Oil at $54 a barrel as global slump hits demand

OIL PRICE: Traders are focusing on the lack of demand for fuel, caused by the global slowdown. (Getty Images)

Oil prices were little changed above $54 a barrel on Wednesday ahead of data expected to show US crude stocks rose last week, another sign that the global economic slump is clipping fuel demand.

American banking and car maker woes reverberated around the globe and the International Monetary Fund said it would need extra funding to help countries through the downturn.

US light crude for December delivery rose 11 cents to $54.50 a barrel by 5.04am UAE time after settling at the lowest level since January 29, 2007 in the previous session.

London Brent crude was untraded at the same time.

US crude inventories likely rose last week as refinery utilisation held steady and imports rebounded, a Reuters poll of 12 analysts showed.

"With no end in sight for the global economic turmoil, traders continue to focus on the lack of demand heading into 2009," said Jonathan Kornafel, Asia director of US-based options trader Hudson Capital Energy.

"While OPEC recently lowered its forecast yet again for year-on-year demand growth, it is becoming quite evident that demand may actually drop from 2008 to 2009."

Oil has shed nearly two thirds of its value since a July record above $147 as the financial crisis has hit the real economy, limiting demand for fuel.

The International Energy Agency, the US Energy Information Agency and the Organization of the Petroleum Exporting Countries have slashed their demand forecasts this month.

OPEC, source of two in every five barrels of oil, is expected to meet on Nov. 29 on the sidelines of an annual gathering of Arab oil ministers in Cairo to discuss oil's rapid fall and the scope for deeper cuts in supply.

The 12-member group has already agreed since early September to remove around 2 million barrels per day (bpd).

But trade sources said top exporter Saudi Arabia had not cut oil flows to the United States for December, after some Asian customers reported they had their supplies cut.

OPEC will discuss with non-member oil producers on cooperating to manage the oil market, IRNA news agency quoted Iran's oil minister as saying.

Traditional price hawk Iran has sought another 1 million to 1.5 million bpd in cuts and has called for the talks with non-OPEC members.

But OPEC member nations might not decide yet to slash production in Cairo, Ecuadorean oil minister Derlis Palacios told Reuters on Tuesday. (Reuters)

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