Oil futures settled in the red Wednesday as markets were inundated with mixed reports on the future of the global energy supply and demand.

The benchmark oil contract plunged $3.17, or 5.3%, to settle at $56.16 a barrel. This is the first time oil has closed at this price since January 2007. 

Oil extended its decline in electronic trading on the New York Mercantile Exchange, breaking through the $56 level shortly after the close of floor trading. According to Alaron Trading Vice President Phil Flynn, that level represents an important technical barrier; now that it's broken -- oil could head significantly lower toward the $50 a barrel level. 

Despite recent reports showing weakening in global energy demand, the International Energy Administration warned today that energy supplies won’t keep up with growth without substantial infrastructure investment.

“We cannot let the financial and economic crisis delay the policy action that is urgently needed to ensure secure energy supplies,” the IEA said in a release. "The credit squeeze could delay spending, potentially setting up a supply crunch that could choke economic recovery.”

According to the IEA, even though energy prices are presently trending lower, this supply squeeze can push energy prices dramatically higher in the long-run.

“While market imbalances will feed volatility, the era of cheap oil is over,” the release said.

In the short run, however, the data are more bearish.  Indeed, numerous major energy consuming countries reported sharply lower economic growth expectations amid wide-spread financial turmoil. 

The Energy Information Administration [EIA] corroborated these concerns in its Short-Term Energy Outlook report released today.

"The recent dramatic deterioration in the outlook for economic growth in the United States and the rest of the world has led to a significant reduction in [the EIA's] assumptions for world economic growth and projections of energy demand and prices," the report said. 

The EIA also slashed its projection for the the average price of crude oil in 2009 to $63.50 a barrel, which would represent a 37% drop from 2008. 

As wholesale energy prices slide, retail energy prices have slowly followed.  Drivers paid $2.20 per gallon on average for regular gas nationwide, which is down from $3.21 last month, according to AAA's Daily Fuel Gauge Report. 

Other energy markets were also lower:  

Wholesale gasoline sunk six cents to settle at $1.25 per gallon -- the lowest level in exchange history; 

Heating oil was lower bynine cents to settle at $1.84 per gallon;

Natural gas fell 30 cents to settle at $6.41 per million British Thermal Units. 

Metal markets were mixed: 

Gold was lower by $14.30 to $717.70 per troy ounce;

Silver traded lower by 33 cents to $9.48 per troy ounce;

Copper was up one cent to $1.65 per pound.