International Energy Agency, which said a slowing world economy may force it to cut further its forecast for oil demand growth when it releases its latest monthly report today.
Turmoil in the world's financial markets has already led the IEA, which advises many of the biggest economies on energy policy, to cut its assumption for 2008 world oil demand growth to the lowest rate in 15 years at just 440,000 barrels per day.
The head of the IEA said yesterday the agency had to take into account the changing view of the global economy. "We are likely to cut demand ... because the IMF changed its projections on the world economy very dramatically," Nobuo Tanaka said.
The IEA comment reinforced fears among traders and analysts that the ferocity of the recession sweeping through many of the world's biggest economies has not yet been fully factored into projections for oil demand. - Reuters
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