Oil prices dive below US$20 on economic woes

Reuters, London

Oil prices faltered again on Friday, diving to below US$20 a barrel for the first time in more than two years as evidence piled up of an economic downturn that has left OPEC largely powerless to check the market's slide.

London Brent hit a session low of $19.04 a barrel, but staged a late rally and ended 15 cents stronger at $19.77.

U.S. light crude also fell to less than $20 a barrel for the first time in more than two years, but pared losses late in the session and ended 22 cents weaker at $20.17 a barrel.

Brent has fallen around $2 this week under a barrage of bad news about the U.S. economy, and has lost around 30 percent of its value since the Sept.11 attacks.

OPEC's plans for another output cut have failed to prop up prices in the face of fresh evidence that the slowing world economy is biting into global petroleum demand.

"The economic downturn is proving broader and deeper than expected and world oil stocks are relatively comfortable -- about 5 to 6 percent higher than this time last year," said Gary Ross of New York's Petroleum Industry Research Associates.

"The market has lost confidence because of the worldwide recession and its undoubted effect on global oil demand after another week of bearish monetary figures on both sides of the Atlantic and proof of increasing stockbuilds of oil," said Lawrence Eagles of brokers GNI.

Dealers are not ruling out further price losses despite the near certainty that the cartel this month will agree to slice another million barrels daily, 4 percent, from exports.

"From a trading perspective people are very quick to cut their losses and equally quick to take their profits," said Peter Gignoux, head of the energy desk at Schroder Salomon Smith Barney in London.

"Concerns exist that a one million barrel per day cut by OPEC may not be enough," said Eagles of GNI.

The slump has taken OPEC's reference basket of crudes down to $18.25, stranded well below the group's central $25 a barrel target.