* Demand outlook increasingly bleak, OPEC cut taken in
stride
* Oil's over 20 pct drop this week leads U.S. stocks lower
By Annika Breidthardt
SINGAPORE, Dec 19 (Reuters) - Oil held above $36 on Friday,
after falling more than 20 percent this week to its lowest
since June 2004 as OPEC's record supply cut failed to put a
floor under prices, instead being viewed as another sign of
slumping demand.
Oil is now more than $110 off its July peak, having shed a
third of its value just this month as a global recession cuts
into fuel use.
U.S. light crude for January delivery <CLc1>, which expires
later on Friday, rose 3 cents to $36.25 a barrel at 0121 GMT,
after falling on Thursday to $35.98, the first time below $36 a
barrel since late June 2004.
Months further out along the curve have dropped less than
the front-month contract, with crude for February delivery
<CLc2> 44 cents higher at $42.11, an almost $6 contango that is
the highest on record.
London Brent crude <LCOc1> for February delivery was
untraded at the same time after closing at $43.36 on Thursday.
"Until traders see a sustained drop-off in the rate of
demand destruction, the market will have a hard time
establishing a floor. We expect the market to level off in the
high 20's before beginning a push back towards $50, sometime in
the late second, early third quarter," said Jonathan Kornafel,
Asia Director of Hudson Capital Energy.
"From a credibility standpoint, OPEC has no choice but to
bite the bullet for the next few months."
Asian refiners were still waiting to hear of any cuts to
their allocations for January, with four North-Asian end-users
telling Reuters on Friday they had not yet had any notices.
Analysts doubted the producer cartel, whose third
production cut since September brought its total reduction to
over 4 million bpd or 5 percent of world supply, would fully
implement the agreed cuts, further weighing on prices.
"We believe that full implementation of the cuts is
unlikely," said Goldman Sachs analysts in a note to clients.
The economic outlook for next year is increasingly bleak.
Top forecasters are now predicting the first decline in world
energy use since 1983, and economic indicators show a deep
global recession taking hold.
Deutsche Bank forecast oil demand will drop 1.2 percent in
2009, more bearish than predictions from the U.S. Energy
Information Administration. []
JP Morgan cut its 2009 crude oil price forecast to $43 a
barrel from $69 previously, while Goldman Sachs reiterated it
expected oil to average $30 a barrel in the first three months
of 2009.
No. 2 energy consumer China on Thursday announced it would
cut domestic fuel prices on Friday for the first time in almost
two years to revamp its regulated pricing regime and revive
growth. []
The cuts of roughly 14 percent for gasoline and 18 percent
for diesel could stimulate demand, analysts said.
(Reporting by Annika Breidthardt; Editing by Michael
Urquhart)
