OPEC President Nigeria called on its fellow OPEC countries to make deeper output cuts on Tuesday as prices tumbled to an 8-month low below $59 a barrel and the tide showed no sign of turning.
Nigeria and Venezuela have already made voluntary reductions to their production from October 1 but the cuts, representing less than one percent of OPEC supply, have failed to halt the steepest drop in oil prices in 15 years.
Investors are focused on U.S. heating oil stocks at seven-year highs and the conspicuous silence of the world's biggest oil exporter Saudi Arabia. Only when Saudi Arabia says it is making cuts will the market sit up and take notice.
(Today's drop in the oil price) vindicates what Nigeria is doing and I hope other members will act in the same way, OPEC President Edmund Daukoru told Reuters in Abuja.
Nigeria wants to show a good example. We are simply doing what we think is right in light of the market, said Daukoru, who is also Nigerian Minister of State for Petroleum.
He was speaking as U.S. oil tumbled to $58.84 a barrel, its lowest level since February 17 and a far cry from its mid-July record high of $78.40. The speed of the descent has alarmed OPEC, the group that pumps a third of the world's oil.
Oil dragged down other commodities.
Gold fell nearly three percent and copper was also down.
Momentum is building for further oil price falls unless OPEC acts to curb supplies to a market focused on slowing demand growth in the world's biggest energy burner the United States.
OPEC's own economists are predicting demand for the group's oil will drop by 800,000 barrels per day next year as new non-OPEC oil starts flowing, mainly in the Caspian.
At some stage there will have to be a decision on whether a serious surplus of oil is building. That could be quite soon, said London-based energy consultant Geoff Pyne.
ANALYSTS TRIM PRICE FORECASTS
Oil analysts are making the first downward revisions to their 2007 price forecasts, a Reuters poll found on Tuesday.
The deepest cut was by the Center for Global Energy Studies which lowered its U.S. oil price outlook for next year by more than $10 to $54.50 even with the assumption that OPEC would eventually cut output by at least 1 million barrels.
If they don't cut then it will be even lower in 2007, said Leo Drollas, the group's deputy executive director.
The cuts in Reuters' running poll of 32 analysts put the consensus forecast for benchmark U.S. light crude futures for 2007 at an average of $64.21 a barrel, down 47 cents from the previous update in late September.
Calyon Investment Bank pointed to the magnitude of the recent price correction, a slowing pace of global
GDP growth next year, and very comfortable OECD middle distillate stocks just two months ahead of heating season.
DROP IN OPEC OUTPUT
OPEC's sixth biggest producer Nigeria and fourth biggest Venezuela are the only two countries to have declared publicly that they are cutting back output.
But other countries may be taking similar steps quietly, a Reuters survey showed on Tuesday.
It found the organization's output last month fell to its lowest level since April, even as ministers decided at a September 11 meeting in Vienna to keep their output ceiling unchanged.
OPEC oil output fell 380,000 barrels per day to 29.47 million barrels per day, the survey of consultants, shippers, industry and OPEC sources concluded.
OPEC's largest exporter Saudi Arabia trimmed its output by 100,000 bpd because of slower demand for its crude.
Analysts say that by publicly trying to shore up prices Nigeria and Venezuela may be playing to a domestic audience - both countries face elections in the coming months.
Gulf oil producers have long-established ties with the United States, where energy prices are also an election issue.