Oil Slips to 22-Month Low on Bleak Outlook

The International Energy Agency also made downward revisions to its global oil demand forecasts for this year and 2009 on Thursday, as rich-world economies sink into recession and growth slows in developing countries.

The IEA now expects global oil demand to average 86.2 million barrels a day this year, nearly flat compared to 2007, and 86.5 million barrels a day next year. Its forecast cuts 330,000 barrels a day from the previous 2008 estimate and 670,000 barrels a day from next year's.

The German economy, Europe's biggest, also tipped into recession in the third quarter as weakening exports fueled a bigger-than-expected fall in national output.

Gross domestic product contracted by 0.5% in the July-September period compared with the previous quarter, the Federal Statistical Office said, following a 0.4% fall in GDP in the second quarter.

The Energy Department said Wednesday it expects U.S. consumption of petroleum to drop next year more severely than any time since 1980. The department's Energy Information Administration said 2009 petroleum consumption is projected to sink by 250,000 barrels per day, or 1.3%, more than twice that projected in its previous outlook.

Signs that U.S. consumer spending has plummeted also fueled pessimism. Department store retailer Macy's (M Quote) said sales fell more than 7% in the third quarter and consumer electronics retailer Best Buy (BBY Quote) slashed its fiscal 2009 guidance on fears that consumer spending will erode.

"It's not just gloom and doom sentiment, it's indeed real," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. "Companies are showing poor earnings and announcing major job cuts."