Crude prices retreated Tuesday amid concerns that demand might be reduced due to the slowdown of U.S. economy while the Organization of Petroleum Exporting Countries (OPEC) members are considering an increase in output.
Light, sweet crude for January delivery dropped 3.28 U.S. dollars to 94.42 dollars a barrel on the New York Mercantile Exchange.
The contract has marched toward 100 dollars a barrel this month, hitting its all-time high of 99.29 dollars last week, but failed to top the psychological milestone.
In London, January Brent crude lost 2.80 dollars to 92.52 dollars a barrel on the ICE Futures exchange.
"The fact that oil is down is also adding to the overall positive mood on Wall Street today," said Wall Street Strategies' senior research analyst Conley Turner.
Wall Street surged Tuesday as Citigroup, the largest U.S. bank, got a 7.5 billion U.S. dollar investment from the Abu Dhabi Investment Authority.
The Dow Jones industrials rose more than 200 points while the S&P 500 index and the Nasdaq composite index were more than 1 percent.
Energy stocks declined as crude prices plunged over 3 percent to under 95.00 dollars a barrel.
"The reason being cited this time around is that Saudi Arabia's oil minister commented that the country has increased production to the highest this year at about 9 million barrels per day," Turner told Xinhua.
"This does not come much of a surprise since it was just a few weeks ago that OPEC stated that it was going to increase production."
Several OPEC ministers have said recently that their nations are ready to boost oil output to bring down high oil prices. Analysts believe the cartel will boost production by 500,000 to 1 million barrels a day on the OPEC ministers meeting due on Dec. 5.
"Additionally, the prevailing sentiment that slowing economic growth in the United States and Europe is likely to curtail the demand for oil and is helping drive down the price today," Turner pointed out.
On Tuesday, the Conference Board, an economic research group, said its Consumer Confidence Index dropped to its lowest point since October 2005 due to credit crisis and higher energy prices. The index fell to 87.3 for November, down almost 8 points from the revised 95.2 during October.
Moreover, Golden Sachs, a leading global investment banking and management firm, increased the U.S. economy recession risk to 40-50 percent and predicted the U.S. unemployment would increase from4.7 percent to 5.5 percent. Therefore, the firm saw more rate cut and GDP growth below trend for extended period.
The International Energy Agency, an energy policy adviser to 26Western industrialized nations, and OPEC have recently cut their demand forecasts for the rest of this year and next year, in part because of high prices.
"Even if that were the case, the slackening demand by the United States will invariably be replaced by that of China and India which are steady on their paths to economic growth," said Turner.
"As is stands, the oil trade has not yet broken. As such, the 100 dollars per barrel target will be attained sooner or later," he concluded.
Source: Xinhua
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