Oil Falls to 16-Month Low

Crude oil fell more than $5 a barrel to a 16-month low and gasoline tumbled as weakening fuel consumption outweighed prospects of a production cut by OPEC at a meeting this week.

U.S. fuel demand during the past four weeks was down 8.5 percent from a year ago, an Energy Department report today showed. The financial crisis that's curbed the nation's energy use is spreading to emerging markets. OPEC will decide on Oct. 24 to lower output by at least 1 million barrels a day, according to a Bloomberg News survey.

Crude oil for December delivery declined $5.28, or 7.3 percent, to $66.90 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures touched $66.20, the lowest since June 14, 2007. Prices, which have tumbled 55 percent since reaching a record $147.27 on July 11, are down 24 percent from a year ago.

Gasoline for November delivery declined 12.29 cents, or 7.3 percent, to $1.569 a gallon in New York. Futures touched $1.5505, the lowest since February 2007.

Pump prices are following futures lower. Regular gasoline, averaged nationwide, declined 3.1 cents to $2.858 a gallon, AAA, the nation's largest motorist organization, said today on its Web site. Pump prices have tumbled 31 percent from the record $4.114 a gallon reached on July 17.

Argentina's planned seizure of $29 billion of private pension funds stoked concern the nation is heading for its second default in a decade. President Cristina Fernandez de Kirchner's decision hurt markets already reeling from slumping commodity prices and slower growth.

China's gross domestic product increased 9 percent in the third quarter from a year earlier, the weakest pace in five years, as the slowdown in the U.S. and other markets saps demand for Chinese products. China is the world's biggest oil consumer, after the U.S.

Energy prices also fell because the euro sank to almost a two-year low against the dollar as stock markets declined around the world. The euro dropped 1.7 percent to $1.2846 from $1.3063 yesterday, after touching $1.2743, the lowest since Nov. 7, 2006.

U.S. gasoline demand averaged 8.8 million barrels a day over the past four weeks, down 4.3 percent from the same period last year, the report showed. Consumption of distillate fuel, a category that includes heating oil and diesel, averaged 3.9 million barrels a day, down 5.8 percent.

Crude oil inventories rose 3.18 million barrels to 311.4 million barrels, the report showed. It was the fourth-straight increase. A gain of 2.65 million barrels was forecast, according to the median of responses by analysts in a Bloomberg News survey.

The Organization of Petroleum Exporting Countries may disregard pleas from oil-consuming nations on the brink of recession and cut output this week, a Bloomberg survey showed.

Brent crude oil for December settlement fell $5.14, or 7.4 percent, to $64.58 a barrel on London's ICE Futures Europe exchange. Futures touched $63.96, the lowest since May 7, 2007.

TradingEconomics.com, Bloomberg.com
10/22/2008 12:35:48 PM