Oil has dropped nearly $100 from its July record as the world economic crisis reduced global demand growth to its weakest in 23 years. Crude oil’s continuing slide will add to concern that the U.S. economy faces deflation, threatening investment in oil and gas production projects.
Crude oil for December delivery fell $4.77, or 8.9 percent, to $48.85 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices touched $48.64, the lowest since May 23, 2005. Futures have dropped 67 percent since reaching a record $147.27 on July 11.
The December contract expires today. The more active January contract dropped $4.46, or 8.6 percent, to $49.44 a barrel. It fell as low as $49.28 today.
The International Energy Agency, an adviser to 28 nations, said last week that world oil demand will rise at its slowest pace for 23 years in 2008. It cut its 2009 estimate by 670,000 barrels a day to 86.5 million barrels a day, the biggest reduction in 12 years.
New York oil futures first traded above $50 on Sept. 28, 2004, in the middle of oil’s six-year rally toward this year’s records. Prices climbed on the strength of oil import demand from emerging economies, led by China, the world’s second-largest oil consumer after the U.S.
U.S. consumer prices plunged 1 percent last month, more than forecast and the most since records began in 1947, after being unchanged the prior month, the Labor Department said yesterday. That increased concern the world’s largest economy risks a sustained period of falling prices or deflation.
U.S. gasoline purchases declined for a 30th consecutive week last week, MasterCard Inc. said on Nov. 18. China cut diesel imports to the lowest in 14 months during September, the Customs General Administration said Nov. 17.
The IEA’s expectation that demand will expand next year is more optimistic than the outlook from several other analysts. Ian Taylor, chief executive officer of oil trader Vitol Group, said on Oct. 28 he expects a 1 million-barrel decline in 2009, while Wood Mackenzie Consultants Ltd. predicts a drop of 250,000 barrels.
Brent crude oil for January settlement declined $3.86, or 7.5 percent, to $47.86 a barrel on London’s ICE Futures Europe exchange. Futures touched $47.82, the lowest since May 23, 2005.