Oil prices extend losses in Asian trade

SINGAPORE: Oil prices extended their losses in Asian trade Friday as global recession concerns overshadowed the euphoria from a strong rebound in international stock markets, analysts said.

Investors are focusing on the negative fallout from a global financial crisis on energy demand, they said.
New York's benchmark contract, light sweet crude for December delivery fell 1.41 dollars to 64.55 dollars a barrel. It declined 1.54 dollars to close at 65.96 dollars in US trade Thursday.

Brent North Sea crude for December tumbled 1.31 dollars to 62.40 a barrel, after dropping 1.76 dollars to settle at 63.71 dollars in London the previous day.

"It would be tempting to conclude from the price action in financial markets over the past few days that all is right with the world again. It is not," research house Capital Economics said.

"Risk aversion has receded a little in response to the concerted efforts of policymakers. But we are staring down the barrel of a major global recession and the growing probability of deflation."

News that the US economy, the world's biggest energy consumer, contracted at a 0.3 percent annualised pace in the third quarter sent oil prices downwards overnight, reversing gains that followed the rise in share prices across the globe.
A shrinking US economy, a major engine for global economic growth, means consumers and businesses cutting back on spending amid the worst banking and financial crisis in decades.

"In the United States, (the) ongoing turmoil in financial markets, the collapse in households' financial wealth and soaring unemployment suggest (that) an outright contraction in consumer spending in the third quarter is just the tip of the iceberg," Capital Economics said.

"Although falling energy prices will shore up household income, most of the cash is likely to be saved, not spent."
It said it now expects the US economy to contract by 1.5 percent in 2009, instead of shrinking 0.5 percent as previously forecast.

Major economies like Europe and Japan are in the same predicament, it added.

Oil prices have fallen from historic peaks of more than 147 dollars a barrel in July as the financial crisis spilled into the general economy and hurt energy usage.

The Organisation of Petroleum Exporting Countries (OPEC) last week slashed output in a bid to shore up prices and some members have renewed calls for more production cuts.