* U.S. crude futures drop 3.9 percent to low of $57.04
* International Energy Agency to cut energy demand forecasts
* OPEC says may cut oil output again if price falls further
(Updates throughout)
By Christopher Johnson
LONDON, Nov 12 (Reuters) - Oil fell almost 4 percent to
nearly $57 a barrel on Wednesday, its lowest for 20 months, on
expectations of weaker energy demand and as global stock markets
headed downwards.
The fall in oil prices prompted OPEC officials to say they
might decide to cut oil production further in an attempt to
adjust the balance between oil output and demand.
U.S. crude for December delivery <CLc1> hit a low of $57.04,
down $2.29 and its lowest point since March 20, 2007, before
rallying to around $57.59 by 1500 GMT.
London Brent crude <LCOc1> shed $1.61 to $54.10 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.
OPEC RESPONSE
Gloom over the state of the economy was underlined by a
lower opening on Wall Street, where the Dow Jones industrial
average slipped 1.95 percent or almost 170 points to 8,524.47 by
1445 GMT. []
"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.
OPEC President Chakib Khelil said on Wednesday OPEC could
decide to make a further cut in oil supply before its scheduled
meeting next month in Oran, Algeria if prices continue to slide.
"Probably OPEC will not have a choice but to take another
decision in Oran, if not before Oran, if the prices continue
their decline in the market," he told Reuters.
OPEC agreed last month to cut production by 1.5 million bpd
from Nov. 1 after the sharp fall in oil prices.
Oil demand forecasts are in the process of being adjusted in
the light of new economic data.
In a research note, Credit Suisse added the U.S. Department
of Energy would probably cut its one-year U.S. WTI crude 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. 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. []
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)
