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Oil Prices Dip Briefly Below $60, Then Rally

Oil prices in Asia slipped briefly below $60 a barrel for the first time in more than 18 months, then rallied to $61, after a two-day plunge. From Sydney, Phil Mercer reports.

Analysts say that worries over the state of the world economy and prospects for growth in the United States are forcing the oil price down.

Prices have fallen about 60 percent since peaking at more than $147 a barrel in mid-July.

Tumbling prices have followed mounting economic problems in the United States, where unemployment is rising and retail sales are falling. There are signs that other developed economies also face a severe recession, which will cut oil demand.

The gloom about demand is forcing traders to sell oil contracts.

Bruce Robinson is with the Australian Association for the Study of Peak Oil and Gas, an organization representing scientists. He says that high prices may have contributed to the current financial crisis.

"The high oil price may well have played a serious part in triggering the recession rather than the other way around," he said. "But either way, the oil price has fallen and OPEC is cutting production, and the bad news is that it gives us false hope that oil prices are on the way down when almost surely they're on the way up in the long term."

The Organization of Petroleum Exporting Countries, OPEC, agreed to lower production by 1.5 million barrels a day in October. Its members are scheduled to meet again in December.

The actions of central banks have also affected the market.

The decision by the Bank of England and the European Central Bank to lower interest rates this week is a further sign of worsening economic conditions in Europe. The cuts sent the euro down sharply against the U.S. dollar, which in turn triggered a sell-off in oil, which is priced in dollars.

In Australia, gasoline prices have retreated, although falls have been limited because of the weakness of the Australian dollar against its American counterpart.

In Asia Friday morning, oil prices fell briefly to just under $60, then settled slightly above $61 a barrel.