October 9, 2008 / 2:09 AM / in 10 years

Oil hits 12-month low, demand outweighs OPEC

NEW YORK (Reuters) - Oil prices fell to near 12-month lows below $85 on Thursday as a wider market slide stirred demand concerns and outweighed calls by some OPEC members to cut output to prop up prices.

General view of the Tema oil refinery near Ghana's capital Accra in this file photo from March 28, 2005. REUTERS/Yaw Bibini

The producer group announced it will hold an emergency meeting on November 18 in Vienna to discuss the impact of the financial crisis on oil markets, which has helped knock prices from a record peak over $147 a barrel in July.

U.S. crude settled down $2.36 at $86.59 a barrel before dropping to $84.63 — its lowest level since October 24, 2007 — in post settlement trade when the Dow Jones industrial average slipped below 9,000.

London Brent crude fell $1.70 to settle at $82.66 a barrel.

“We’re still worried about the demand side of the market. The (U.S. Energy Information Administration) data from yesterday was bearish and we might be seeing a second effort to price that in,” said Tim Evans, an analyst for Citi Futures Perspective.

U.S. gasoline and crude stocks rose sharply last week as demand in the world’s biggest consumer continued to slow due to the economic crisis and high fuel costs, the EIA reported on Wednesday.

U.S. stocks fell for a seventh straight session on Thursday, with the Dow sliding below 9,000 for the first time in more than five years, as investors worried recent moves by authorities worldwide to thaw frozen credit markets might not be enough to avert a global recession.

Analysts said that, despite Wednesday’s coordinated rate cut by global central banks and other moves to calm investors, there remained abundant signs credit markets were gridlocked.

Further pressure on energy prices has come as investors, who earlier this year piled into oil and other commodities as a hedge against inflation and the weak dollar, sought to put cash into safer havens.

The slumping economy has prompted analysts to revise downward their global oil demand growth targets for next year, with the EIA this week dropping its 2009 projection by 140,000 barrels per day.

In addition, No. 2 consumer China — one of the engines behind the six-year rally in oil prices — is expected to halt auto fuel imports in October for the second month in a row, according to a Reuters poll.

OPEC members Nigeria, Qatar, Libya and Iraq this week floated the idea of a cut in the group’s oil output amid the slowing demand outlook.

“The Organization is concerned about the deteriorating economic conditions with contagion risks,” the Organization of Petroleum Exporting Countries said in a statement announcing the emergency meeting next month.

“The continuing turmoil in the financial markets has spread to many regions and created even more uncertainties for the world economy.”

Reporting by Matthew Robinson, Gene Ramos, and Robert Gibbons in New York; Jane Merriman in London; Annika Breidthardt in Singapore; editing by Jim Marshall

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