Oil plunged to its lowest price of the year Monday on concerns about the slowing global economy and future demand for oil and gas.
Benchmark West Texas Intermediate crude fell $3.30, or 3.8 percent to $83.58 per barrel in afternoon trading on the New York Mercantile Exchange. Earlier it dropped as low as $82.52. That is the lowest price of the year for crude, but it's still higher than the $71.63 per barrel low of the past 12 months. Oil hit that on Aug. 24 of last year.
Brent crude, used to price many international varieties of crude, fell $3.12 to $106.25 per barrel on the ICE Futures exchange.
Anxious traders pulled money out of oil and stocks and bought assets considered to be safer during times of economic uncertainty, such as Treasurys and gold. Gold topped $1,700 an ounce for the first time.
Standard & Poor's on Friday cut the Triple-A credit rating for long-term U.S. government debt. Monday's trading session was the first chance traders and investors had to react, and many of them sold off.
In the past two weeks, oil prices have dropped nearly $16 per barrel. Analysts think oil remain volatile this week as traders look for some clarity about the direction of the world economy and demand for oil. The Department of Energy is scheduled to release its Short-term Energy Outlook on Tuesday, and OPEC is expected to issue an updated forecast for global oil consumption as well.
Traders also are concerned about debt problems in Europe, where the European Central Bank said it will intervene to prop up the sagging economies of Spain and Italy.
Some analysts believe that global oil demand, particularly in emerging markets like China, will continue to support prices. The share of global oil demand in emerging markets has risen from 44 percent in 2008 to 48 percent this year, Barclays Capital said in a report for clients. China's share of global oil demand has increased more than 2 percent in the same period.
Goldman Sachs analysts also believe oil prices will rise next year. They told clients in a note published Friday that the risk of a U.S. recession has risen, but their revised U.S. economic outlook remains consistent with a recovery at a slower pace, "which is typical following a housing bust."
In addition Goldman said the outlook for economic growth in China and other emerging markets is positive.
Gasoline futures have fallen between 35 cents and 40 cents in the last two weeks. That will translate into a savings at the pump of about $140 million to $160 million a day for motorists, according to Cameron Hanover energy consultancy.
The national average price for retail gas was $3.663 a gallon Monday, according to AAA, Wright Express and the Oil Price Information Service. That's down 4.2 cents in the past week but still 88.7 cents more than a year ago.
Pump prices should fall further, but the drop isn't likely to prompt consumers to spend more money on fuel because of worries about where the economy may be headed, according to OPIS chief oil analyst Tom Kloza.
"People can argue whether or not we're going to see a recession in the next year. I don't think people can argue that we are in a slog," he said.
In other Nymex trading for September contracts, heating oil fell 7 cents to $2.8731 per gallon, gasoline futures dropped 6 cents to $2.7489 per gallon and natural gas rose 2 cents to $3.957 per 1,000 cubic feet.