Oil prices slide as demand weakens

Source: Agencies  |   2008-11-18  |     ONLINE EDITION

OIL prices fell below US$56 a barrel yesterday and gasoline futures plunged to a new low as Japan joined a number of European nations in recession and provided even more evidence of a broad deterioration in demand for energy.

Light, sweet crude for January delivery dropped US$2.11 to settle at US$55.49 a barrel on the New York Mercantile Exchange. Gasoline futures fell 5 percent, or 6.45 cents to US$1.1746 a gallon after earlier touching a 52-week low of US$1.168.

In London, Brent crude fell US$1.93 to settle at US$52.31 on the ICE Futures exchange.

"This is just a continuation of the weak demand theme in energy," said Jim Ritterbusch, president of energy consultants Ritterbusch and Associates.

Japan, the world's second-largest economy, said it slid into recession for the first time since 2001 after gross domestic product contracted at an annual pace of 0.4 percent in the third quarter after a shrinking 3.7 percent in the second quarter. Japan now joins the 15-nation euro-zone in recession, defined as two straight quarters of GDP contraction.

"Markets are very worried about the international economic outlook, about oil consumption," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "As data is released in the US, Europe and other countries, investors get a reminder of the economic problems in the developed world."

Oil rebounded from an overnight drop yesterday as cold weather heading into the East drove up heating oil and natural gas futures and a government report showed a surprise jump in US industrial output.

The Federal Reserve yesterday said industrial output rose 1.3 percent last month, reflecting a return to more normal operations at chemical plants, oil refineries and drilling platforms following hurricanes that hit the Gulf Coast.