Oil prices sank under $53 a barrel this evening, hitting the lowest level since January 2007, as traders expected weaker economic conditions to affect demand for energy.
Brent North Sea plunged to $52.88, a level last seen on January 22, 2007. US crude dropped to $56.41 a barrel, which was last witnessed on March 20, 2007.
The International Energy Agency said a slowing world economy may force it to cut further its forecast for oil demand growth when it releases its latest monthly report on Thursday.
Turmoil in the world's financial markets has already led the IEA, which advises many of the biggest economies on energy policy, to cut its assumption for 2008 world oil demand growth to the lowest rate in 15 years at just 440,000 barrels per day.
An OPEC source said on Tuesday that the group might cut oil output by a further one million barrels per day when it meets next month in Algeria because of slowing world demand. OPEC agreed last month to cut production by 1.5 million barrels a day from November 1.
But the IEA has also warned that - despite current lower oil prices - the era of cheap oil is over. The IEA has predicted that by 2030 a barrel of oil will cost over $200 in today's money. The report estimates that global energy demand will grow by about 1.5% for the next two decades.
The IEA says that level of increased demand is unsustainable not only because the depletion of oil wells is faster than anticipated, but also because current investment in the development of the world's remaining oil resources is too low.
