Oil prices plummet below $80 US for 1st time in a year
Traders work the crude oil options pit at the New York Mercantile Exchange Friday. (Mary Altaffer/Associated Press)
Oil prices lost altitude Friday as the cost of a barrel of liquid gold dropped below $80 US for the first time since September 2007.
Crude for November delivery slipped by as much as nine per cent in morning trading, hitting $78.61 US a barrel, a drop of $6.98 from the previous day's level.
Analysts said the reason for the commodity sell-off is the same rationale that kids use to hide under the bedcovers at night — pure fear.
"The whole market has lost confidence in everything … There's just a lot of panic," Mark Pervan, commodity strategist with ANZ Bank in Melbourne, told the Associated Press.
The last time oil prices had a 7 as the first number was back during the week of Sept. 10 to 14, when a barrel cost $79.14.
Buyers now see economic growth in Canada, the United States and Europe slowing as a result of the shrinking market for global credit.
That has led to worries that oil demand is also faltering.
Many analysts do not know how quickly the economy will slow because of the ongoing financial meltdown. Therefore, oil experts are reluctant to say how much they think demand for crude will fall.
In September, Abadalla Salem El-Badri, secretary-general for the Organization of Petroleum Exporting Countries, said that lower demand might slice 700,000 barrels a day from the current 32 million barrels that is used each day.
Common wisdom among traders is that OPEC will defend the per-barrel price at $80, which means a cut in production of crude will be sought to maintain that value.
OPEC has also called an emergency meeting in Vienna for Nov. 18 to discuss its next moves.
Still, the organization's members have three to four million barrels a day in extra production capacity and some states, such as Nigeria, must continue to pump oil for national economic reasons.
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