Oil Closes Below $78, Down 10% on Recession Fears

Oil prices dropped more than 10 percent on Friday and touched 13-month lows in a global flight from risk amid concerns of a worldwide recession and further signs of slumping energy demand.

The International Energy Agency slashed its estimate of worldwide 2008 oil demand growth to its lowest rate since 1993, and lowered its 2009 growth forecast by 190,000 barrels per day.

U.S. light, sweet crude plunged $8.89 to settle at $77.70 a barrel, the lowest levels since Sept. 10, 2007.

London Brent crude settled down $8.57 at $74.09 a barrel.

"At this point, margin calls are certainly a pressure factor in the crude oil market,'' said Jim Wyckoff, president of Jimwyckoff.com, which provides commodities markets commentary. "Some hedge funds, which are taking losses in other markets, are being forced to liquidate other holdings, such as those in the energy markets.''

CNBC.com

U.S. stocks turned positive in the late afternoon after trading lower most of the day in a turbulent session, with analysts citing bets that the finance chiefs of the world's major economies will take coordinated steps this weekend to confront the financial crisis.

Earlier, all three major U.S. stock indexes were sharply lower as panicked investors dumped stocks on fears that frozen credit markets would push the global economy into recession.

The Reuters-Jefferies CRB index, a global commodities benchmark, hit a 20-month low as investors who had flocked into commodities this year shed positions in crude and other raw materials markets.

Markets were awaiting a meeting of finance ministers and central bankers from the Group of Seven nations this weekend in Washington.

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Slumping demand in the United States and other developed economies has sent oil prices off their peak above $147 a barrel in July, after surging consumption in emerging markets such as China sent commodities on a six-year rally.

The price fall has caused some OPEC members to call for a cut in production levels, and the cartel has agreed to hold an emergency meeting in Vienna on Nov. 18 to discuss the impact of the global financial crisis on the oil market.

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