World oil prices fell in Asian trade today as euphoria over the US government's bailout of Citigroup faded and investor pessimism about the global economic downturn returned, analysts said. New York's main futures contract, light sweet crude for January delivery, traded at $53.93, down 57 cents from Monday's close of $54.50 after soaring $4.57. Brent North Sea crude for January delivery dropped 50 cents to $53.43 a barrel after closing yesterday in London at $53.93, up $4.74.
"It was up significantly yesterday reacting to another bailout on Wall Street," said Victor Shum, a Singapore-based analyst with energy consultancy Purvin and Gertz. "It was a significant boost and it is not surprising that we are correcting a bit today," he said. Financial markets soared yesterday after the US government pumped billions of dollars into ailing US bank Citigroup and Britain unveiled a mammoth financial stimulus package worth £20 billion.
The latest moves by the US and British governments are aimed at shoring up their faltering economies, which have been hit badly by the Wall Street-born financial crisis that started last year. Despite the massive bailouts, worries about a prolonged global economic downturn hitting energy demand continue to haunt the oil futures market, analysts said. "The market is really concerned how deep and how long this global recession is going to be," said Mr Shum.
"I don't think that the oil market, and also the equity market, have hit a bottom yet and so there will continue to be downward trend in the oil futures," he said. Opec's second largest exporter, Iran, said the oil cartel should further slash output to boost prices, which are down by about 64 per cent from their record peak of above $147 in July. "Opec decided to cut production by 1.5 million barrels [a day] in October, but it could not stop oil prices from falling," the Iranian Opec envoy Mohammad Ali Khatibi was quoted as saying yesterday by the Resalat daily.
"So it appears that Opec needs to further reduce production to prevent this trend," Mr Khatibi said. The Organisation of the Petroleum Exporting Countries (Opec), which pumps about 40 per cent of the world's crude, is scheduled to hold an extraordinary meeting on Saturday in Egypt. There is speculation member nations will agree to cut output again in a bid to boost oil prices. *AFP