Oil dips as demand crumbles, OPEC eyes deeper cuts
NEW YORK (Reuters) - Oil prices extended losses on Wednesday as fuel demand in the United States continued to crumble under the weight of a financial crisis, prompting OPEC to sharpen the ax for another round of production cuts.
U.S. crude fell 17 cents to settle at $46.79 a barrel after hitting a 3-1/2-year low of $46.26 earlier in the session. Brent crude finished unchanged at $45.44.
The small decline comes in the midst of a global economic crisis that has sliced more than $100 off the cost of a barrel since July by tamping down consumption.
A report from the U.S. Energy Information Administration released Wednesday showed U.S. oil product demand running 6.2 percent below a year-ago while crude oil and refined fuel inventories slipped unexpectedly across the board.
"Crude imports dropped 1.5 million barrels (per day) to 9.5 million barrels (per day) from the prior week's very high level, and refinery crude runs fell 1.9 percent, as it looks like refiners are moving to rationalize output to the lower demand levels," said Tim Evans, an analyst for Citi Futures Perspective.
Valero Energy Corp (VLO.N), the nation's biggest oil refiner, said it was keeping its gasoline-production units at around 85 percent of capacity due to soft U.S. fuel demand.
The downturn in the energy market has prompted oil producer group OPEC to consider another round of cuts to oil output when it next meets December 17 in Algeria.
"For sure we will cut in Oran (Algeria)," Qatari Oil Minister Abdullah al-Attiyah told reporters on the sidelines of a petrochemical conference in Dubai. "I don't know by how much. We will discuss it there."
OPEC's secretary-general said in remarks published on Wednesday that oil producers needed at least $70 to $80 a barrel or more for crude to meet their development needs.
OPEC oil supply has already been falling for the past three months as members began to implement a deal to cut output, a Reuters survey showed on Tuesday.
But the survey suggested OPEC countries met only 66 percent of a pledge to lower output by 1.5 million barrels per day in November, less than analysts had expected.
(Reporting by Richard Valdmanis with additional reporting by Alex Lawler in London, Maryelle Demongeot in Singapore; Editing by Marguerita Choy)
