Oil prices fall to 20-month low

Oil prices dropped to their lowest level in 20 months accompanied by fears over lower energy demand, and as weak economic growth further reduced global consumption.┬á Decreased energy prices are providing some much appreciated relief for struggling consumers, but a 59 percent drop in oil prices since their record price of $147.27 a barrel in July, gives an idea of how drastic the outlook of the global economy has darkened as of late.┬á Yesterday, oil fell almost 5 percent to $59.33 a barrel, the lowest since March of 2007. The International Energy AgencyÔÇÖs executive director Nobuo Tanaka said today in London at a conference to give the agencyÔÇÖs 2030 outlook that prices have dropped too far based on the costs of production.┬á The IEA said cheap oil is on its way out and that prices could soar as high as $200 a barrel by 2030, but analysts expect IEA to cut its global oil demand forecast in a report to be published on Thursday. ┬á ÔÇ£We have a pretty good idea that global growth is going to be pretty awful next year and probably not much better in 2010,ÔÇØ said senior commodity strategist at ANZ Bank in Melbourne. ÔÇ£With definitive slowing in China, the market is even more sensitive to negative economic news out of the US and Europe.ÔÇØ ┬á In an effort to stem the slide, the Organization of Petroleum Exporting Countries (OPEC) announced a cartel last month to cut oil supply by 1.5 million barrels a day. While several members have been giving signs of trimming their production, OPEC, whose members account for 40 percent of the worldÔÇÖs oil experts, is scheduled to meet in Algeria next month to discuss further action and might be forced to meet before that if prices continue to fall. ┬á David Kirsch, an oil analyst at PFC Energy, said OPEC knew they could not change the marketÔÇÖs short-term view. ÔÇ£What OPEC is looking for is managing the fundamentals so they can create the conditions for a price recovery at some point, when the economy starts to recover.ÔÇØ┬á Despite these efforts, decreased consumption has continued to weigh on the oil market, and producers face the difficult task of seeking to balance oil supplies with slowing demand during one of the worst economic downturns in recent history.