Crude drops on concerns over demand in Asia

23/12/2008

Crude oil has continued to extend losses seen yesterday (December 22nd) during trading this morning as investors fear that the deepening downturn is beginning to hurt energy demand in Asian economies.

Such a scenario could in turn deflate heating oil prices further in the coming weeks.

On the New York Mercantile Exchange, crude for February delivery fell back below $40 (£27) a barrel, continuing losses witnessed during trading yesterday.

Mark Pervan, an analyst at Australia & New Zealand Banking Group, told Bloomberg that demand is continuing to fall.

"We've still got more weak demand data to come out and that will put more downside risk for price," he commented.

Publication of such figures could in turn dampen the price of heating oil and other distillates such as DERV, red diesel and bunker fuel.

He said that it is likely that the Organisation of the Petroleum Exporting Countries will probably be forced to cut production again in an attempt to support oil prices.

The cartel announced record cuts of 2.2 million barrels a day earlier this month, with the restriction coming into effect in January.