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Oil prices sank under $55 a barrel on Tuesday to strike a 21-month low as fresh recession jitters fanned fears about slowing global energy demand, traders said. On London's InterContinental Exchange (ICE), Brent North Sea crude for delivery in December plunged to $54.92 per barrel - a level last seen on January 30 2007. Brent later stood at $55.94, down $3.14 from Monday.
At the same time, on the New York Mercantile Exchange (NYMEX), light sweet crude for December tumbled to 58.32 dollars, the lowest level since March 21, 2007. The contract was later down $2.91 at $59.50. Prices have now shed about 60% since scaling historic highs above $147 in July on mounting evidence of slowing global economic growth and energy demand. Crude oil prices on Tuesday extended earlier losses after Wall Street fell in opening trade, with investor sentiment unsettled by fears about a collapse of General Motors and more poor corporate news amid the credit crisis. European stock markets also closed sharply lower on Tuesday as news of more corporate problems highlighted concerns about the spreading damage from the global credit crunch to the underlying world economy. "The short-term focus continues to be on weak demand," Barclays Capital analysts wrote in a research note to clients on Tuesday. Crude oil prices closed up almost two dollars on Monday, with sentiment boosted by hopes that China's huge economic stimulus package would lift demand for energy. But traders banked profits on Tuesday as poor data out of the United States - the world's biggest energy consuming nation - reignited fears about recession. "News that China's crude oil imports jumped by 28% in October from a year ago and that militants are threatening to renew attacks on oil facilities in Nigeria failed to lift prices," noted Sucden analyst Michael Davies. The oil market was also undermined by the strengthening dollar which tends to dampen demand because dollar-priced crude becomes more expensive for buyers holding weaker currencies. China over the weekend announced a $586bn stimulus package aimed at boosting its economy which would mean greater demand for commodities including oil, dealers said. The Asian giant is a major buyer of commodities and its voracious appetite for oil to fuel runaway economic growth in recent years was a key factor behind the rise to record levels in July. OPEC president Chakib Khelil indicated over the weekend another round of production cuts may occur should oil prices remain below the cartel's preferred range of $70 to $90. The Organisation of the Petroleum Exporting Countries (OPEC), which pumps more than 40% of the world's crude, announced in October that its daily output would be cut by 1.5m barrels per day to 27.3m barrels per day from November. OPEC's next meeting is scheduled to take place in Oran, Algeria, on December 17. Before that, OPEC's Arab members will meet in Cairo on November 29, Khelil said. Investors were also gearing up for the latest weekly snapshot of US energy inventories, delayed a day until Thursday because of the Veterans Day public holiday on Tuesday. AFP
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