Singapore: Oil prices fell further Friday on worries that a flagging US economy would weigh on crude demand.
Concerns about the economy were stoked by a US Commerce Department report Thursday that construction of new homes fell nearly a quarter in 2007, the largest drop in 27 years. Also, a Philadelphia Federal Reserve survey of regional manufacturing activity registered a negative 20.9 from a revised reading of negative 1.6 in December, coming in well short of expectations.
The data added to the negative economic sentiment that has been the market’s dominant driver in recent days, pushing prices down more than $10 from their record over $100 a barrel two weeks ago.
“It’s one piece of bad news after another,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. “The worries about the US economic slowdown, and of oil demand slowing down in the US and other parts of the world, continue to weigh on the market.”
The White House and Congress moved toward a rescue of the US economy Thursday through steps that would include tax rebates. Federal Reserve Chairman Ben Bernanke endorsed the idea of putting money into the hands of those who would spend it quickly and boost the flagging economy. He said he expects slower economic growth in 2008, but no recession.
“The good news, if you can call it that, is that the US Federal Reserve recognizes the weaker economic outlook, and it looks like actions will be taken both by the Bush administration and the Fed to help bolster the economy,” Shum said.
Light, sweet crude for February delivery dropped 41 cents to $89.72 a barrel in Asian electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract fell 71 cents to settle at $90.13 on Thursday.
Meanwhile, the American Petroleum Institute, a trade group for oil and gas producers, said high prices cut demand for gasoline and oil in the fourth quarter. On Wednesday, the International Energy Agency cut growth predictions for world oil demand this year to 2.3% from a previous estimate of 2.5%.
Shum said that regardless of the health of the US economy, the oil market would soon be heading into a period of softer demand.
“No matter how the US economy turns out in the next few months, the global oil market will see softer demand when we go into February because peak winter demand would have passed and demand is typically weaker in the spring,” Shum said.
Heating oil prices lost 0.55 cent to $2.498 a gallon while gasoline prices dropped 0.28 cent to $2.264 a gallon.
Natural gas futures added 3 cents to $8.111 per 1,000 cubic feet.
In London, March Brent crude lost 10 cents to $88.65 a barrel on the ICE Futures exchange.