Oil plunged to a one-month low under $89 a barrel on Friday, extending a fall that has lopped nearly 10 percent off record prices on concerns about the economic health of top consumer the United States. The slide came as Opec members gave conflicting signals over whether the cartel will agree to ramp up supplies when it meets next week in Abu Dhabi.
US crude settled down $2.30 at $88.71 a barrel after trading as low as $88.45. Brent crude settled $1.96 lower at $88.26 a barrel. Oil has tumbled from a record $99.29 struck last week on worries demand growth in the United States could be clipped by wider economic problems.
"We're in a downtrend because the market is very concerned about the economy and where it goes from here," said Eric Wittenauer, analyst at AG Edwards in St. Louis. "That obviously has implications for demand growth."
Federal Reserve Chairman Ben Bernanke bolstered hopes of another interest rate cut on Thursday, saying a resurgence in financial strains in recent weeks had dimmed the outlook for the US economy. The resumption of 80 percent of throughput in Enbridge's pipeline system, which carries 1.1 million barrels per day (bpd) of crude from Canada into the Midwest, also helped push prices lower.
The system was shut on Wednesday by an explosion along a Minnesota-section of the pipelines, briefly choking off 10 percent of US crude imports. Line 3, the only branch still shut, is expected to return to service over the next few days.
Prices spiked more than $4 after the blast, then gave up the gains after the US Department of Energy said it was ready to provide emergency oil stockpiles to refiners if needed and Enbridge said flows would restart quickly. "We went from almost losing Canada to having the thing fixed in a day," said John Kilduff of MF Global.
"Everyone's trying to gauge how much of a train wreck the economy is," said Kilduff. "It doesn't bode well for sustained energy demand growth going into next year. To sustain near $100 oil, we need at least decent economic growth."
Opec members have insisted there is enough crude on markets to keep up with demand and blamed high prices on speculators, but ministers have not given a clear signal on whether they will agree to hike output when the cartel meets on December 5. "There is absolutely ample supply," said Saudi Arabian Oil Minister Ali al-Naimi. "The price movement has nothing to do with the fundamentals of the market."
Asked whether that meant Opec would need to raise production, he responded: "That remains to be seen." Naimi's comments were echoed by Opec President and U.A.E. Oil Minister Mohammed al-Hamli and Qatari Oil Minister Abdullah al-Attiyah, both of whom said Friday that the world oil market is well supplied.
Both Kuwait and Nigeria, meanwhile, said Opec could agree to increase oil output if required by market fundamentals. And Venezuelan Oil Minister Rafael Ramirez said there is no need for the group to further raise output. A Reuters poll of market participants showed many players expecting Opec to add supplies again, after members previously agreed to add 500,000 bpd to markets starting November 1.