Oil Falls to 2 Week Low

Crude oil fell to a two-week low on speculation a deepening economic contraction in the U.S., the world’s biggest energy consumer, will cause the slump in fuel demand to worsen.
TradingEconomics.com, Bloomberg 2/2/2009 5:15:12 AM

Crude fell as much as 4 percent before a report later today by the Institute of Supply Management forecast to show U.S. manufacturing shrank in January at the fastest pace in 28 years. The United Steelworkers union is considering strike actions that may affect 8.7 percent of U.S. refinery capacity.

Crude oil for March delivery fell as much as $1.67, or 4 percent, to $40.01 a barrel in electronic trading on the New York Mercantile Exchange. That’s the lowest since Jan. 20. Oil was at $40.54 a barrel at 12:41 p.m. London time.

New York futures traded at a discount of $4.12 a barrel to Brent crude contracts in London because of excess supplies at Cushing, Oklahoma, the U.S. storage hub. Brent crude oil for March settlement fell as much as $1.48, or 3.2 percent, to $44.40 a barrel on London’s ICE Futures Europe exchange.

New York futures fell 10 percent last week and are down 73 percent from the record $147.27 a barrel on July 11. Still, prices have rebounded from a four-year low of $32.40 reached Dec. 19 as the Organization of Petroleum Exporting Countries implements a record supply reduction.

The Institute of Supply Management factory index probably dropped to 32.5 last month from 32.9 in December, according to a Bloomberg News survey. Readings below 50 signal contraction. U.S. gross domestic product contracted at a 3.8 percent annual pace in the fourth quarter.