Oil prices nudged higher for a second day on Monday, struggling to end their steepest slump in more than a decade amid robust winter fuel stocks and easing geopolitical and weather risks to oil supplies. NYMEX crude for October delivery was up 2 cents at $63.35 a barrel in Globex electronic trading by 0529 GMT, building on Friday's 11-cent gain and again attempting to halt a $9 plunge in prices over the past three weeks and a near 20 percent reversal since mid-July's record high of $78.40.
From peak to trough, oil prices have fallen by more than $16, the steepest retracement since the first Gulf War in 1990/1991, although deep $15 corrections in the autumns of 2004 and 2005 were followed by new peaks within about half a year.
Oil shed nearly $3 last week after data showed an expanding cushion of U.S. natural gas stockpiles and the highest distillate inventories in nearly seven years, indicating consumers in the world's biggest market were amply supplied ahead of winter.
A wave of profit-taking across the commodities complex has also driven prices successively lower and may push oil into the $50s before relenting as trend-following and technically minded speculative funds wield more influence than ever before.
The Reuters-Jefferies/CRB Index (^CRB - news) of 19 commodities dropped to its lowest in 13- months.
Increased dominance of 'funds' as the incremental buyer of oil futures has induced greater technical traits to the market, said Doug Leggate, analyst at Citigroup Investment Research. Our technical analysts believe a critical inflexion point has been breached, and downside risk may lie in the $50s.
Many analysts say a fall below $60 a barrel could galvanize OPEC, which a week ago opted to keep current output steady but left open the door to another meeting soon if prices kept falling, hinting at its first formal output curbs since 2004.
The producer group has yet to establish a formal price target, but is on alert for any indication that the slump could be prolonged by fundamental market imbalances or by a slowdown or reversal in global economic growth.
The International Monetary Fund said on Friday it had revised its forecast for this and next year's global growth slightly higher, but U.S. industrial output fell last month for the first time since January, providing fresh evidence of a cooling economy.
We are following (U.S. economic growth) with a lot of attention, because this element is critical for petroleum demand in the next few years, Algerian Energy and Mines Minister Chakib Khelil told reporters on Sunday, but he added that he thought prices would remain above $50 a barrel in the coming years.
Now everything depends on world economic growth... We count a lot on the wisdom of the chairman of the Federal Reserve to take good decisions on interest rates, as well as on the European Central Bank, to encourage economic growth.
The U.S. Federal Reserve meets on Wednesday.
There were few developments on the supply risk front over the weekend, with China urging Iran to be more flexible on its nuclear program after a week of European Union talks that left officials upbeat but prompted President George W. Bush to raise concerns that Tehran was simply playing for time.
Weather concerns remained on the backburner for the time being, with the fourth storm of the Atlantic hurricane season Helene churning over the open seas, but posing no immediate threat to land, U.S. forecasters said.