Oil falls below $50

Oil skidded to $48 a barrel on Thursday, losing ground for the fifth successive day as fallout from the world financial and economic crises continued to weigh on fuel demand. In electronic trading on the New York Mercantile Exchange (Nymex), crude oil for January delivery dipped below $52 a barrel, touching $51.97, while the Brent crude near-month contract fell to $50.30 on London's ICE Futures Exchange. The basket price for Opec crudes stood at $45.89 a barrel on Wednesday, down from $46.55 the previous day. On the Dubai Futures Exchange yesterday, the January Oman crude futures contract closed at $44.85, the first time it has settled below $45 a barrel since the contract was launched in June last year. Today's slide in oil prices to the lowest levels seen in nearly two years follows the release of US data showing that the country's crude inventories rose by 1.6 million barrels last week to 313.5 million barrels, due to declining fuel demand in the world's biggest energy consuming economy. The increase was about twice what analysts had forecast. Petrol stocks climbed 539,000 barrels to 198.6 million barrels. US fuel demand fell 5.2 per cent in the first 10 months of this year in the biggest drop since 1981, the American Petroleum Institute reported. Investors have fled securities and commodities markets as worsening economic turmoil has lifted the allure of cash. Stocks declined worldwide after the Dow Jones Industrial Average dropped to a five-year low on Wednesday, with prices for most commodities following suit. Oil has dropped 65 per cent from its July peak of $147.27 a barrel. On London's European Climate Exchange yesterday, EU carbon dioxide emission permits followed crude's decline, falling for the fifth consecutive day as the weakened economic outlook reduced the likelihood of power plants and industrial installations exceeding their existing emissions allowances for the greenhouse gas. EU allowances for December fell nearly 4 per cent to ?15.69 (Dh71.96) per tonne, their lowest level since April last year. In the latest evidence that the global economy is worsening, Japanese exports last month showed their biggest monthly drop in the past seven years. The world's biggest oil importer fell into a recession during the third quarter. In further gloomy economic news, the US Federal Reserve forecast a US recession, predicting the economy would contract in the first half of next year. However, some analysts are predicting that oil prices will rebound within the next few months. Prices may rise to $70 a barrel early next year as Opec production cuts take effect, said Michael Lynch, the president of Strategic Energy and Economic Research, a US consulting firm. Opec, which supplies about 40 per cent of the world's crude oil, said at an Oct 24 emergency meeting in Vienna that it would cut output by 1.5 million barrels per day (bpd). The group is due to meet informally in Cairo on Nov 29 and will hold a regularly scheduled meeting in Oran, Algeria, on Dec 17. Mr Lynch said a decision by Opec to cut production by at least another 1 million bpd would help to reverse the steep oil price decline. He said he did not expect a significant recovery in US fuel demand until next year's third quarter. tcarlisle@thenational.ae