Oil hits 11-month low over demand concerns

By Mark Shenk BLOOMBERG NEWS | Friday, October 10, 2008

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NEW YORK | Crude oil prices fell Thursday to an 11-month low as concern that demand for fuel will decline outweighed signs that OPEC may curb output.

Even though the Organization of Petroleum Exporting Countries said Thursday it would hold an emergency meeting Nov. 18 to tackle the recent plunge in prices, concerns persisted that a global recession would erode consumption.

"The main driver of the market has been concern that the global economy will contract," said Michael Fitzpatrick, vice president for energy risk management at MF Global Ltd. in New York. "There's been a lot of trading on emotion because of the recent headlines."

Crude oil for November delivery fell $2.36, or 2.7 percent, to settle at $86.59 a barrel on the New York Mercantile Exchange, the lowest settlement price since Oct. 23.

Oil prices have dropped 41 percent since reaching a record in July on signs that demand will drop.

OPEC is "very likely" to agree to cut oil production at the meeting in Vienna, Austria, because prices have fallen "dramatically," the group's president, Chakib Khelil, said Thursday. The group, which is responsible for more than 40 percent of global oil output, had been scheduled to meet next on Dec. 17 in Oran, Algeria.

"The organization is concerned about the deteriorating economic conditions with contagion risks," OPEC announced from its Vienna headquarters.

OPEC resolved at its most recent meeting last month to stick more closely to official quotas, implying a cut of about 500,000 barrels a day.

"Some OPEC members would like to cut production, but I think it would be suicide," said Phil Flynn, senior trader at Alaron Trading Corp. in Chicago. "I don't think they will make a cut unless things improve dramatically on the economic front."

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