Oil steady near 22-month low in Asia

SINGAPORE: Oil prices were steady near 22-month lows on Wednesday in Asia as investors paused to examine the extent of global economic weakness, which has sent crude down more than 60 per cent in four months.

Light, sweet crude for December delivery was up 8 cents to $54.47 a barrel in electronic trading on the New York Mercantile Exchange by mid afternoon in Singapore. The contract Tuesday fell 56 cents to settle at $54.39, the lowest since January 2007.

``Market sentiment is still bearish, but not as bearish as a week ago,'' said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. ``Volatility has come down and the market is consolidating a bit.''

Stock markets have served for the past few months as a barometer of investor perceptions about the health of the global economy. The Dow Jones industrial average rose 1.8 per cent Tuesday as Hewlett-Packard Co. said fourth quarter and 2009 results will exceed analyst expectations.

Most Asian stocks, however, fell Wednesday. Japan's benchmark Nikkei index fell 0.7 per cent, Hong Kong's Hang Seng index dropped 0.5 per cent and the Korea Composite Stock Price Index slid 1.9 per cent.

Oil investors have already priced in a recession in developed countries and only evidence of an especially severe or prolonged slowdown may push prices down further, Chu said.

Prices have fallen 63 per cent since reaching a record $147.27 a barrel in mid-July.

``I don't see oil falling below $50,'' Chu said. ``It should be above $60 in a couple weeks.''

Investors will be watching for signs of slowing U.S. demand in the weekly oil inventories report to be released Wednesday by the U.S. Energy Department's Energy Information Administration.

The report is expected to show that oil stocks rose 1.2 million barrels last week, according to the average of estimates in a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.

The Platts survey also projects that gasoline inventories rose 700,000 million barrels and distillates increased 900,000 barrels last week.

The Organization of Petroleum Exporting Countries is holding an informal meeting later this month ahead of an official meeting next month. OPEC President Chakib Khelil has signaled the group may announce production cuts at the December meeting, but some members, such as Iran, have called for earlier cuts.

``Expect crude to nudge near $50 with moves below sure to inspire strong statements and calls for an early meeting by the hawkish OPEC members,'' brokerage Kim Eng said in a report.

In other Nymex trading, gasoline futures were steady at $1.14 a gallon. Heating oil gained 1.28 cents to $1.77 a gallon while natural gas for December delivery fell 1.9 cents to $6.52 per 1,000 cubic feet.

In London, December Brent crude fell 30 cents to $52.54 on the ICE Futures exchange.