Crude recoils after dipping to 19 month lows on signs of shrinking demand amid a global economic slowdown

07-Nov-08

Halting a two day fall, crude oil prices have recoiled near US$$61 a barrel in Asia. But, oil prices do seem to be very precariously poised for another steep fall as evidence of a severe U.S. recession continues. Yesterday, crude for December delivery dipped to US$60.7 a barrel on the New York Mercantile Exchange. This marks the crude's lowest settlement prices since March 21, 2007. Brent crude for December settlement dipped to US$57.4 a barrel on London's ICE Futures Europe exchange, the lowest level since Feb. 14, 2007. This drastic dip in crude prices has resulted from fears of shrinking fuel demand. Growing bad news on the economic front is negatively affecting oil. The number of Americans continuing to draw unemployment benefits rose to a 25 year high, and the US retailers' sales plunged to the weakest October level since at least 1969. This has further fueled a sell-off in equity markets - pulling down the Dow Jones industrial average by 4.9% on Thursday, followed by a dip in the Asian markets. The dollar surged after the European Central Bank cut its key rate by half a percentage point to 3.25%, joining the Bank of England, Swiss and Czech central banks as they confront a looming recession. When a central bank cuts interest rates, it tends to weaken that nation's currency, meaning the dollar typically trades higher against it.