Oil Slips to 22-Month Low on Bleak Outlook

By Pablo Gorondi

Oil prices continued to slide, to near $55 a barrel Thursday before rebounding slightly, as bad economic news from the world's largest economies heightened fears that a severe global downturn will slash demand for crude.

By midday in Europe, light, sweet crude for December delivery was down 13 cents to $56.13 a barrel, after falling to as low as $54.67, in electronic trading on the New York Mercantile Exchange.

In London, December Brent crude fell 36 cents to $52.01 a barrel on the ICE Futures exchange.

The Nymex contract fell $3.50 overnight to settle at $56.16, the lowest closing price since January 2007, after the Energy Department slashed its 2009 oil consumption forecast.

"As the global economy continues to weaken, we're going to see further downward pressure on oil," said Stephen Roach, chairman of Morgan Stanley Asia, in Singapore. "I think we'll certainly challenge the $50 threshold. We could challenge the $40 threshold."

According the Paris-based Organization for Economic Cooperation and Development, the world's developed economies have slid into recession and will shrink further in 2009.

The OECD said Thursday that gross domestic product was likely to fall by 0.3% in 2009 for its 30 member countries, representing democracies with market economies.

It said the U.S. economy would contract by 0.9%, Japan's by 0.1% and the euro area by 0.5%.

The latest forecasts were a sharp downgrade since the last set in June, when the organization forecast OECD growth of 1.7% in 2009 and indicated that the worst of the financial crisis might have passed.

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