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Oil plunges nearly 4 usd on calls for lower demand
LONDON (Thomson Financial) - Oil plunged nearly 4 usd a barrel as profit taking surged after the International Energy Agency predicted lower global demand growth this year and next and said high prices are already hurting consumption. The IEA, which represents 26 industrialised oil consuming nations, said earlier its 2007 world oil demand forecast has been cut by 160,000 bpd to 85.7 mln bpd, while the 2008 forecast is down by 300,000 bpd to 87.7 mln bpd. The agency also reduced its forecast for the fourth quarter call on OPEC or demand for OPEC oil by 700,000 bpd, as it cut its fourth quarter demand estimate by 500,000 bpd to 87.1 mln bpd. 'The report has really unnerved the market because ... if you look at (their) supply demand balances they're much less tight than they had been in prior reports, its a really big revision,' said Andy Lebow, a trader at MF Global. He added that if the agency's projections turn out to be accurate, the counter-seasonal global stock draws seen at the end of September and in October might abate in November and December. At 5.02 pm, London's benchmark Brent crude contracts for December delivery were down 3.30 usd at 88.28 usd per barrel, some 7 usd down from last week's all time record of 95.19 usd. Meanwhile, New York WTI crude contracts for December delivery were down 3.52 usd at 91.10 usd per barrel, some 7 usd away from last week's all time record high of 98.62 usd. Prices began their downward ascent yesterday, on speculation OPEC might hike output further at its upcoming heads of state summit meeting in Riyadh this weekend. Although that speculation has receded somewhat following the IEA report and following fresh comments from Saudi Arabia's oil minister Ali al Naimi, oil prices remain very much depressed. 'Crude prices should drift for a little while longer and so we would not be 'buying the dips' here, as we don't expect the uptrend in crude resuming as soon -- or as effortlessly -- as it has in the past few weeks,' said MF Global analyst Ed Meir. Saudi Arabia's Ali al-Naimi told the Financial Times today that 'there will be absolutely no discussion' of short-term supply at a November 17-18 OPEC summit in Riyadh. He added, however, that OPEC was 'watching' the market carefully and that Saudi Arabia would 'look at all the information available', leaving the door open for an output hike at OPEC's next meeting in Abu Dhabi on Dec 5. 'I think now the markets feel OPEC could possibly do something,' said CMC Markets trader Nas Nijjar, although he specified an official production announcement was still more likely at the Abu Dhabi meeting. Elsewhere, oil was losing ground ahead of the expiry, later today, of the options on the December futures contract, with the large number of options to buy oil at 100 usd now set to expire worthless. This might lead oil even lower through to the end of the week, as speculators try to exit the NYMEX December futures contract ahead of its expiry on Friday. [size=1][color=silver][email][email protected][/email] ma/slm COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News. [/color][/size]