Despite Friday's modest rally, oil is still down $75 - or 51 percent - since catapulting to a record high of $147.27 on July 11.
The bearish sentiment around oil has grown more feverish in recent days, lopping more than $11 off prices in the previous three trading sessions alone. A barrel of crude hasn't been this cheap in almost 14 months.
The pullback comes as a widening economic slowdown forces a wholesale contraction in U.S. energy demand: Americans are driving less, airlines are keeping more planes on the ground and businesses are ramping down operations.
Highlighting the weak appetite for energy, U.S. filling stations hungry for business ratcheted down prices for a gallon of regular by another 4.4 cents overnight to a new national average of $3.04, according to auto club AAA, the Oil Price Information Service and Wright Express. That's 26 percent lower than the all-time high of $4.114 reached July 17 but 8.7 percent higher than a year ago.
Still, 23 states are now seeing average pump prices below $3, according to AAA, and the average for the entire country is expected to hit that mark sometime this weekend. Prices haven't been below $3 nationally since Feb. 16.
"Depending upon how things go in the next few months, we might have another significant move down in gas prices. You're probably talking another 20 cents lower," said Gene McGillian, an analyst at TFS Energy LLC in Stamford, Conn.
Worried about the financial fallout of the oil price drop, the Organization of the Petroleum Producing Countries, which controls 40 percent of the world's oil supply, called a special meeting for next Friday in Vienna, Austria to address the slide. Underscoring the cartel's anxiety, it moved up the date of the meeting by nearly a month.
An Iraqi lawmaker said Friday the government expects to cut its budget next year by $15 billion because of falling oil prices. Abbas al-Bayati, a senior lawmaker of the United Iraqi Alliance, the largest Shiite bloc in parliament, said the recent plunge would cut into earlier budget estimates, which were made when crude was hovering around $120 a barrel.
Analysts say OPEC could decide to trim output by as much as 1 million barrels a day in a bid to halt the slide, in addition to a 500,000 barrel per day cut announced last month.
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That may have led some traders to bid up oil on Friday, though any rally will likely be short-lived given the rapidly waning appetite for petroleum products, said Addison Armstrong, director of market research at Tradition Energy in Stamford, Conn.
"Demand is really in trouble," Armstrong said. "Every week we get figures showing falling U.S. demand for energy. European demand is just beginning to turn down, and all indications are that China is in for a significant economic downturn."
"We could have prices in the low $60 range very soon," he added.
Still, some analysts say crude's decline has been overdone amid the panicked selling in world equity markets.
"Even in a dire economic situation, a lot of energy use isn't discretionary, so I expect prices to bounce back at some point," said Gavin Wendt, head of mining and resources research at consultancy Fat Prophets in Sydney.
In other Nymex trading, heating oil futures rose 4.61 cents to settle at $2.1569 a gallon, while gasoline futures rose 4.41 cents to settle at $1.661 a gallon. Natural gas for January delivery rose 9.1 cents to settle at $7.306 per 1,000 cubic feet.
In London, December Brent crude rose $1.76 to settle at $69.60 a barrel on the ICE Futures exchange.
Associated Press writers Pablo Gorondi in Budapest, Hungary, Bushra Juhi in Baghdad and Alex Kennedy in Singapore contributed to this report.
Press; By STEVENSON JACOBS]
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