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Oil and gas prices slip to new 3-year lows

Oil and gas prices slip to new 3-year lows

Oil and retail gasoline prices dipped to new three-year lows Tuesday with the United States officially in a recession.
Light, sweet crude for January delivery fell more than 4 percent, or $2.32 to settle at $46.96 a barrel on the New York Mercantile Exchange. Earlier Tuesday, prices briefly fell to $46.82, the lowest level since hitting $46.20 intraday on May 20, 2005.
In London, January Brent crude slid $2.53 to a new 52-week low of $45.30 on the ICE Futures exchange.
The government has reported that the unemployment rate shot up to a 14-year high of 6.5 percent in October, and many economists believe it will top 8 percent before the economy mounts a sustained rebound. November's unemployment rate will be released Friday.
The National Bureau of Economic Research, a private, nonprofit research organization, said Monday that its group of academic economists who determine business cycles pegged December 2007 as the start of the U.S. recession.
Analyst Peter Beutel of Cameron Hanover said traders are searching for the bottom in the oil market.
"Right now, everyone is wondering when is this market going to rally," he said. "At some point it should."
Beutel said colder-than-expected temperatures across much of the U.S. and expected further cuts in production by OPEC make a strong case for oil prices to rally.
Backing up Beutel's claim on demand is the SpendingPulse report by MasterCard released Tuesday afternoon.
The report's four-week moving average shows demand of 63.9 million barrels a week. That is down 2.1 percent from the year-ago moving average and the smallest decline since May.
"It looks like we're getting back to a more normal level from demand and price," Michael McNamara, vice president of MasterCard SpendingPulse
MasterCard's report is based on aggregate sales activity in the MasterCard payments network, coupled with estimates for all other payment forms, including cash and check.
The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global supply, cut output by 1.5 million barrels a day in October, bringing total cuts to around 2 million barrels a day this year.
The slowing economy has cut into energy demand, leaving OPEC's power to control prices through production cuts diminished.
OPEC Secretary-General Abdullah El-Badri said the group would likely reduce output quotas by between 1 million and 1.5 million barrels at a meeting on Dec. 17 in Algeria, according to a report on Iranian state television Monday.
The head of OPEC said he hopes oil producing nations such as Russia will join the organization, or at least agree to output cuts to help spark a rally in prices.
Chakib Khelil, also Algeria's oil minister, said oil producers such as Russia, Norway and Mexico should express their solidarity with OPEC, either by joining the cartel or by following its reductions of output quotas.
Meanwhile, analysts believe U.S. gas prices at the pump may finally be bottoming out after a precipitous decline from record highs this summer, though demand could fall even further in January with job losses reducing the number of people who drive to work.
Gas prices fell for the 20th week since early July and hit $1.811 per gallon (48 cents a liter), according to the government's Energy Information Agency. The national average for a gallon of gas peaked at $4.11 ($1.08 a liter) in July.
"The big move for 2008 is over," said Tom Kloza, publisher and chief oil analyst at the Oil Price Information Service. Prices may fall a few more cents this month and then likely waver into February before beginning to move higher, he said.
Kloza said demand will weaken further in early 2009 as job losses mount amid what may be an extended recession.
"January could be really, really ugly," he said.
In other Nymex trading, gasoline futures fell 5.29 cents to settle at $1.0583 a gallon. Heating oil fell 3.19 cents to settle at $1.5832 after hitting a 52-week low of $1.5778 a gallon. Natural gas for January delivery fell 18 cents to settle at $6.424 per 1,000 cubic feet.
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Associated Press writers Pablo Gorondi in Budapest, Hungary, and Alex Kennedy in Singapore contributed to this report.


Updated : 2021-10-16 21:04 GMT+08:00