Oil slid for a third straight day to hit a 22-month low of $55 a barrel on Thursday, after a 5 percent overnight loss, as mounting pessimism about the global economy outweighed OPEC's comments that it could cut output again as early as end-November, Reuters reported.
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 focussed on near-term demand woes after the U.S. Energy Information Administration (EIA) slashed America's 2008 oil demand outlook and the International Energy Agency (IEA) flagged further reduction in its oil forecast.
U.S. light crude for December delivery fell 40 cents to $55.76 a barrel by 2:19 a.m. British time, after having fallen earlier to $55.03 -- the lowest since January 29, 2007. The contract fell $3.17 to settle at $56.16 a barrel on Wednesday.
London Brent crude fell 41 cents to $51.96.
"Oil prices continue to be pressured by fears that weaker international economic growth will depress oil consumption," said David Moore, a commodities strategist at the Commonwealth Bank of Australia.
Oil's overnight fall came after the U.S. 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 U.S. government data would show a further build-up of its crude and gasoline stocks also weighed on prices, analysts said.
Analysts polled by Reuters ahead of U.S. weekly inventory data forecast crude oil stocks rose 1.2 million barrels last week, while distillate inventories were seen rising by 800,000 barrels.
Analysts also forecast a 300,000 barrel rise in gasoline stocks. The data will be released on Thursday, a day later than usual due to the U.S. Veterans' Day holiday on Tuesday.
Oil has lost about $91, or 62 percent, 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 that the ferocity of the recession sweeping through many of the world's biggest economies has not yet been fully factored into projections for oil demand.
OPEC President Chakib Khelil told Reuters on Wednesday that OPEC may cut oil supplies again, possibly by the end of this month 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, who is also Algeria's energy and mines minister, told Reuters in an interview in Algiers.
A further decision to lower output could happen as early as a November 29 meeting of the Organisation of the Arab Petroleum Exporting Countries in Cairo, Khelil said.
The group includes top OPEC producer Saudi Arabia, Kuwait and the United Arab Emirates.