Shanghai Daily | 上海日报 -- English Window to China News

OIL prices continued their downward spirals yesterday as crude hit a 20-month low and Wall Street offered yet more evidence that US consumers are holding on to the money they have.

Light, sweet crude for December delivery fell US$3.08 to settle at US$59.33 a barrel on the New York Mercantile Exchange, the lowest closing price since March 2007.

The latest decline in crude prices comes two days ahead of a report from the International Energy Agency, which some analysts expect will cut its 2009 oil demand forecast for the third consecutive month.

Sharp swings in crude prices are taking place almost daily on the New York trading floor.

While the Nymex contract is now trading near first-half 2007 prices, the difference then between daily highs and lows was around US$1.50 a barrel, while now the average daily range is around US$5.50 a barrel with recent daily peaks at US$9.50, said analyst Olivier Jakob of Petromatrix in Switzerland.

Oil prices and stock markets jumped Monday after China said it planned to spend US$586 billion to spur economic growth, but crude prices gave up most of those gains as an early Wall Street rally failed.

Investors have grown increasingly leery about the swooning US economy, which faces its worst recession in decades.

Industry analysts had expected China and India would continue buying crude if the US and other western nations went into recession, but the booming economies of Asia have begun to show signs of fatigue.

Some forecasts had called for China's gross domestic product to grow 10 percent next year, but more recent forecasts have it closer to 6 percent, the firm Cameron Hanover said in a report yesterday.

"The big question is whether this stimulus package can work with interest rate cuts to keep Chinese growth at fairly high levels," the report said.
Most Asian and European stock markets fell Tuesday, following the lead of the Dow Jones industrials average Monday.

Yesterday, the Dow sank more than 200 points after Homebuilder Toll Brothers Inc. and Starbucks Corp gave investors more evidence the housing market and consumer spending are getting weaker.

Toll Brothers said fourth-quarter revenue fell 41 percent from the year-ago period, while Starbucks reported lower sales across the coffee chain, leading to profits that fell below analysts' expectations.

Investors are grappling with how bad the recession in the US could be, as government statistics and company results reflect an abrupt slowdown in consumer demand, bank lending and investment during the second half of the year.

Crude demand from the US, the world's largest consumer of energy, is a key driver of oil prices.

"We saw extremely poor car sales and pretty shocking unemployment numbers from the US last week," said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney. "It wouldn't surprise me if oil edged down toward US$50."

U.S. car sales fell to a 25-year low in October while the unemployment rate shot to a 14-year high of 6.5 percent last month.

Oil prices fell despite signs that OPEC members are going ahead with production cuts agreed to at an emergency meeting in Vienna, Austria, last month.

Saudi Arabia told refiners in Asia on Monday that it would reduce supplies in December by around 5 percent, said Sucden Research in London.

Many analysts are expecting another cut by the Organization of Petroleum Exporting Countries, which will hold an extraordinary meeting on December 17 in Oran, Algeria.

The prime minister of Qatar said yesterday that "fair" oil prices of between US$70 to US$90 per barrel would ensure that expensive oil exploration could continue, avoiding price spikes in the future.

Sheikh Hamad Bin Jassim Bin Jabr Al-Thani said that while oil prices below US$70 a barrel would help consumers in the short term, it could trigger price spikes in the near future.

Events that earlier this year sent oil prices surging seem to have no effect now.

Militants in Nigeria on Monday resumed attacks on the country's oil installations. The military said it killed eight people while guarding a facility in the oil-rich south of the country.

The Movement for the Emancipation of the Niger Delta, the region's main militant umbrella group, said it wasn't involved in any fighting.

Militants frequently attack oil facilities, seeking to hobble Africa's biggest petroleum industry and force Nigeria's federal government to send more oil funds to the southern states where the crude is pumped.

"The focus of the market has really been on the demand side," Hassall said. "I'd be surprised if supply side issues in Nigeria could change the mood of the market."

In other Nymex trading, heating oil futures fell 7.66 cents to settle at US$1.9290 a gallon, while gasoline prices dropped 6.2 cents to settle at US$1.3059 a gallon. Natural gas for December delivery tumbled 84.3 cents to settle at US$6.71 per 1,000 cubic feet.

In London, December Brent crude tumbled US$3.37 to US$55.71 a barrel on the ICE Futures exchange.