AP
Singapore, Oct 22: Oil prices fell below US$70 a barrel on Wednesday in Asia as investors shrugged off a looming OPEC production cut after company forecasts suggested the US may be headed for a severe economic slowdown that crimps crude demand.
Light, sweet crude for December delivery dropped US$2.73 to US$69.45 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.
The November contract expired Tuesday and fell US$3.36 to settle at US$70.89. Last Thursday, that contract had declined as low as US$68.57 a barrel, the lowest since June 2007.
Crude investors have followed equity markets this week, looking for signs on how the US economy will weather the current global financial turmoil. On Tuesday, DuPont, Sun Microsystems and Texas Instruments reported disappointing earnings and bleak forecasts, sending the Dow Jones industrials average down 2.5%.
"Oil is now highly correlated with the stock market," said Clarence Chu, a trader with market maker Hudson Capital Energy in Singapore. "People are looking to the Dow for sentiment on the economy."
The Organization of Petroleum Exporting Countries, which accounts for about 40% of global oil supply, has signaled it plans to announce an output quota reduction at an emergency meeting Friday in Vienna.
But investors are skeptical about how much of the cut will be implemented, given the history of OPEC members exceeding their production quotas.
"There should be a short-term boost to prices when they announce a cut on Friday," Chu said. "But OPEC production has always been above their quotas, so there's a credibility problem."
Crude oil is down 52% from its peak of $147.27 reached in mid-July.
A stronger dollar this week has also pushed oil prices lower. Investors often buy commodities like crude oil as an inflation hedge when the dollar weakens and sell those investments when the greenback rises.
The euro fell Wednesday to US$1.2820 from US$1.3005 on Tuesday while the dollar was steady at 100.15 yen.
Investors Natural gas for November delivery jumped 5.8 cents to US$6.90 per 1,000 cubic feet.
In London, November Brent crude was down US$1.48 to US$68.24 a barrel on the ICE Futures exchange.