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Opec raises the prospect of a cut in oil output

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By Esther Bintliff

Published: November 15 2008 02:00 | Last updated: November 15 2008 02:00

Oil prices continued to slide this week with crude at one point dipping below $55 a barrel – the lowest since early 2007 – as official data pointed to a longer and more intense global economic downturn than previously forecast with an accompanying slump in worldwide demand for commodities.

Nymex December West Texas Intermediate fell $2.04 to $56.20 yesterday, bringing its losses for the week to 8.1 per cent. On Thursday, WTI crude oil touched a 22-month low of $54.67 after the International Energy Agency, the western countries’ oil watchdog, warned of significantly weaker demand this year and 2009 due to the bleak economic outlook.

The Opec oil cartel scheduled an emergency “consultation” meeting in Cairo on November 29 to consider a further production cut on top of the 1.5m barrels a day approved last month.

Opec officials yesterday suggested that the cartel was considering a 1m-1.5m b/d cut but industry executives said the group might need to cut as much as 2m b/d to balance the market.

Analysts warned that supply-side moves could still be outweighed by rapidly waning demand.

Amanda Lee, of Deutsche Bank, said: “As we saw in 1998 and 2001, Opec could struggle to cut production as fast as world growth is slowing.”

Meanwhile, the latest US inventories data showed an above-consensus rise inpetrol stocks, up 2m barrels in the week to 198.1m compared with forecasts of a 300,000 build.

Nymex December RBOB unleaded gasoline fell 8.1 cents, or 6.2 per cent, to $1.2215 a gallon, down 9.5 per cent on the week.

Gold rose 1 per cent yesterday to $743.9 a troy ounce, helped by a surge in equity markets. On the week, bullion was up 1.1 per cent, having consistently held above the $700 a troy ounce level – a low of $700.25 came on Thursday.

Base metals were mixed, with news of a massive Chinese state stimulus package and a series of production cuts countering the grim demand outlook.

Nickel shed 1.8 per cent yesterday to $11,100 a tonne, down 9.3 per cent over the week. Copper added 2.1 per cent on the week to $3,810 a tonne while zincrose 8.4 per cent to $1,198 a tonne.

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