MW: Oil falls as economic troubles fuel demand worries
Oil futures fell Thursday, tumbling more than 5% to below $36 a barrel, as worries that the economic downturn will dampen energy demand continued.
Meanwhile, natural gas dropped after a government report showed a less-than-expected decline in U.S. inventories last week.
Oil demand will fall for a second year in 2009, the Organization of Petroleum Exporting Countries forecast Thursday. First-time applications for unemployment in the U.S., the world's largest oil consumer, rose 54,000 last week, the Labor Department reported.
Crude for February delivery was last down $2, or 5.4%, to $35.28 a barrel on the New York Mercantile Exchange. It tumbled as much as 6% Wednesday after government data showed U.S. heating-oil inventories rose more than expected.
"People without jobs are turning down their thermostat," said James Williams, an economist at energy research firm WTRG Economics. "They will drive less and they didn't buy as much from retailers, and then shipments of goods by truck is down and with it diesel consumption."
Global oil consumption is expected to fall 200,000 barrels a day this year, OPEC said. Consumption declined 100,000 last year, the first year of negative growth since 1983, the cartel, which controls about a third of the world's oil production, said in its monthly report.
"The huge decline" in the Organization for Economic Cooperation and Development, particularly in the U.S., "is expected to offset weaker growth in non-OECD" countries, OPEC said in the report.
In the U.S., first time applications for state unemployment benefits reached seasonally adjusted 524,000 in the week ended Jan. 10, the Labor Department reported. The four-week average of new claims fell 8,000 to 518,500 -- a level that is 55% higher than the average during the same period in the prior year. Read more on jobless claims.
Troubles in the U.S. economy have led to declines in energy demand and a sharp increase in petroleum inventories.
Distillate fuel inventories, including heating oil and diesel, jumped 6.4 million barrels in the week ended Jan. 9, the Energy Information Administration reported Wednesday. Analysts surveyed by energy information provider Platts had expected a gain of 1.7 million barrels.
The sharp increase in distillate inventories surprised analysts.
"January is a time period when high demand for winter fuels typically results in a pull on inventories," said Linda Rafield, senior analyst at Platts.
Meanwhile, the EIA reported crude inventories at Cushing, Okla., the delivery point for crude futures traded on the New York Mercantile Exchange, rose 2.5% to 33 million barrels, up 20% in four weeks.
Also helping oil move lower Thursday, the U.S. dollar rose against the euro after the European Central Bank cut its benchmark lending rate by half of a percentage point to 2%. See full story.
A stronger greenback tends to put downward pressures on dollar-denominated commodities prices.
Natural gas
In other energy trading, February natural-gas futures fell 3.9% to $4.775 per million British thermal units.
U.S. natural-gas inventories fell 94 billion cubic feet in the week ended Jan. 9, the EIA reported Thursday. Analysts surveyed by Platts had expected a decline between 101 billion cubic feet and 106 billion cubic feet.
At 2,736 billion cubic feet, stocks were 28 billion cubic feet higher than last year at this time and 81 billion cubic feet above the five-year average, the EIA reported.
Also on the Nymex, February reformulated gasoline sank 3.2% to $1.1307 a gallon and February heating oil fell 1.1% to $1.447 a gallon.
