Oil Prices Fall Further, Close at $35.35

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Light Sweet Crude Oil Futures,Feb-2009,RTH Intraday Chart
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Light Sweet Crude Oil Futures,Feb-2009,RTH Intraday  Chart
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NYMEX:CLG09 (Light Sweet Crude Oil Futures,Feb-2009,RTH)
     
Light Sweet Crude Oil Futures,Feb-2009,RTH Historical   Chart
 

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Oil Prices Fall Further, Close at $35.35

12.25.2008

 

 

Crude prices tumbled further yesterday following a raft of bad economic news and growing stockpiles of unused gasoline that suggested demand for energy has continued to erode.
Despite last week’s decision by the Organisation of Petroleum Exporting Countries (OPEC) to cut daily crude oil production by 2.2 million barrels, oil prices  had fallen  to $39 on Tuesday.
The price of the commodity depreciated further by $3.63 to settle at $35.35 yesterday with Light, sweet crude for February delivery settling at $35.35 in a shortened day of trading. Prices fell as low as $35.13 just before the market closed for the holiday. It was the ninth straight day that crude has fallen.
February Brent crude slumped $3.75 to settle at $36.61 a barrel on the ICE Futures exchange.
Investors expecting more evidence of slowing United States energy demand got a bit of a surprise as the Energy Department reported crude inventories dropped last week.
But Americans continue to cut back on driving amid the worst recession in a generation, leading to growing stockpiles of gasoline and eroding demand for motor fuel.
Gasoline futures plummeted below 80 cents a gallon.
“I don’t see anything out of this report that’s really going to change this downward move. Things are going to remain under downside pressure through the balance of this year and probably into the new year,” said Jim Ritterbusch, President of energy consultancy Ritterbusch and Associates.
A steady stream of dismal US economic and corporate data during the past few months has hammered investor confidence and sent oil prices reeling 74 percent since July.
More bad news emerged yesterday with consumer spending falling for a fifth straight month in November, the longest weak stretch in a half century, while incomes declined under the weight of massive job layoffs.
Separately, new claims for unemployment benefits rose more than expected last week, as layoffs spread throughout the economy, more evidence the labor market is weakening as the recession deepens. The Labor Department reported initial requests for jobless benefits rose to a seasonally adjusted 586,000 in the week ending Dec. 20, from an upwardly revised figure of 556,000 the previous week. That’s much more than the 560,000 economists had expected.
Manufacturers are slashing energy use as well. Orders at U.S. factories for big-ticket manufactured goods fell again in November, reflecting further setbacks in the battered auto industry and a big drop in demand for commercial aircraft.
For the week ended December 19 crude inventories fell by 3.1 million barrels, or one per cent to 318.2 million barrels, which is 9.1 per cent above year-ago levels, the Energy Department’s Energy Information Administration said in its weekly report.
Analysts had expected a boost of 1.5 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.
Gasoline inventories rose by 3.3 million barrels, or 1.6 percent, to 207.3 million barrels, which is 2.4 percent below year-ago levels. Analysts expected stockpiles of the motor fuel to rise by 900,000 barrels.
OPEC may meet in Kuwait City on January 19, 2009 to discuss further production cuts. The group’s next official meeting is March 15 in Vienna.
The fall of benchmark crude on the Nymex has been paralleled by steep declines in Brent futures traded on London’s ICE exchange.
Trader and analyst Stephen Schork noted that Brent crude has dropped “in 79 of the last 123 sessions by a total of $108.05 a barrel” – a 73 percentage point loss.

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