Oil falls below $65 on U.S. woes
LONDON -- Oil prices slipped below $65 a barrel Friday, heading for what will likely become the sharpest monthly decline in crude prices since futures trading began on the New York Mercantile Exchange.
Since Oct. 1, the price of crude has fallen about $34, meaning a barrel of oil has lost about 35 percent of its value. Crude have not fallen that fast in the 25 year history of Nymex trading.
Light, sweet crude for December delivery fell $1.51, more than 2 percent, to $64.45 a barrel in Nymex trading.
Since prices peaked above $147 in July, crude's value has been halved.
Consumers have pulled back drastically on spending, including spending on fuel, amid a global economic crisis.
The string of dour economic reports continued Friday.
Consumer spending dropped in September by the largest amount in four years, while incomes suffered because of Hurricane Ike, according to the Commerce Department.
Personal spending fell by 0.3 percent last month, the biggest decline since June of 2004. That followed flat readings in both July and August, contributing to the worst quarterly performance in 28 years.
The decline was slightly worse than economists expected and confirmed that the economy hit a wall in the third quarter because of the weakness in consumer spending, which accounts for two-thirds of total economic activity.
In London, December Brent crude fell $1.71 to $62 a barrel on the ICE Futures exchange.
Investors often buy commodities such as crude oil as an inflation hedge when the dollar weakens and sell those investments when the greenback rises. Oil investors have also been tracking equity indexes as a barometer of global economic health.
"The dollar has been relatively firm and that has taken some of the edge off the market. There's also the other issues that have been in the market for a while such as worries about demand and consumption patterns," said David Moore, commodity strategist with Commonwealth Bank of Australia in Sydney.
"A further fall in the oil price cannot be ruled out. It is difficult to predict where the bottom could be," he added. "An important factor over the next few months will be whether OPEC can achieve its output cuts. If it can that will certainly tighten market conditions."
Iran's oil minister said Friday the country will cut its crude oil production by 199,000 barrels a day from November 1, according to the official IRNA news agency.
Gholam Hossein Nozari said the production decrease is in line with OPEC's decision last week to cut production by 1.5 million barrels a day in response to a sharp fall in oil prices.
"Market participants are concerned that OPEC might not fulfill its promise, as it needs to be disciplined with all members conducting a coordinated cut," wrote analysts at Sucden Energy in London. "One thing is for certain though, it is clear that the group is very keen to defend oil prices of above $80 per barrel, while some members, like Iran, would prefer prices above $100 per barrel."
Venezuelan Oil Minister Rafael Ramirez says that OPEC, which controls about 40 percent of world crude oil production, will need to cut production by at least another 1 million barrels per day to boost falling prices.
Nozari said that OPEC may hold another urgent meeting if crude prices don't rebound.
In other Nymex trading, gasoline futures fell 4 cents to $1.43 a gallon. Heating oil fell 1.96 cents to $1.96 a gallon and natural gas for December delivery gained 5.0 cents at $6.48 per 1,000 cubic feet.