Oil dips to around $48 on more bad economic data
Benchmark crude for May delivery fell 21 cents to $48.20 on the New York Mercantile Exchange. On Monday, the contract fell 7.6 percent, or $3.97, to settle at $48.41.
By JOHN PORRETTO
The Associated Press
3/31/2009
HOUSTON— Oil prices slipped again Tuesday on dismal projections from the World Bank for developing countries and new figures from the government about gloomy U.S. consumers.
Benchmark crude for May delivery fell 21 cents to $48.20 on the New York Mercantile Exchange. On Monday, the contract fell 7.6 percent, or $3.97, to settle at $48.41.
In London, Brent prices fell 18 cents to $47.81 a barrel on the ICE Futures exchange.
Markets awaited the release of the latest U.S. inventory figures due Wednesday. Storage facilities have been taking in more and more unused crude as industries and consumers cut back consumption.
"Tomorrow's release of the weekly U.S. government inventory data is likely to show that crude supplies, already 12 percent above the five-year average level, probably grew by 3.5 million barrels," said Addison Armstrong of Tradition Energy.
It will be tough for crude prices to return to the $50-a-barrel mark as market fundamentals remain weak, said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore.
With the global economy grinding to a halt, growth in developing countries will slow to 2 percent this year, according to the World Bank, which predicts that economic activity will remain depressed for the next two years.
That's less than half the gross domestic product — a total output of goods and services — that the World Bank expected as recently as November. The worsening economic crisis forced the bank to revise expectations.
"Across the developing world, we see that conditions of recession are affecting the poorest people, making them even more vulnerable than before to sudden shocks, but also reducing opportunities available to them and frustrating their hopes," said Justin Yifu Lin, a chief economist at the World Bank in Washington. "This could reverse years of progress and is nothing less than an emergency for development."
Many analysts had believed that China and India would continue to consume enormous amounts of oil even as the U.S. and Europe fell into recession. But those nations have been hurt by the economic downturn and oil prices have plunged.
Oil prices began to rebound about a month ago, though energy market analysts found little fundamental reason for it.
The U.S. government last week said crude storage facilities were brimming with more oil than they've had in 16 years. Combined with the strategic petroleum reserve, the nation now has 1.05 billion barrels of oil in storage — enough to fuel roughly 44 million cars for a year.
The Organization of Petroleum Exporting Countries has promised to slash production by 4.2 million barrels per day, but there are doubts about the level of compliance by OPEC members.
"With OPEC not meeting again until May, inventory data in coming weeks will be uber important for the market," energy-focused securities firm Tudor Pickering Holt & Co. said in a note to clients Tuesday.
The Organization for Economic Co-Operation and Development said Tuesday it expected the U.S. economy to contract by 4 percent in 2009 and stagnate in 2010, while the 16-nation euro-zone will likely shrink by 4.1 percent this year and by 0.3 percent next year.
The OECD also forecast Japanese output to contract by 6.6 percent in 2009 and another 0.5 percent next year.
Millions of Americans are now out of work and optimism has been eroded severely.
While the New York-based Conference Board said Tuesday that its Consumer Confidence Index rose to 26.0 in March, from a revised 25.3 reading in February, those figures remain at historic lows.
There have been three consecutive monthly drops in consumer confidence and the latest reading came in below the 28 expected by economists surveyed by Thomson Reuters, and remains less than half of its level of 65.9 last March.
Consumers are also seeing prices at the pump rise as they usually do at this time of the year. Refiners are switching to more expensive summer blends.
After ticking up steadily for the past week, U.S. retail gas prices were unchanged overnight, with the national average for a gallon of regular unleaded holding at $2.048 per gallon, according to auto club AAA, Wright Express and Oil Price Information Service.
A gallon of gasoline is 8.2 cents more expensive than a month ago but $1.239 cheaper than a year ago, when crude prices were headed to new highs.
In other Nymex trading, gasoline for April delivery fell 2.44 cents to $1.355 a gallon while heating oil fell 2.16 cents to $1.321 a gallon. Natural gas for May delivery fell less than a penny to $3.73 per 1,000 cubic feet.
Associated Press writers Pablo Gorondi in Budapest, Hungary, Eileen Ng in Kuala Lumpur, Malaysia, Deb Riechmann in Washington and John Porretto in Houston contributed to this report.
Dorothy Cox of The Trucker staff may be reached to comment on this article at dlcox@thetrucker.com.