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2008-12-18 11:09:57
By ALEX KENNEDY, Associated Press Writer Alex Kennedy, Associated Press Writer
1 hr 6 mins ago
SINGAPORE Oil prices hovered near 4 1/2-year lows Thursday in Asia as
persistent investor pessimism over global crude demand outweighed OPEC's
largest-ever production cut.
Light, sweet crude for January delivery edged up 26 cents to $40.32 a barrel in
electronic trading on the New York Mercantile Exchange by midafternoon in
Singapore. Earlier, it fell as low as $39.19 a level not seen since at least
July 2004.
The 13-nation Organization of Petroleum Exporting Countries, which accounts for
about 40 of global oil supply, said Wednesday it planned to reduce its output
quotas by 2.2 million barrels a day.
But markets had already expected a vastly reduced flow of oil and traders
focused instead on troubling economic data that points to a long and severe
global economic slump.
"The market apparently had already priced in this cut," said Peter McGuire,
managing director at investment firm Commodity Warrants Australia in Sydney. "I
think OPEC will have to have another meeting in January, and I wouldn't be
surprised to see possibly a 3 million cut next time."
OPEC's next official meeting is scheduled for March. The group had already
announced cuts totaling 2 million barrels earlier this year, also with little
effect. The unprecedented production cuts and the market reaction show just how
fast energy demand has fallen during the worst economic downturn in at least a
generation.
Overnight, the contract fell $3.54 to settle at $40.06 a barrel, after touching
$39.88.
Oil prices have tumbled 73 percent since July. What started as a crisis in the
U.S. sub-prime mortgage sector last year has mushroomed into a recession in
most developed countries and a sharp downturn in emerging nations.
Companies across the world are laying off workers and banks are reluctant to
lend. Plunging property values and high debt levels have led many consumers to
pull back spending.
"I'm worried about growth," McGuire said. "You have to get people spending."
Oil prices may fall as low as $35 a barrel during the next few weeks, he said.
U.S. crude inventories rose slightly last week and gasoline reserves increased
as demand stayed below year-ago levels, according to government data released
Wednesday.
Analysts had expected crude stocks to fall 900,000 barrels, according to a
survey by Platts, the energy information arm of McGraw-Hill Cos.
In other Nymex trading, gasoline futures were up 1.25 cents to $1.0180 a
gallon. Heating oil was up 2.7 cents at $1.4695 a gallon while natural gas for
January delivery fell 1 cent to $5.609 per 1,000 cubic feet.
In London, February Brent crude rose 47 cents to $46.00 a barrel on the ICE
Futures exchange.