Oil prices steady near 22-month lows

World oil prices held steady on Wednesday at their lowest levels in about 22 months but analysts said they will drop even lower because of worries over falling energy demand.

New York’s main oil futures contract, light sweet crude for December delivery, was three cents higher at 54.42 dollars a barrel after closing Tuesday in New York down 56 cents at 54.39 dollars, its lowest since January 2007.

Brent North Sea crude for delivery in January was three cents higher at 51.87 dollars after settling 47 cents lower at 51.84 on Wednesday in London.

Concern for slowing global economic growth and its impact on energy demand has led oil prices to plummet from record peaks above 147 dollars in July.

Prices should drop further to 43 or 44 dollars a barrel before rebounding along with the global economy next year, CFC Seymour securities in Hong Kong said in a report.

“We believe prices will be in decline until evidence emerges that the US is on track to end its recession,” CFC Seymour said.

Phil Flynn, of Alaron Trading, said oil “is being overwhelmed with the weight of the global economy”.

A Tuesday forecast by the Centre for Global Energy Studies (CGES) that world oil demand would likely contract this year for the first time in 25 years weighed on market sentiment.

The London-based energy market think-tank said prices have continued to fall despite the Opec cartel’s agreement last month to cut production by 1.5 million barrels per day. The price slide will continue “until real output cuts have been implemented,” CGES said.

The Organisation of the Petroleum Exporting Countries (Opec), which produces about 40 percent of the world’s oil, has so far failed to fully implement the output reduction that was to have begun on November 1, according to analysts.

“Oil demand forecasts continue to be revised downwards and a year-on-year contraction in global oil demand in 2008 and 2009 is now a very real possibility for the first time for 25 years,” CGES said.

“The path of oil prices will depend on how, and how quickly, Opec cuts production in response to the falling demand for its oil,” it added.

Opec is to meet on November 29 in Egypt, and some members are calling for the cartel to further cut production in the face of plunging prices.