Oil prices drop as inventories grow

October 16, 2008 International oil prices sank on Thursday as investors worried that a looming global recession will lower demand. Crude oil for future delivery fell to below US$71 a barrel in electronic trading on the New York Mercantile Exchange, its lowest price in more than a year. In London, Brent crude oil for November dropped below $66 a barrel.

Oil prices have dropped more than 50 percent since hitting a record high of $147 a barrel in July. A report released today showed an unexpected increase in inventories. Analysts expected only a 1.9 million barrel increase last week, but the actual amount was 5.6 million barrels

The Organization of Petroleum Exporting Countries (OPEC) cut its estimate for crude oil demand next year in a report released Wednesday. OPEC, which was planning on having an emergency meeting next month on the issue of lower oil prices, pushed forward the meeting to next week. The cartel is expected to cut production by 500,000 barrels a day, in a bid to boost oil prices. Saudi Arabia, which initially did not support the cut a few weeks ago, now supports such a move. Some Asian governments are under pressure to reduce domestic fuel prices in light of the decline of the price of oil. In China, some drivers are paying more for gas than drivers in the United States, which last occurred several years ago. India, China, and Indonesia appear to be to content to keep the price at the same level; however, some other Asian governments have lowered the price already. Malaysia and Vietnam have cut prices and are expected to do the same if oil drops some more.