Crude prices tumble below $35
By CHRIS KAHN, AP Energy Writer
Thursday, January 15, 2009
(01-15) 09:06 PST NEW YORK, (AP) --
Oil prices tumbled below $35 a barrel Thursday as new employment claims rose and government reports show that unused gas and oil inventories continue to build.
Light, sweet crude for February delivery fell $2.35 to $34.93 a barrel Thursday on the New York Mercantile Exchange. At one point prices fell to $34.65.
Prices have fallen 27 percent in just a week and may hit new five year lows, analysts said.
"It was very predictable that January was going to be ugly, but I'm not sure if anyone thought it would be this ugly," said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service.
Kloza said trucking companies have seen an huge drop in business as orders dry up, just one example of how demand for energy has fallen away.
OPEC lowered its energy demand forecast for 2009, with investors already shrugging off production cuts of 4.2 million barrels a day by member countries. The Organization of Petroleum Exporting Countries said in its January report that it expects world demand for crude will fall 180,000 barrels per day in 2009, compared with the previous year.
Sustained job losses, bankruptcies and massive government bailouts have drowned out news of supply cuts that just six months ago would have sent crude prices soaring.
"I don't think there's anything they can say at this point," said analyst Stephen Schork, who doesn't expect a sustained rally in oil prices during the first half of this year.
"They didn't have control of oil prices when it was on the way up," he said. "They don't have control of it when it's on the way down."
The Labor Department reported first-time requests for unemployment insurance jumped to a seasonally adjusted 524,000 in the week ending Jan. 10. Analysts had expected 500,000 new claims.
An analyst with the Labor Department said the increase is partly due to a flood of requests from newly laid off people who delayed filing claims over the holidays.
On Thursday, the government reported that the draw on natural gas inventories was less than expected, suggesting that industry is pulling back production sharply.
Meanwhile, U.S. oil inventories have been rising for months, suggesting that the recession has slashed energy demand. The Energy Information Administration said Wednesday that crude inventories grew by 1.2 million barrels for the week ended Friday after jumping 6.7 million barrels the previous week.
Gasoline inventories rose by 2.1 million barrels and distillates increased by 6.4 million barrels.
"It just points to the doom and gloom in the American economy," said Gerard Rigby, an energy analyst with Fuel First Consulting in Sydney.
Investors were also dismayed by bad retail numbers. The Commerce Department reported Wednesday that retail sales dropped 2.7 percent last month, more than double the 1.2 percent decline that analysts expected.
In London, the February Brent crude contract fell 55 cents to $45.53 a barrel on the ICE Futures exchange.
In other Nymex trading, gasoline futures fell 4.37 cents to $1.124 a gallon. Heating oil fell 1.5 cents to $1.4478 a gallon while natural gas for February delivery fell 16.5 cents to $4.805 per 1,000 cubic feet.
Associated Press writers Pablo Gorondi in Budapest, Hungary, and Alex Kennedy in Singapore contributed to this report.
