Oil Falls To Lowest Price Since 2005

SINGAPORE — Oil prices fell to a 3-year low below $49 a barrel Friday in Asia as plunging stock markets, driven down by more bad U.S. economic news, battered investor confidence.

Light, sweet crude for January delivery was down 95 cents to $48.47 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.

The December contract, which expired Thursday, fell overnight by $4.00 to settle at $49.62 after sliding to $48.50, the lowest level since May 18, 2005.

"Sentiment is totally bearish, parallel to the stock market," said Gerard Rigby, an energy analyst at Fuel First Consulting in Sydney. "Everyone is just doom and gloom and not seeing any light on the horizon for the next 12 months."

Traders are worried that a global recession will undermine energy demand. Already, oil prices have tumbled by two-thirds from their peak of nearly $150 a barrel in mid-July.

The Dow Jones industrial average fell 5.6 percent Thursday to its lowest level since March 2003 after the Labor Department said new applications for jobless benefits exceeded analyst estimates and rose to the highest level of claims since July 1992.

The S&P 500 index fell 6.7 percent Thursday to an 11-year low. The S&P 500 has dropped more than 52 percent below its October 2007 record, making this the second-biggest bear market on record, exceeded only by the 83 percent drop between 1930 and 1932.

Asian stock markets followed their U.S. counterparts down Friday, but they pared losses as trading progressed. Japan's benchmark Nikkei index was down 1.2 percent, Hong Kong's Hang Seng index was down 1.4 percent. South Korea's key index was up 0.4 percent.

"$50 was a psychological support level," Rigby said. "Since we haven't traded this low for so long, it's hard to find a new support level."

The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global supply, may cut production before its next official meeting on Dec. 17, Rigby said. OPEC President Chakib Khelil has signaled the group may announce output reductions at the meeting, but some members, such as Iran, have called for earlier cuts.

OPEC lowered production quotas by 1.5 million barrels a day last month.

"Their revenues are dropping so much, I think OPEC will have to call an extraordinary meeting and cut quotas to try to support the market," Rigby said. "Their last cut had zero impact on the market."

In other Nymex trading, gasoline futures fell 1.0 cent to 99.7 cents a gallon. Heating oil gained 2.14 cents to $1.65 a gallon while natural gas for December delivery slid 3.8 cents to $6.28 per 1,000 cubic feet.

In London, December Brent crude fell 68 cents to $47.40 on the ICE Futures exchange.

Comments

[vjthedj]

You know, with oil price declining. I am beginning to suspect, that it will be only temporary, until all the gas guzzlers cars are sold. That way the big three-domestic auto industry will be given enough time to switch to new fuel efficient and hybrid cars, by then, the oil will probably climb back up to over 100 dollars a barrel.

[linton]

Exxon and Co. have milked us for a while, let's see how much profit they make. Also, the speculators should be put out of business. The petroleum situation looks exactly like the mortgage/housing problem. Anything that goes up must come down. It's funny, I buy 4 or 5 gallons each time I stop by the gas station because the price drops everyday. I wish I could store some for a while but then I can't.

[schoolmaster]

Even though the crude price fell more than half, the price of gas at the gas station has not dropped proportionately.

[mjt218]

That's because the taxes, refining costs, and distribution costs have not dropped by half.

[RightWingMarine]

So many people were upset over obscene profits that oil companies were recording. Is this level less obscene? Since there was so much talk about a windfall profits tax (whatever that is) if the profits oil companies have this quarter are less than permissable amount (or if there should even be a loss) will the same people fight for a windfall losses protection for the oil companies?

[mjt218]

Maybe we can roll the oil companies into the bail-out plan just like Wall Street and Detroit? I think the Petrochemical Industry would qualify as "too big to fail."

Lower profits next year may save them from the windfall guillotine.

[linton]

Let's hope they put their past profits to good use and that they don't ask for a bail out. As far as windfall profit taxes, I doubt they will have to pay any since they did not make any.
Believe it or not some realty companies are defaulting on rent etc because business is so slow.

[Giftedd]

HELP THEY ARE RIPPING US OFF IN NAVY BASE YOKOSUKA, JAPAN. GAS=$4.06 gallon
Could anyone come to the rescue of the military people in Naval Base Yokosuka, Japan. The Gas prices are still at $4.06 since it hit that mark in July. The Navy Exchange which operates the lone gas station tseems to have no answers why this rip off is still going on. And the Commanding Officer seems to have no clue why this should be going on. Please spread this message around and help us find out who is benefitting from this. Transactions on the base are operated in synch with U.S standards. Why are we being ripped off. Please send a message to the Commanding Officer of this base and find out who gains from this: http://www.cfay.navy.mil/

[CR46]

I think the people of Alaska are going to get a real small check in 2009!! LOL!!! But no, there should be no extra taxes on oil. Hasn't big oil been telling us it's supply and demand economics? I guess the demand is down and Exxon will earn a few less billion per quarter.

[drec1500Madrid]

Raise the gas tax, institute a petroleum tax....do it now!

[dukeitout]

The DJIA fell to it's lowest level since 2003. In 2003 the price of oil was about $30/barrel which is where it's probably headed in 2008/2009. This is good news at the pumps.

[PhilipTaylor]

Illegal Leveraging at $30 to $1 and higher drove up the price to $147 per barrel. Then at the end of June it the peak of the driving season Congress began an investigation and the illegal trades STOPPED! In one month Crude Oil dropped 23% and now is down almost $100 per barrel at $48.50.

People made $Trillions off Americans and the rest of the world and it will soon unwind more. Gas could reach $1.25 a gallon or lower. We should place a tax on CRUDE OIL of $15 per barrel to finance the GREEN JOBS in our future! Oil will likely drop more than that amount in the near future. It also encourages people to by high gas efficiency cars!

[KillTheMessenger]

There is tons more supply than demand for oil now than there was before. The US consumes almost 10% less, which is far more demand destruction than anybody had forecast. But if people draw the wrong conclusion from this temporary relief, we will see high oil prices again next year. Right now would be exactly the right time to raise the gas tax. The higher we raise it, the lower the price of oil will go and the sooner we will reduce our imports substantially. I am afraid that in the current political climate raising the gas tax is close to impossible, but we need to have an honest discussion about this.

[mjt218]

Unfortunately, the honest discussion probably ends before it begins . . . "I am afraid that in the current political climate raising the gas tax is close to impossible"