* U.S. crude drops 2.7 pct to low of $57.70, then pares loss
* IEA to cut energy demand forecasts
* Kuwait says OPEC must "look seriously" at market surplus
(Recasts with IEA, Kuwait statements)
By Christopher Johnson
LONDON, Nov 12 (Reuters) - Oil fell more than 2.5 percent to
beneath $58 a barrel on Wednesday on expectations of weaker
energy demand, before paring some of its losses after hints OPEC
might consider another cut in oil production.
U.S. crude for December delivery <CLc1> hit a low of $57.70,
down $1.63 and its lowest point since March 20, 2007, before
rallying to $58.10 by 1300 GMT.
London Brent crude <LCOc1> shed $0.88 to $54.83 a barrel.
The bearish tone was set by the International Energy Agency,
which said a slowing world economy may force it to cut further
its forecast for oil demand growth when it releases its latest
monthly report on Thursday.
Turmoil in the world's financial markets has already led the
IEA, which advises many of the biggest economies on energy
policy, to cut its assumption for 2008 world oil demand growth
to the lowest rate in 15 years at just 440,000 barrels per day.
The head of the IEA said on Wednesday the agency had to take
into account the changing view of the global economy.
"We are likely to cut demand ... because the IMF changed its
projections on the world economy very dramatically," Nobuo
Tanaka told Reuters.
The IEA statement reinforced fears among traders and
analysts that the ferocity of the recession sweeping through
many of the world's biggest economies has not yet been fully
factored into projections for oil demand.
GLOBAL RECESSION
"Fear global recession is worsening day by day is driving
this market down," said Rob Laughlin, senior oil analyst at MF
Global. "Demand for oil is deteriorating week by week."
He said crude oil prices could well head down towards $50
before finding a floor, something that could spur the
Organization of the Petroleum Exporting Countries into further
trimming oil production.
An OPEC source said on Tuesday the group might cut oil
output by a further 1 million barrels per day (bpd) when it
meets next month in Algeria because of slowing world demand.
OPEC agreed last month to cut production by 1.5 million bpd
from Nov. 1 after the sharp fall in oil prices.
Kuwait's oil minister said on Wednesday there was a surplus
in the oil market.
"If there is a surplus in the market and unwanted stocks, I
think OPEC has the right to look into this matter seriously,"
Mohammad al-Olaim told reporters when asked if OPEC needed to
cut again. "But you can't jump to an early conclusion."
Oil demand forecasts are in the process of being adjusted in
the light of new economic data.
China's industrial production growth slowed to about 8
percent in the year to October, the first time it has been in
single digits since the end of 2001, an official familiar with
the data said this week. The official data is due on Thursday.
In a research note, Credit Suisse added the U.S. Department
of Energy would probably cut its one-year WTI price forecast
when its publishes its Short Term Energy Outlook on Thursday.
Frederic Lasserre, an analyst at Societe Generale in Paris,
said stock markets rather than supply and demand fundamentals
would probably tell the oil market where the floor would be.
"The signal is going to come from equity markets," he said.
"There is an extremely high correlation between equities and
commodities."
U.S. shares were expected to open fairly steady on Wednesday
as economic gloom was balanced by hopes for a rescue package for
the U.S. auto sector. []
U.S. weekly oil inventory data was expected to show an
800,000-barrel rise in crude stocks last week as demand
continues to slow, a Reuters poll of analysts found. []
Distillate stocks should rise by 500,000 barrels and
gasoline by 800,000 barrels, the poll showed. The data will be
released on Thursday, a day later than usual due to the U.S.
Veterans' Day holiday on Tuesday.
(Additional reporting by Barbara Lewis in London and Sambit
Mohanty in Singapore)
