October 28, 2008 / 1:45 AM / 11 years ago

Oil dips below $63 as faltering demand trumps OPEC

NEW YORK (Reuters) - Oil prices dipped below $63 a barrel on Tuesday as concerns about faltering demand offset OPEC comments suggesting the producer group could throttle back output again to support prices.

Traders work in the crude oil futures pit on the floor of the New York Merchantile Exchange, October 27, 2008. REUTERS/Brendan McDermid

U.S. crude settled down 49 cents at $62.73 a barrel, before rising to $64.10 in post-settlement trade.

London Brent crude settled $1.12 lower at $60.29 a barrel.

Oil demand in the United States and other large consumer nations has dropped this year due to the slumping economy, dragging crude off record highs above $147 a barrel in July.

Gasoline demand fell by 6.4 percent last week versus year-ago levels, according to data from MasterCard Advisors released on Tuesday. [nN28407669]

The losses in oil prices came despite a rally in U.S. stocks as investors scoured the market for bargains.

Oil has tracked global stock markets at times over the past month as the financial crisis deepened.

“Seems oil is finally detaching itself from the stock market. At least for today,” said Tom Bentz, an analyst at BNP Paribas Commodity Futures Inc.

Crude prices found support early on evidence the Organization of Petroleum Exporting Countries would act on last week’s decision to cut production as the United Arab Emirates state oil company reduced volumes to term customers.

OPEC ministers will take further steps to prop up the oil market, and could call another meeting before their next scheduled talks in December, officials of the producer group said on Tuesday.

The credit crisis that began with failing U.S. mortgages has widened into a worldwide rout, with investors dumping stocks and commodities, shunning higher-risk emerging markets and seeking out the safest government bonds and currencies.

U.S. consumer confidence plunged to a record low in October as the economy appeared to be sliding into a deep recession, threatening to pull the rest of the world along with it.

The Conference Board’s consumer confidence index dropped to 38 in October from an upwardly revised 61.4 in September. It was the lowest reading since the research group’s index began in 1967. The previous low was 43.2 in December 1974.

The global economic decline already has cut fuel consumption. Some analysts predict that $50 a barrel — roughly seen as the cash cost of production for many newer oil projects — is possible in the short term.

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OPEC’s announcement last week it would cut output by 1.5 million barrels per day initially did little to stem oil’s fall as the market was skeptical the group would really reduce supplies.

U.S. government inventory data due out on Wednesday was expected to show a rise of 1.4 million barrels in crude stocks, according to a Reuters poll.

Distillate stocks were seen up 800,000 barrels, while analysts forecast a rise of 1.2 million barrels in gasoline stocks.

Additional reporting by Joe Brock and Barbara Lewis in London; Editing by David Gregorio

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