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OPEC officials, concerned about oil's steep drop from record highs over $147 a barrel per day (bpd) in July, said the cartel could possibly decide by the end of the month to cut production again to raise prices.
But comments from the producer group failed to lift oil prices, as investors focused on near-term demand worries after the US Energy Information Administration (EIA) slashed America's 2008 oil demand outlook and the International Energy Agency (IEA) flagged further reduction in its oil forecast.
US light crude for December delivery was down 81 cents at $55.35 a barrel by 0259 GMT, after having fallen earlier to $55.03 -- the lowest since Jan. 29, 2007.
London Brent crude fell 41 cents to $51.96 in early Asian trade.
"Oil prices continue to be pressured by fears that weaker international economic growth will depress oil consumption," said David Moore, an analyst at the Commonwealth Bank of Australia.
Oil fell 5 per cent overnight, along with a big drop in US stock markets, after the US government shifted its position on how it planned to use its $700 billion bailout fund, which added uncertainty to financial markets and renewed fears of a protracted global recession.
Expectations that US government data to be released on Thursday would show a further build-up of crude and gasoline stocks also weighed on prices, analysts said.
Analysts polled by Reuters ahead of US weekly inventory data forecast crude oil stocks rose 1.2 million barrels last week, while distillate and gasoline inventories were seen rising by 800,000 barrels and 300,000 barrels respectively. Oil has lost about $91, or 62 per cent, from its record high of above $147 struck in mid-July, on growing evidence that recent high energy prices and the financial crisis have dented energy demand in the United States and other industrialised nations.
Demand in the United States, the world's biggest consumer of oil, was expected to fall by more than 1 million barrels per day (bpd) for the first time since 1980 this year, the EIA said.
The EIA also forecast world oil demand to rise by only just 100,000 bpd in 2008 and will be virtually flat in 2009, as it cut its 2009 oil price forecast to average around $63.50 a barrel.
Analysts said a move by IEA to further cut its oil demand growth forecast later on Thursday could heighten fears among investors.
In the latest sign that China's economy is also being hit by the global downturn, data on Thursday showed Chinese annual industrial output slumped to 8.2 per cent in October, the weakest reading since late 2001, as manufacturers struggled with a drop in export demand and weakness in the domestic property market.
OPEC President Chakib Khelil said on Wednesday that Organization of Petroleum Exporting Countries may cut oil supplies again, possibly as early as at Nov. 29 meeting in Cairo, if prices keep falling and the world economy weakens.
"If the prices continue their decline, most probably OPEC will have to take a further decision on a cut in supply," Khelil said in an interview in Algiers.
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Today the oil price has struck at 55$ per barrel, the lowest in nearly two years. In these two years, the Government has hiked the cost of petroleum products so many times. When the burden of price hike of oil was passed on to the common man, the benefit of reduction should also be passed on to him in the same manner, which will help in the reduction of overall price of essential commodities and also push down the rate of inflation. Our Prime Minister, who is a renowned economist, has made a statement very recently that there is no possibility of any reduction of petroleum products in the near future. Is this stand because the Left parties have withdrawn their support. The Prime Minister should understand the economy today in the deteriorating stage instead of keeping himself busy with the patching up of differences of the UPA partners.
Gradually the oil prices are coming down over the period and now touched 55$ per barrel. Very recently, our Prime Minister made a statement that there is no possibility of a cut down of Petroleum products. When the burden of hike was passed on to the common man, the benefit of reduction should also be passed on to him, which will go a long way in pushing down the rate of inflation and price of essential commodities. I wonder an eminent economist like our Prime Minister is not thinking on those lines, probably he may be very busy patching up the differences of the UPA partners, which he should realise is at the cost of the economy.