(AFP) – Oct 8, 2008
LONDON (AFP) — Oil prices sank Wednesday as rising American crude reserves signalled weaker demand in the United States, the world's biggest consumer of energy.
The market was also dampened by falling equities, which sparked fresh fears about global energy demand, despite a coordinated move by six of the world's major central banks to slash their interest rates.
New York's main contract, light sweet crude for delivery in November, dived 3.06 dollars to 87 dollars a barrel.
London's Brent North Sea crude for November fell 2.80 dollars to 81.86 dollars a barrel, coming off earlier lows after the central banks' joint effort.
The US Department of Energy said Wednesday that US crude oil inventories rose by 8.1 million barrels in the week ending October 3, which was way ahead of market expectations for a 2.3-million-barrel gain.
Prices had earlier tumbled to 12-month lows as plunging stock markets stoked fears of slowing economic growth and in turn weaker global demand for energy, traders said.
New York crude had touched 86.05 and London Brent hit 81 dollars -- which were the lowest points since October 15, 2007.
Meanwhile, the European Central Bank, Bank of England, US Federal Reserve and central banks in Canada, Sweden and Switzerland announced deep and concerted cuts to interest rates to send their strongest signal of support for the markets since just after the September 11 terror attacks.
But some analysts voiced doubts the half point reduction in lending costs would be enough to snap the markets out of their tailspin.
"Is a rate cut enough to boost the outlook for the real economy? I doubt it," said Simon Wardell, an oil analyst at Global Insight in London.
"Unless there is a staggering turnaround in the economy, the outlook for (oil) prices is still weak," he said, quoted by Dow Jones Newswires.
Prices had risen Tuesday on speculation about a possible reduction in crude oil production by OPEC and a coordinated global round of interest rate cuts to combat the ongoing worldwide banking crisis.
"It's all doom and gloom on the demand side," said Tony Nunan, a manager with Mitsubishi Corp's international petroleum business in Tokyo. "The economy looks like it's going to get worse before it gets better."
However demand for oil, particularly heating fuels, traditionally hits a peak during the upcoming northern hemisphere winter months.
Oil prices first broke through the 100-dollar level at the start of the year and touched record highs above 147 dollars in July.
But they have since fallen sharply on concerns that demand would slow further as a result of the global financial turmoil.
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