Oil down despite talk of output cuts

Oil prices fell on Thursday in spite of mounting speculation that Opec could announce a further cut in production within weeks. The cartel confirmed that it was to hold an emergency meeting on November 18 and reiterated its determination to make sure that oil market fundamentals remained in balance and stability was maintained.

Nymex November West Texas Intermediate fell $2.36 to $86.59 a barrel, touching a low of $86.50. ICE November Brent dropped $1.70 to $82.66 a barrel after reaching a low of $82.15.

Alarmed by the rapid retreat in prices from a record of $147.27 reached in July, almost half the cartel’s members have called for action to halt the slide before their next official meeting in Algeria in December.

Olivier Jakob of Swiss-based consultancy Petromatrix said: “Be it in November or in December, be it formally or informally, Opec will need to reduce production, not because the price is currently too low but because there is not enough demand.”

Wednesday brought further evidence of demand weakness in the US economy, with the government reporting that total consumption of refined products averaged 18.66m barrels a day last week, down 8.6 per cent against the same period a year ago.

Concerns are mounting that demand weakness will intensify in other countries, amid growing fears that the turbulence in financial markets will be followed by a worldwide economic recession. These concerns were underlined by Wednesday’s co-ordinated interest rate cuts by central banks in Europe and North America.

US natural gas prices were slightly firmer after government data showed a rise of 88bn cubic feet in stocks, matching the consensus market forecast for an 86bn-cubic-feet increase. Nymex November Henry Hub rose 5.8 cents, or 0.9 per cent, to $6.80 per million British thermal units.

Gold retreated below $900 a troy ounce amid profit taking in Asia as stock markets in the region recovered after Taiwan and South Korea cut interest rates.

Gold slipped to $887.50 a troy ounce in late London trading, down 2.1 per cent on the day, moving between a high of $908.90 and a low of $880.65.

Investor demand for gold remains undiminished in the face of ongoing turmoil in financial markets. The world’s largest gold exchange-traded fund, the New York-listed SPDR Gold Trust, said bullion holdings rose to a record of 763.90 tonnes on Wednesday, up 18.68 tonnes from Tuesday.

In Chicago, agricultural commodities were mixed in early trading ahead of the latest update on this year’s harvest from the US government, due on Friday.

CBOT December corn rose 7 cents to $4.34½ a bushel, while CBOT December wheat dipped 4¼ cents to $6.03¾ a bushel and CBOT November soyabean rose 10 cents to $9.74 a bushel.

Traders expect the US government to trim its forecast for soyabean production from 2.934bn bushels to around 2.922bn bushel, but to revise the projection for stocks at the end of 2008/09 up from 135m to 187m.

For corn, a small cut is expected in the government’s forecast for this year’s crop, from September’s estimate of 12.072bn bushels to 12.065bn bushels, while stocks at the end of 2008/09 are seen at 1.132bn bushels compared with a previous estimate of 1.018bn bushels.