Oil falls to USD 63 as investors eye falling demand

Oil prices fell to 17-month lows at USD 63 a barrel on Monday in Asia as investors weighed Friday's OPEC output cut against growing evidence of a severe global economic slowdown that would undermine crude demand.


Light, sweet crude for December delivery fell 32 cents to USD 63.83 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.



Investors brushed off a 1.5 million barrel-a-day cut announced by the Organisation of Petroleum Exporting Countries on Friday, focusing instead on falling crude demand as economies across the globe reel from the impact of a credit crisis.



On Friday, oil fell USD 3.69 to settle at USD 64.15. Prices have plunged 57 per cent from a record USD 147.27 on 11th July.



"The mood is fairly negative reflecting worry about the international economic outlook," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney.



"If there is further weak economic data in the US or Europe, prices could come under more downward pressure."



Iran's OPEC governor Mohammad Ali Khatibi said on Sunday a reduction in production "will be considered" at the group's next meeting in Algiers in December - a meeting that might even be held early if necessary.



"I thought the OPEC cut was a fairly decisive act, but concerns of recession in the major economies remain dominant," Moore said. "OPEC's cut does take a step toward tightening the market."



Investors have been paying close attention to signs that a slowing economy and higher gasoline prices earlier this year have hurt crude demand in the US, the world's largest oil consumer.



The US Department of Transportation said Friday that Americans drove 5.6 per cent less, or 15 billion fewer miles (24 billion fewer kilometers), in August compared with same month a year ago - the biggest single monthly decline since the data was first collected regularly in 1942.



Oil investors have also been eyeing stock markets to gauge sentiment on global economic health.



Most Asian stock indexes fell on Monday, led by Hong Kong, South Korea and Australia. Japanese shares rebounded slightly after plummeting last week.



The Dow Jones industrial average fell 3.6 per cent Friday.



"If we're looking a severe economic downturn, it's hard to say what the bottom of any commodity price will be," Moore said.



In other Nymex trading, heating oil futures rose 0.13 cent to USD 1.95 a gallon, while natural gas for November delivery fell 19.8 cents to USD 6.04 per 1,000 cubic feet.



In London, November Brent crude was down 60 cents to USD 61.45 a barrel on the ICE Futures exchange.

Asia stocks crash, Nikkei hits 26 yr low

Japan's Nikkei slumped nearly 500 points on Monday to its lowest close in 26 years as the yen advanced on the dollar, battering exporters such as Toyota amid a slide in Asian shares.


The benchmark Nikkei 6.4per cent to 7,163, its lowest close since October 1982.



The yen rose against the dollar and was approaching a 13-year high as the risk of a global recession and an extended slump in the world's stock markets prompted investors to slash carry trades.



The Bank of Korea slashed interest rates by the most ever in an attempt to restore confidence after stocks lost a fifth of their value and the won fell to a decade low last week.



Elsewhere in Asia, stocks continue to trade deep in red.



Meanwhile world oil prices weakened in Asian trade today with OPEC's decision to cut supply at a time of global financial turmoil seen as hurting already weak energy demand further, dealers said.

Sensex down 191 points in pre-close trade

After dipping below 8,000-points level, the benchmark Sensex recovered most of its early losses, to quote 191 points down in pre-close trading on the back of buying by domestic financial institutions and short-covering by speculators.


The 30-share index, which had lost over 1,000 points at midsession on major sell-off by jittery funds, recovered partially to trade 191.89 points down at 8,509.18 points after touching the day's low of 7,697.39, a level last seen on October 2005.

The wide-based National Stock Exchange index Nifty was down by 79.80 points at 2,504.20 points after dropping to 2,252.75 points at one stage.

Marketmen said emergence of buying by domestic financial institutions and covering-up of short positions by speculators at prevailing lower levels helped Sensex to recover part of lost ground.

Porsche raises Volkswagen stake

Porsche has increased its stake in Volkswagen, saying it hopes to have a majority holding in Europe's biggest carmaker by the end of the year.

Porsche revealed its stake had risen to 42.6% - saying it had chosen to make the announcement because of uncertainty in the car market.

It had previously already been been the largest shareholder, holding about 35%.

Porsche has said it did not want to merge with VW - but create an alliance that could take on competition.

It has also argued that it needs a strong influence at VW, which makes components for a third of Porsche cars.

The car industry, which is often seen as a barometer of the world economy, is entering a deep recession, with sales and profits tumbling.

Manufacturing plants are closing, production is being cut back, jobs are being axed and car company share prices are tumbling as a consequence.

United plans

Last week Porsche said disagreements between family members in the company had been resolved.

Two cousins, Wolfgang Porsche and Ferdinand Piech, have held conflicting opinions on how to take over VW.

Mr Piech - who is both the Porsche boss and head of the VW supervisory board - has backed unions who object to the takeover of their company.

But Mr Porsche said that the families were "united" on plans including the idea of co-management of both companies.

The so-called "VW Law" - which essentially gives German authorities the right to veto strategic decisions Volkswagen - will also be scrapped.

Global shares continue to slide

European markets have fallen sharply in morning trade, touching five-year lows, as investors continue to fret about the depth of the global economic slowdown.

The UK's FTSE 100 fell 5.6% to 3,665 at one point, its lowest level since April 2003, before recovering slightly to 3,693, down 4.9% from Friday's close.

Its decline came after Japan's Nikkei index earlier ended at a 26-year low.

The pound also continued its recent falls, dropping against the dollar to $1.5341 in early trading.

The euro was also lower, sliding to $1.2377, around levels last seen in April 2006.

Earlier on Monday the Group of Seven (G7) industrialised nations issued a statement warning that the strength of the yen was a threat to economic stability, which was taken as a threat of co-ordinated action to reduce the value of the currency.

While the yen briefly weakened, it soon climbed back towards Friday's 13-year high against the dollar.

The yen has been strengthening as a result of the end of the carry trade, in which traders borrowed the Japanese currency and used it to buy currencies with higher interest rates.

As the difference between Japanese rates and those elsewhere in the world has fallen, traders have been unwinding the carry trade, which means they have been using other currencies to buy yen, which has boosted the Japanese currency.

In other currency news, the Australian government intervened for a second time to support its currency, which was trading at a 5-year low against the US dollar. One US dollar was worth 0.6122 Australian dollars.

The Australian central bank last intervened more than a year ago and before that had not done so since 2001