RTRS: Oil falls below $39, heads for worst year ever
Oil slid below $39 a barrel on Wednesday, closing out its worst year ever after falling 60 percent, with a rapid reversal in the economic outlook having brought it crashing back from a mid-year record high.
Fresh sets of dismal data from the United States on Tuesday added pessimism that oil demand in 2009 will suffer further, countering any support from Middle East tensions and hopes for another Saudi output cut.
Analysts forecast an average of $49.00 a barrel for U.S. crude in the first quarter, and an average of $58.48 for next year, down $14.00 from their previous forecasts, the latest Reuters poll showed.
By 5:21 a.m., U.S. crude fell 74 cents to $38.29 a barrel, while London Brent dropped 59 cents to $39.56, after sliding more than $1.00 earlier.
"Basically, the situation globally is much worse than expected. It's all very pessimistic numbers," said Tetsu Emori, a fund manager at Astmax Co Ltd in Japan.
The United States saw its worst job market in 16 years hammer consumer confidence to a record low in December, the shopping season was the worst since at least 1970, and prices of U.S. single-family homes in October fell a record 18 percent from a year earlier.
"I'm pessimistic about next year. I think recovery will be seen later in 2010 or early 2011," Emori said.
WANING OIL USE
U.S. retail gasoline demand for the week ending December 26 dropped 3.8 percent from the same week a year ago, as drivers tightened their belts over Christmas, a MasterCard survey showed.
Weekly U.S. inventory data due later in the day will give more clues on the impact on oil use.
A poll of analysts forecast that U.S. crude stocks fell by 1.5 million barrels last week, while distillate inventories rose by 1.1 million barrels and gasoline increased by 1.5 million barrels.
Support for oil prices from the Israel-Hamas conflict waned, even as the Palestinian death toll continued to mount. Foreign powers have stepped up calls on the two warring parties for an immediate ceasefire.
Oil prices jumped as much as 12 percent on Monday, after Israel launched its fiercest air offensive in Hamas-ruled Gaza in decades, seeking to halt rocket attacks by Hamas.
Top OPEC exporter Saudi Arabia is set to cut oil supplies further in February, market sources said on Tuesday, potentially taking output below its agreed OPEC target.
With oil coming off more than $100 from a record peak above $147 a barrel in July, the Organization of the Petroleum Exporting Countries has announced its biggest-ever production cut of 2.2 million barrels per day to fight the price slide.
