Oil falls toward $50 level as markets ignore pirates
Thursday November 20 2008
OIL slipped below $54 and looked set to fall towards €50 a barrel yesterday after a US government report showed a decline in demand for oil across the country.
Prices also fell in response to poor housing data and a report showing that consumer prices in the US plunged the most since 1947 as gasoline pump prices dropped by a record amount.
Climbed
Governments, businesses and consumers cut back on energy use when the economy slows and this was reflected in a US Energy Department report showing that inventories climbed more than forecast as fuel demand dropped.
Markets seemingly ignored the hijacking of oil tankers off the East African coastline. A barrel of sweet crude for January delivery fell 78 cents, or 1.4pc to $53.61 on the New York Mercantile Exchange.
The Energy Department said oil supplies rose 1.6m barrels to 313.5m million barrels last week. Stockpiles were forecast to rise one million barrels, according to a Bloomberg News survey of analysts. US fuel demand during the past four weeks averaged 19.1m barrels a day, down 7pc from a year ago.
"Across the range of petroleum products we are seeing major declines in US demand," said Rachel Ziemba, an analyst at RGE Monitor, an economic research company in New York. "We are looking forward to negative oil-demand growth next year because of the economy."
Oil prices touched $53.30, the lowest since January last year. Oil has now dropped 64pc since reaching a record $147.27 on July 11.
US gasoline inventories rose 539,000 barrels to 198.6m barrels in the week ended November 14, the report showed. "The market is shooting for $50," said Dan Flynn, an energy analyst at Alaron Trading Corp. in Chicago. "Prices should continue to slide, given demand and the anticipated worsening of the economy."
Lower
Speculation that the recession will further curb demand is helping send prices lower.
US housing starts and permits for future construction both dropped to record lows in October, signs the housing downturn may extend into a fourth year. Construction starts on housing fell 4.5pc in October, less than forecast, to an annual rate of 791,000 that was the lowest since records began in 1959, the US Commerce Department said.
Brent crude oil for January settlement declined 34 cents, or 0.7 percent, to $51.50 a barrel on London's ICE Futures Europe exchange
- Pat Boyle
