were the fundamentals strong for high oil prices, was china's and indias booming economies for real, and that the worlds economies could support oil prices that were in a bubble?Oil industry analysts had believed that the booming economies of India and China would pick up any slackening of demand if Western nations went into recession. That view has weakened in recent months, the latest economic data from China reveals a slowdown that is far worse than originally forecast




Another economic report, another drop for oil
Monday November 3,
12:21 pm ET 
By John Porretto, AP Energy Writer

Oil prices fall again with more predictions of declining global
demand, particularly China

HOUSTON (AP) -- Concern over the health of the global economy pushed
oil prices lower Monday with few signs of increased demand for crude
as nations from the United States to Asia try to dodge a recession.
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A report Monday from the Institute for Supply Management suggested to
some U.S. economists that it is too late.
The ISM manufacturing index fell to 38.9, the lowest reading since
September 1982. Any reading below 50 signals contraction.
Light, sweet crude for December delivery that had crested above $69 in
early trading, fell $2.58 to $65.23 a barrel on the New York
Mercantile Exchange.
But the biggest declines were in gasoline futures, where prices
dropped 6 percent in early trading.
Decline gasoline futures have led to sharp drops in the price of
gasoline. The price for a regular gallon of gasoline dropped to $1.41
nationally on Monday, down more than 30 percent from last month,
according to auto club AAA, the Oil Price Information Service and
Wright Express.
Oil industry analysts had believed that the booming economies of India
and China would pick up any slackening of demand if Western nations
went into recession. That view has weakened in recent months.
In a report Monday, Credit Suisse forecast the sharpest drop in global
oil demand since 1982.
And Credit Suisse analyst Mark Flannery said the latest economic data
from China reveals a slowdown that is far worse than originally
forecast.
Credit Suisse, in a research note, reduced its estimates for 2009
Chinese oil demand growth from 4 percent to near zero. It predicts
some recovery in 2010, back to 5.4 percent.
"A slower China means a slower global economy," Flannery said in the
report, noting he's also made reductions to his forecasts for other
parts of Asia and the Middle East.
Declining expectations for demand come after the largest single
monthly price drop for crude since futures were first traded on Nymex
25 years ago.
In a note to clients Monday, Raymond James & Associates said the
continued downward pressure on oil is partly the result of investor
worries at the global level, "but tomorrow's U.S. presidential
election may alleviate some of the uncertainty by providing more
clarity around future government policies."
The U.S. Commerce Department last week said the economy shrank 0.3
percent in the July-September quarter, the worst showing for the
world's largest economy in seven years.
Victor Shum, an energy analyst at consultancy Purvin & Gertz in
Singapore, said he saw continued "downward volatility in oil futures."
"I expect oil to trade within the $60-$70 range in the near term,"
Shum said. The U.S. employment data due later this week is likely to
underline the economy's weakness and will cap gains in oil prices, he
said.
That report is due Friday.
Oil prices have fallen about 54 percent since peaking above $147 a
barrel in mid-July. In October alone, crude prices tumbled 32 percent.
Declining prices comes despite a 1.5-million barrel production cut by
the Organization of the Petroleum Exporting Countries, a group of oil
exporting countries that accounts for 40 percent of global crude
production.
Venezuela's Oil Minister Rafael Ramirez has said OPEC will need to cut
production by at least another 1 million barrels daily to stop the
fall.
Opinion, however, is mixed on whether all members of the cartel will
follow through on the cuts -- or keep churning out as much crude as
they can on fears that prices will plummet even more.
Shum said OPEC's recent output cut offset the decline in demand but a
second cut may help tighten supply in the market and support oil
prices in the long run.
In other Nymex trading, gasoline futures slipped more than 9 cents to
$1.41 a gallon. Heating oil fell 6 cents at $2.02 a gallon and natural
gas for December delivery dropped 16 cents to fetch $6.62 per 1,000
cubic feet.
In London, December Brent crude fell $3.04 to $62.28 a barrel on the
ICE Futures exchange.
Associated Press writers George Jahn in Vienna and Eileen Ng in Kuala
Lumpur, Malaysia, contributed to this report.

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