Crude prices plunge on cut in '09 forecast
NEW YORK - Crude oil fell below $59 a barrel in New York for the first time since March 2007, and gasoline tumbled, on speculation the International Energy Agency will cut its 2009 oil demand forecast because of slowing economic growth.
The IEA, which coordinates energy policy in 28 developed countries, will reduce the estimated growth in global demand for a third month in a report today, according to four former IEA analysts. Energy prices also dropped because of declining equity markets and a rising US dollar.
"It all comes back to the economy and how deep folks think the recession will be," said Rick Mueller, director of oil markets at Energy Security Analysis Inc. in Wakefield, Mass. "Demand is poor and should get worse as the recession deepens."
Crude oil for December delivery declined $3.08 to $59.33 a barrel on the New York Mercantile Exchange, the lowest settlement since March 20, 2007. Futures dropped as low as $58.32. Prices have tumbled 60 percent since they reached a record $147.27 on July 11.
Gasoline for December delivery declined 6.2 cents to $1.3059 a gallon in New York, the lowest settlement since the contract began trading in October 2005.
Pump prices are following futures lower. Regular gasoline, averaged nationwide, declined 2 cents to $2.22 a gallon, AAA, the nation's largest motorist organization, said yesterday on its website. The fuel has tumbled 46 percent from the record $4.11 a gallon reached on July 17.
"The view of the market is very pessimistic," said Addison Armstrong, director of market research for Tradition Energy in Stamford, Conn. "The only news I foresee that can move prices higher is a cold spell, which would boost heating oil demand, and that would have only limited impact."
The IEA has cut its 2008 forecast about 1.3 million barrels a day in seven revisions this year.
The Organization of Petroleum Exporting Countries cited falling demand for its Oct. 24 decision to reduce production by 1.5 million barrels a day. OPEC ministers will discuss the market situation when they meet next on Dec. 17 and may agree to another supply cut then, the group's president, Chakib Khelil, said on Nov. 8 in Algiers. 