Oil falls to 3-year low below $49 in Asia

Oil falls to 3-year low below $49 in Asia
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First Published: Fri, Nov 21 2008. 09 34 AM IST
Updated: Fri, Nov 21 2008. 09 34 AM IST
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 18 May, 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% 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% Thursday to an 11-year low. The S&P 500 has dropped more than 52% below its October 2007 record, making this the second-biggest bear market on record, exceeded only by the 83% 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%, Hong Kong’s Hang Seng index was down 1.4%. South Korea’s key index was up 0.4%.
“$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% of global supply, may cut production before its next official meeting on 17 December, 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.
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First Published: Fri, Nov 21 2008. 09 34 AM IST