Page last updated at 23:56 GMT, Wednesday, 3 December 2008

Oil falls on poor economic data

Oil pump
Oil is far below the record of $147 a barrel reached in July

Oil prices have fallen as a barrage of poor economic data heightened fears of a protracted global recession leading to a decline in demand.

Prices had rebounded on Wednesday morning after Opec said it would cut production later in December.

But reports of weakening global economic activity sent prices down, despite an unexpected report showing US inventories had fallen.

US light crude slipped to $46.79 a barrel. Brent fell to $45.44.

Crude had risen to $47.84 early on Wednesday, with Brent hitting $46.

This was before the Institute of Supply Management reported record falls for US service sector activity in November, and before the Federal Reserve painted a bleak picture of the US economy in its influential Beige Book.

Oil prices are now more than $100 below their July peaks.

Production cuts

Qatar said Opec would cut output at its meeting on 17 December after not doing so last weekend.

Separately, the oil cartel's head said oil producers needed oil to cost at least $70 to $80 a barrel.

"We don't want to impose a particular price on the market, but it must be at least $75, $80 or more so producing countries have enough income to meet the needs of their citizens, investments to expand, and to carry out oil projects," the oil cartel's secretary-general Abdullah al-Badri told Iranian newspaper Hamshahri.

Qatar's Oil Minister Abdullah al-Attiyah told journalists he was sure Opec would cut oil production at its meeting in Algeria.

Weak demand

But many analysts believe that demand rather than supply is the major driving force behind the price of oil.

"Supply side developments such as Opec cuts aren't going to turn this market around," argued Jim Ritterbusch at energy consultants Ritterbusch and Associates.

"We've been driven lower now for almost five months by bad demand side news, so it's going to take favourable demand side news to turn us around," he added.

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