Oil Prices Tumble To Lowest Level In More Than A Year

Oil prices fell to their lowest level in more than a year Monday before rebounding to just above $63 a barrel as growing evidence of a global economic slowdown had investors betting on a further drop in energy demand.

Traders undeterred by OPEC's sizable production cut late last week also appeared to be taking their cues from world stock markets, which slumped again Monday with the Nikkei index in Japan closing at its lowest in 26 years, down 6.4 percent. Hong Kong and European markets followed suit, closing or trading substantially lower.

Wall Street was wavering in morning trading, with the Dow Jones industrials down about 22 points, or 0.27 percent, at the 8,355 level after having fallen more than 100 earlier.

"The market ignored OPEC's attempt to shore up prices as there are larger, long-term problems plaguing the market that a short-term production cut cannot overshadow, including softening demand, institutional unwinding and the credit crunch," Raymond James & Associates analyst Darren Horowitz said in a note to clients Monday. Institutional unwinding referred to selling by funds, including those that need to raise money to pay off margin loans, or money borrowed to buy stocks and other investments

Light, sweet crude for December delivery declined 93 cents to $63.24 a barrel in trading on the New York Mercantile Exchange.

On Friday — even after the Organization of the Petroleum Exporting Countries announced a 1.5 million barrel-a-day cut — oil fell $3.69 to settle at $64.15. Prices have plunged 57 percent from a record $147.27 on July 11.

"The mood is fairly negative reflecting worry about the international economic outlook," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "If there is further weak economic data in the U.S. or Europe, prices could come under more downward pressure."

Iran's OPEC governor Mohammad Ali Khatibi said Sunday a reduction in production "will be considered" at the group's next meeting in Algiers in December — a meeting that might even be held early if necessary.

"I thought the OPEC cut was a fairly decisive act, but concerns of recession in the major economies remain dominant," Moore said. "OPEC's cut does take a step toward tightening the market."

Vienna's JBC Energy said prices were out of OPEC's control — for now.

"Oil is currently being driven by the present financial crisis and not by OPEC cuts," said its research report. "As oil prices are being pressured by the credit squeeze and a lack of liquidity, they may stay largely detached from supply factors for several weeks to come. As a result, OPEC is currently struggling with factors beyond its control."

Investors have been paying close attention to signs that a slowing economy and higher gasoline prices earlier this year have hurt crude demand in the U.S., the world's largest oil consumer.

The Department of Transportation said Friday that Americans drove 5.6 percent less, or 15 billion fewer miles, in August compared with same month a year ago — the biggest single monthly decline since the data was first collected regularly in 1942.

A gallon of regular gas fell 3 cents overnight to a new national average of $2.668, according to auto club AAA, the Oil Price Information Service and Wright Express. That's roughly a dollar less than what was paid just a month ago and 18 cents below gas prices one year ago on Oct. 27.

In other Nymex trading, gasoline futures fell 1.41 cents to $1.438 a gallon, while heating oil slipped 1.63 cents to $1.9538 a gallon. Natural gas for November delivery fell 17.5 cents to $6.572 per 1,000 cubic feet.

In London, November Brent crude was down $1.75 to $60.30 a barrel on the ICE Futures exchange.