From Deseret News archives:

Oil slips as investors mull recession

Published: Tuesday, Nov. 18, 2008 9:00 a.m. MST
 |  E-MAIL | PRINT | FONT + - 
VIENNA, Austria — Fears of a prolonged recession in developing countries and weak crude demand sent oil prices drifting below $55 a barrel Tuesday.

Bearish news included Japan becoming the latest major economy to officially enter recession, and a further downward revision from OPEC regarding oil demand.

Light, sweet crude for December delivery slipped 55 cents to $54.40 a barrel in electronic trading on the New York Mercantile Exchange by noon in Europe. The contract Monday fell $2.09 to settle at $54.95, the lowest since January 2007. Prices have fallen about 62 percent since reaching a record $147.27 in mid-July.

Stock markets, which oil investors use to gauge sentiment about the global economy, fell on mounting evidence that U.S. consumers are cutting spending as big corporations shed tens of thousands of staff.

The Dow Jones industrial average fell 2.3 percent Monday, and Asian stocks were lower across the board Tuesday. Japan's benchmark Nikkei index fell 2.3 percent, Hong Kong's Hang Seng index slid 5.1 percent and the Korea Composite Stock Price Index dropped 3.9 percent.

Story continues below
"We're hearing bad news every day," said Victor Shum, an energy analyst with consultancy Purvin & Gertz in Singapore. "The market has priced in a recession in the developed countries and a slowdown in China so the uncertainty is how long and deep this recession will be."

Citigroup Inc. said it's cutting another 53,000 jobs in the coming quarters after announcing last month it would lay off 22,000 workers. Analysts forecast Wall Street could lose up to 200,000 jobs by year-end.

Retailer Target Corp. said profit fell 24 percent in the third quarter and Lowe's Cos. predicted a fourth-quarter profit below the average analyst forecast.

"The $55 level has gotten some support," Shum said. "But downward pressure continues and we may approach $50."

The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of world crude supply, will have an informal meeting later this month, and some members are calling for another production cut on top of the 1.5 million barrels a day reduction the group announced last month.

OPEC will more likely reduce output quotas at it next official meeting on Dec. 17, Shum said.

"The cuts will not have much impact on pricing because the downward spiral has been due to recession fears and a substantial reduction in demand," Shum said. "However, the cuts will set up a price resurgence down the line when the economy finally recovers."

In a dramatic escalation of high seas crime, Somali pirates had seized a Saudi supertanker loaded with crude oil hundreds of miles (kilometers) off the coast of East Africa — defeating the security web of warships trying to protect vital shipping lanes. But the seizure, reported Monday, had little effect on prices.

"At present everybody is thinking about the overall economy" and not the hijacking, said Ehsan Ul-Haq, chief analyst at JBC Energy in Vienna. But further seizures "could become a big problem," affecting prices, he said.

In other Nymex trading, gasoline futures fell by nearly 2 cents to $1.16 a gallon. Heating oil slipped by more than 2 pennies to $1.76 a gallon while natural gas for December delivery was flat at $6.53 per 1,000 cubic feet.

In London, December Brent crude dropped 33 cents to $51.98 on the ICE Futures exchange.

Recent comments

You Utah folks need to know you're still being ripped off. Why are...

Utah, come on | Nov. 18, 2008 at 11:06 a.m.

Problem is, you can't be selective about which prices fall and which...

Earl | Nov. 18, 2008 at 10:55 a.m.

Let it fall baby, Let it fall!!!!!

Buck Beaver | Nov. 18, 2008 at 9:35 a.m.

previousnext

Latest comments

Time for big matchups in WAC, MWC

If you are going back 8 years then the record is the Utes winning five out of...

Bronco, Kyle rubber match

It's people like you that give BYU a bad name. Do you realize that BYU is...

I love the very first comment on this article: "They are gonna lose and...

Letters: Scrap Utah's flat tax

Think about it | 11:40 a.m. Nov. 23, 2009 What tax is considered to be...

I'm amazed that you lefties can say that Palin is unqualified. How about the...

Fitting that these two are players of the week...they'll hook up numerous...

Bronco, Kyle rubber match

If I were a BYU fan I would be "really" hoping for a win this year...

Hall, Johnson matchup key

Boise State, especially Kellen Moore, is so overrated it's ridiculous. Top...

you be MVP if you didn't play the whole season?

A little bird told me the parade will be on Tuesday the 24th (tomorrow) at...

Advertisements