Reuters logo
Oil down $1 on grim economic outlook
December 30, 2008 / 2:14 AM / 9 years ago

Oil down $1 on grim economic outlook

NEW YORK (Reuters) - Oil prices fell $1 on Tuesday as fear about demand in a sickly world economy outweighed expectations of further Saudi supply cuts in February and tension in the Middle East due to the Israeli-Hamas conflict.

<p>A woman fills petrol into her car at a filling station in Puchheim westward of Munich in this December 12, 2008 file photo. REUTERS/Michaela Rehle</p>

The market took in data showing a sharp fall in weekly U.S. retail gasoline demand, and record low consumer confidence in the world’s largest energy user in December.

U.S. crude settled down 99 cents at $39.03 a barrel. London Brent settled down 40 cents at $40.15.

“Concerns over the state of the global economy eclipses fears that the conflict between Israel and Hamas will inflame tensions in the Middle East,” Addison Armstrong, analyst at Tradition Energy, wrote in a note.

Oil prices had jumped as much as 12 percent on Monday after Israel launched its fiercest air offensive in Hamas-ruled Gaza in decades.

U.S. retail gasoline demand for the week ending December 26 dropped 3.8 percent from the same week a year ago as consumers tightened their belts over Christmas, according to a MasterCard Spending Pulse report.

U.S. consumer confidence fell to a record low in December as the worst job market in 16 years hammered sentiment, the U.S. Conference Board said on Tuesday.

The U.S. shopping season was the worst since at least 1970 due to the recession, according to the ICSC-Goldman Sachs Weekly Chain Store Sales index, released Tuesday.

Prices of U.S. single-family homes in October fell a record 18 percent from a year earlier, according to the Standard & Poor‘s/Case-Shiller Home Price Indices released Tuesday, a further indication of deep recession.

“This market is driven by expectations. With home prices plunging and consumer sentiment plunging, the outlook for energy demand and prices can only reflect that,” said John Kilduff, senior vice president at MF Global in New York.

South Korea’s November factory output fell more than 10 percent in November from October, amid fears that Asia’s fourth-largest economy is slipping into a recession.

Oil has dropped more than $100 from a record peak above $147 a barrel in July, with the recession denting demand in large consumer nations.


The Organization of the Petroleum Exporting Countries already has announced its biggest-ever production cut of 2.2 million barrels per day to fight the oil price slide.

Top OPEC exporter Saudi Arabia is set to cut oil supplies further in February, market sources said on Tuesday, potentially taking output below its agreed OPEC target.

The group already has cut output three times in an effort to remove about 5 percent of world supply.

OPEC oil supply, excluding Iraq and Indonesia, is expected to fall by 400,000 bpd in December as members boost compliance with their deal to reduce output, consultant Petrologistics said.

The estimate indicates OPEC has more than delivered on its pledge to lower the supply from 11 members to 27.3 million day from November 1 to prop up prices.

An updated poll of analysts forecast that U.S. crude stocks fell by 1.5 million barrels last week, while distillate inventories rose by 1.1 million barrels and gasoline stocks increased by 1.5 million barrels.

Weekly U.S. fuel inventory data is due on Wednesday.

Additional reporting by Robert Gibbons in New York, Christopher Johnson and Jane Merriman in London and Baizhen Chua in Singapore; Editing by David Gregorio

Our Standards:The Thomson Reuters Trust Principles.
0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below