Oil prices fall as OPEC calls special meeting to discuss oil market

NEW YORK - Oil prices extended their losses Thursday even as OPEC hinted it might cut output to halt the market's dramatic slide at a special meeting next month.

At the pump, crude's decline pushed prices even lower. A gallon of regular shed 4.4 cents overnight to a new national average of $3.403 - or 89 cents a litre US - according to auto club AAA, the Oil Price Information Service and Wright Express. Prices peaked at $4.114 on July 17.

In Canada, pump prices for unleaded gasoline dropped to just under C$1.17 a litre, down from $1.19 a day earlier, according to GasBuddy.com, a website that tracks fuel prices across North America.

Fearful that oil prices could fall too far and harm their petroleum-dependent economies, OPEC said it would hold an extraordinary meeting Nov. 18 in Vienna, Austria to discuss the widening economic crisis and how it's affecting the oil market.

The 13-member cartel didn't mention a production cut but hinted that such a move may be coming, saying it would work "to ensure that oil market fundamentals are kept in balance and market stability is maintained."

Light, sweet crude for November Delivery fell $1.44 to US$86.99 a barrel in afternoon trading on the New York Mercantile Exchange, after fluctuating between positive and negative territory earlier in the day.

The contract fell $1.11 on Wednesday to settle at $88.95 after earlier edging below $85 - a key technical level that some traders believe could lead to another plunge.

Crude has shed about $60 - or 40 per cent of its value - since soaring to a record $147.27 on July 11. The massive losses come as a global financial downturn forces people and businesses everywhere to cut back.

Libyan national oil company chief Shukri Ghanem on Thursday called on oil producing countries to cut output to "protect their interest (and) stop the loss of income."

"However, OPEC's aim is to create a balanced market, which neither harms the producers nor the importers," Ghanem told The Associated Press.

OPEC controls 40 per cent of the world's oil supply, but many analysts doubt it will be able to slow oil's descent just by tightening output. OPEC's announcement that it would cut production by 520,000 barrels a day failed to halt oil's drop.

Peter Beutel, oil analyst at Cameron Hanover in New Canaan, Conn. said history shows that OPEC cuts can rally prices for "a week, two weeks or a month."

"But over a longer period of time, they're incapable of stopping major moves," Beutel said. "We've been down this road before, but OPEC refuses to learn this lesson."

Meanwhile, oil market traders continue to watch a fast-unfolding financial crisis. The U.S. Federal Reserve, along with central banks in Europe and China cut interest rates Wednesday in a bid to jump-start lending. But U.S. stocks sank in response Wednesday and continued to fall Thursday.

"Traders are expecting the world to move toward recession, with the U.S. and Europe especially a concern," said Gerard Rigby, an energy analyst with Fuel First Consulting in Sydney. "Based on the short-term trend, you could see prices approaching $80 next week."

Weighing on prices was evidence of falling demand in the U.S, where crude inventories jumped by 8.1 million barrels last week while gasoline stocks surged 7.2 million barrels, the Energy Information Administration said Wednesday in its weekly inventory report.

Both increases far exceeded expectations, reflecting both persistently weak demand and a recovery of the Gulf Coast energy complex that had been shut down by hurricanes Gustav and Ike.

"Overall demand for oil fell for a fifth straight week and year-on-year demand fell for a 24th straight week" this year, noted trader and analyst Stephen Schork in his Schork Report. "In fact last week demand ... fell to the lowest level since the week following the 9-11 2001 attacks."

Demand for gasoline was also weaker, falling 5.3 percentage points over the four weeks ended Oct. 3 compared with the same period a year earlier, according to the EIA report.

In other Nymex trading, heating oil futures fell 4.92 cents at $2.4453 a gallon while gasoline lost 4.83 cents to $2.4462 a gallon. Natural gas for November delivery rose 6.5 cents to $6.807 per 1,000 cubic feet.

In London, November Brent crude fell $1.27 to $83.09 a barrel on the ICE Futures exchange.