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Oil prices fall to US$49 a barrel, three-year low

An oil worker is reflected as he checks a pipe into a waste oil pit on Thursday in the Persian Gulf desert oil fields of Sakhir, Bahrain. Oil prices plunged more than US$3 a barrel on Thursday, dipping below US$50 a barrel. PHOTO: AP

Oil prices fell to a three-year low below US$49 a barrel yesterday in Asia as plunging stock markets, driven down by more bad US economic news, battered investor confidence.

Light, sweet crude for January delivery was down US$0.95 to US$48.47 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore.

The December contract, which expired on Thursday, fell overnight by US$4.00 to settle at US$49.62 after sliding to US$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 US$150 a barrel in mid-July.

The Dow Jones industrial average fell 5.6 percent on 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 on Thursday to an 11-year low.

The S&P 500 has dropped more than 52 percent below its record from last October, 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 US counterparts down yesterday, 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.

“US$50 [per barrel of oil] 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.”

OPEC, 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 signalled 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 US$0.01 to US$0.997 a gallon. Heating oil gained US$0.0214 to US$1.65 a gallon while natural gas for delivery next month slid US$0.038 to US$6.28 per 1,000 cubic feet (28.3m3).
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