BLBG: Oil Falls Toward $50 a Barrel as Fuel Use Falls, Equities Slump
By Christian Schmollinger and Grant Smith
Nov. 20 (Bloomberg) -- Crude oil fell for a fifth day, approaching $50 a barrel, as the weakening world economy increased concerns that demand for fuels will slow.
U.S. fuel use during the past four weeks averaged 19.1 million barrels a day, down 7 percent from a year ago, an Energy Department report said yesterday. Stocks declined worldwide after the Dow Jones Industrial Average dropped to a five-year low yesterday.
“We have a good chance to make another leg down to the downside,” said Gerrit Zambo, an oil trader at BayernLB in Munich. “Fifty is a critical point, and if this is broken we could see Brent going down to $40.”
Crude oil for December delivery fell as much as $1.67, or 3.1 percent, to $51.95 a barrel on the New York Mercantile Exchange. It was at $52.16 a barrel at 12:45 p.m. London time. That’s the lowest since Jan. 22, 2007.
Brent crude oil for January settlement fell as much as $1.42, or 2.8 percent, to $50.30 a barrel on London’s ICE Futures Europe exchange. That’s the lowest since May 31, 2005. It was at $50.54 a barrel at 12:46 p.m. London time.
“U.S. demand has really been collapsing and dragging the OECD demand as well,” said Antoine Halff, head of energy research at Newedge USA LLC in New York, in an interview with Bloomberg Television. “We might end up with a contraction in global demand growth for the year.”
Bernstein Forecast
Oil has dropped 64 percent since reaching a record $147.27 a barrel on July 11. Yesterday, December futures fell 77 cents, or 1.4 percent, to $53.62 a barrel, the lowest settlement since Jan. 22, 2007.
The more active January futures contract was down 78 cents, or 1.4 percent, at $53.32 a barrel. December futures expire at the close of trading today.
Sanford Bernstein & Co. said in a report today it expects global oil demand to contract by 600,000 barrels a day next year, and by 260,000 barrels a day this year. JP Morgan Chase & Co., Vitol Group, and the Centre for Global Energy Studies have already said they expect 2009 consumption to be lower.
Goldman Sachs Group Inc. cut its 2009 forecast to $86 a barrel from $80 in a report dated yesterday, adding that it was closing all its trading recommendations for oil.
Japan Exports
In the latest evidence that the global recession is deepening, exports from Japan dropped at the fastest pace in almost seven years in October. Japan, the world’s largest oil importer, fell into a recession last quarter.
The MSCI World Index lost 2.2 percent to 803.37, the lowest since April 2003, as of 10:33 a.m. in London.
Oil prices also fell as U.S. crude inventories climbed because of declining demand for fuels.
Crude-oil supplies rose 1.6 million barrels to 313.5 million barrels last week, the Energy Department said yesterday. Stockpiles were forecast to rise 1 million barrels, according to a Bloomberg News survey of analysts.
Gasoline inventories rose 539,000 barrels to 198.6 million barrels in the week ended Nov. 14, the report showed. Analysts surveyed by Bloomberg News were split over whether supplies of the motor fuel increased or declined.
U.S. fuel demand fell 5.2 percent in the first 10 months of this year, the biggest drop since 1981, the American Petroleum Institute said in a report yesterday.
To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.
