[R-G] Oil falls below $53 on fears of deep recession

Thu Nov 20 11:18:44 MST 2008

Oil falls below $53 on fears of deep recession
November 20, 2008 - 12:35am
http://www.wtop.com/?nid=105&sid=1522135
By ALEX KENNEDY
Associated Press Writer

SINGAPORE (AP) - Oil prices fell below $53 to almost a two-year low  
Thursday in Asia as investors, egged on by plummeting stock markets,  
priced in lower crude demand from a global economic downturn that's  
shaping up as the worst in decades.

Light, sweet crude for December delivery was down 81 cents to $52.81 a  
barrel in electronic trading on the New York Mercantile Exchange by  
midday in Singapore. The contract Wednesday fell 77 cents to settle at  
$53.62, the lowest since January 2007.

"People are saying this slowdown could be the worst since the Great  
Depression," said Toby Hassall, an analyst with Commodity Warrants  
Australia in Sydney. "There's definitely fear out there that it's  
going to be pretty severe."

Concerns that Congress may not approve a $25 billion rescue package  
for ailing U.S. carmakers General Motors Corp., Ford Motor Co., and  
Chrysler LLC helped drag the Dow Jones industrial average down 5.1  
percent Wednesday to its lowest level since March 2003.

Asian stocks opened down Thursday with Japan's benchmark Nikkei index  
falling 4.7 percent, Hong Kong's Hang Seng index off 5.1 percent and  
the Korea Composite Stock Price Index sliding 5.4 percent

"The stock markets are representing investor pessimism regarding the  
economic outlook and what we have in store over the next year,"  
Hassall said. "I think we're going to see oil test $50 sooner rather  
than later."

On Wednesday, the U.S. Department of Transportation provided more  
evidence that the slowdown continues to hurt gasoline consumption,  
even as prices fall. Americans drove almost 11 billion fewer miles in  
September, the department said.

A production cut by OPEC may keep prices from falling further. The  
Organization of Petroleum Exporting Countries is holding an informal  
meeting later this month ahead of an official meeting in December.  
OPEC President Chakib Khelil has signaled the group may announce  
production cuts at the December meeting, but some members, such as  
Iran, have called for earlier cuts.

"It's gonna take a pretty big supply side response from OPEC at their  
next meeting to provide some support," Hassall said. "The focus of the  
market is definitely on the demand side."

Investors have been brushing off news that earlier in the year would  
have sent prices higher. Chevron Corp. invoked "force majeure" Tuesday  
on 90,000 barrels a day of Nigerian production after a pipeline was  
breached by militants in the Niger Delta. Earlier this week, Somali  
pirates hijacked a Saudi supertanker carrying $100 million in crude.

In other Nymex trading, gasoline futures fell 1.35 cents to $1.09 a  
gallon. Heating oil gained 0.28 cent to $1.76 a gallon while natural  
gas for December delivery was steady at $6.74 per 1,000 cubic feet.

In London, December Brent crude fell 72 cents to $51.00 on the ICE  
Futures exchange.