Oil prices slumped 3.7 percent Tuesday, after the International Energy Agency cut its forecast for world oil demand growth, saying that the recent surge in crude prices had already hurt consumption.
The losses extended U.S. crude's slide -- from last week's record $98.62 -- to more than $7 per barrel, as profit-taking, signs of a slowing economy, and signals OPEC may finally take action to cool the market encouraged selling.
U.S. light, sweet crude for December delivery settled down $3.45, or 3.7 percent, at $91.17 per barrel in Nymex trade.
The slide was the biggest dollar drop for the front month contract since Dec. 1, 2004 -- and the biggest percent drop since Aug. 6.
London Brent crude fell $3.15 to $88.83 per barrel.
The sell-off from last week's record accelerated Tuesday after the IEA sharply reduced its forecast for oil demand growth through the rest of 2007 and into 2008, saying a price rally of around a third since mid-August was already slowing consumption.
"It's not surprising that oil prices are retreating. There's a bit of worry about demand in the U.S., which has suffered from the subprime crisis," said Lawrence Poole, an energy analyst at Global Insight, a consultancy in London.
The IEA, the adviser to 26 industrial consumer nations, cut its prediction for fourth-quarter demand growth by 570,000 barrels per day and by 180,000 bpd more for the first quarter.
"The recent dramatic price rise is having a "short-term" shock effect, at the same time as consumers appear to be adapting behavior to deal with steady annual price increases," the agency said in its monthly Oil Market Report.
Demand for oil in the United States, the world's largest oil consumer, has dropped 0.4 percent versus a year ago, according to the latest government data.
Crude oil imports by China, the world's second largest oil consumer, fell to a 10-month low in October, according to preliminary government data.
OPEC Cool To Output Change
Saudi Oil Minister Ali al-Naimi said the Organization of Petroleum Exporting Countries would make no output decision at the group's summit meeting this week in Riyadh, despite pressure from consumer nations calling for another production hike to cool red-hot prices.
"This is not the place to focus on price, incremental production or a decrease," Naimi told a news conference in Riyadh.
OPEC's next official policy meeting is on Dec. 5 in Abu Dhabi. The group agreed to increase output by 500,000 bpd starting Nov. 1. But analysts said the move would not be enough to stem decreases in consumer stockpiles.
The OPEC summit in Riyadh brings together heads of state of the OPEC nations for the first time since 2000, when oil was at $30 per barrel.
Algerian Energy and Mines Minister Chakib Khelil said Monday the cartel would call on consuming nations to play their part in bringing down record oil prices, which are increasingly influenced by financial markets.
A rebound in the U.S. dollar, which Monday posted its biggest one-day gain versus the euro in more than a year, helped pull down crude oil futures, although it lost some of that ground against a basket of currencies on Tuesday.
Traders will also be focusing on the weekly U.S. crude inventory data, which will be released a day later than normal Thursday because of the Veterans Day holiday Monday.
An expanded Reuters poll shows analysts expect an 800,000 barrel drawdown on crude stocks, a 100,000-barrel decline in distillate inventories and a 100,000-barrel drop in gasoline supplies.