Oil Prices Sink On Bleak U.S. Economy News

Barrel Of Crude Nears $35 Amid Steady Stream Of Dismal Data

(CBS/AP)  Crude prices tumbled Wednesday following a raft of bad economic news and growing stockpiles of unused gasoline that suggested demand for energy has continued to erode.

Light, sweet crude for February delivery fell $3.63 to settle at $35.35 a barrel 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.

Investors expecting more evidence of slowing U.S. 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," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates. "Things are going to remain under downside pressure through the balance of this year and probably into the new year."

A steady stream of dismal U.S. 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 Wednesday 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 U.S. 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.

"Until we see an economic stimulus plan that gives us confidence, it's gonna be hard to see our way out of the current downturn," economist Mary Kay Plantes told CBS News Radio.

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 Dec. 19 crude inventories fell by 3.1 million barrels, or 1 percent, to 318.2 million barrels, which is 9.1 percent 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.

Demand for gasoline over the four weeks ended Dec. 19 was 2.7 percent lower than a year earlier, averaging nearly 9 million barrels a day.

In a separate weekly report, the EIA said natural gas storage levels in the U.S. tumbled last week but remain 3.4 percent above the five-year average for this time of year. The EIA said natural gas inventories held in underground storage in the lower 48 states slipped by 147 billion cubic feet to about 3.02 trillion cubic feet. Analysts had expected a drop of between 142 billion and 147 billion cubic feet.

Oil traders so far have brushed off attempts by OPEC to boost prices through production cuts. The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global supply, said last week it would slash production by 2.2 million barrels a day, its largest single cutback ever. The most recent round of cuts would reduce OPEC production by more than 2 million barrels per day.

OPEC may meet in Kuwait City on Jan. 19 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.

On Wednesday, February Brent crude slumped $3.75 to settle at $36.61 a barrel on the ICE Futures exchange.

In other Nymex trading, gasoline futures tumbled by 6.3 cents to settle at 79.27 cents a gallon. Heating oil plunged 12.8 cents to settle at $1.1983 a gallon while natural gas for January rose 17.3 cents to settle at $5.91 per 1,000 cubic feet.

[fiberglass3]

Some woman on TV claims that we have enough here in this country for 60 years. Surprised? Not really !

Add Canada, Mexico and Russia to that and also add electric transportation, and the fact that all of us have learnd to drive far less ......

I''m surprised that OPEC doesn''t want our business.

[whitemale08]

The Bush/Hannity/Limbaugh-Depression rolls on.

But don''t think these oil prices are here to stay.

Oil tankers are leaving their oil stored on ship offshore until the price goes back up.

That was the same thing ADM would do to Africa by keeping the grain off coast stored in cargo ships until they could affored it.

ADM killed alot of black Africans back in the 80''s with this method sparking celebrities to sing at the Live Aid Concert.

A monetary-system,especially one designed by British idiots like Maynard Keynes and John Locke doesn''t give a d*mn whether you can ''afford'' to eat.

If you can''t then just die for the sake of the economy.

Now it''s our turn to be treated the same way as the neo-liberal monetary-system will cause shortages in everything we need to survive as a civizilation.

I hope you Keynesiasts and globalists are happy!

[shanev137]

Posted by vsg4 at 02:16 PM : Dec 24, 2008


True. There are all kinds of new reports coming out now showing that global demand for oil started falling off a cliff way before oil hit $150 a barrel. More proof that it was just another huge money grab for the wealthy before the credit markets caved in and the recession hit.

[noloyalisti]

This is what Bushoccio and his Republican Crime Family meant when they said Mission Accomplished. Destroy union labor and the middle class. Then the fascist takeover can be complete.

[vsg4]

The part reason for price drop of crude oil is less money from Hedge funds & investment companies at the peak of $147 per barrel rate they were manipulating with 300 billions in crude oil features market and practically no regulations) into it as they are going bankrupt now.

[lochlan-2009]

I guess we all just got the message, this July, and cut our driving and energy consumption, these last few months, by 75%. Or, there was massive fraud in the "free" markets and we''re still not hearing who got all the cash. Great job, main stream propaganda media. Keep up the good work NOT telling us how the organized crime ring, our government, are *** every single hard working Ameican across the country. And the head of Fox news now owns the wall street journal. Is government going to stop controlled and manipulative media.

What does it mean to call yourself an American these days?

[credibility2]

Given the price of crude, the price at the pump is still too high and comparable to a crude price per barrel of around $100. The gas companies will continue to rip us off and not lower the pump price accordingly. I stopped at a Mobil station yesterday and every one of their pumps mysteriously only had premium grade available, which of course was nearly $2/gal. It''s interesting that the gas companies have played with our minds so much that we actually think gas at $1.75 is cheap.

[zzy-izzy]

What a nice thing to happen

[antoniof123]

Yee haa, welcome to the Great Depression!!!!!

[davidrbr]

A soviet style economic meltdown in 2009? Gov''t closed, police not paid, corruption everywhere, oh wait that is America.