Oil Drops

Crude prices fell after economic reports in the U.S. showed a deepening recession that may cut fuel demand in the world’s largest oil user.

Consumer spending slumped the most in seven years and orders for durable goods including refrigerators and washing machines declined twice as much as forecast, the Commerce Department said yesterday. Gasoline demand dropped 1.3 percent from last week, the Energy Department said in its weekly report.

Crude oil for January delivery retreated as much as $1.82, or 3.3 percent, to $52.62 a barrel in electronic trading on the New York Mercantile Exchange. It was at $54 a barrel as of 11:39 a.m. New York time. Oil yesterday gained 7.2 percent after China cut interest rates by the most in 11 years, which may help revive demand.

The New York exchange is open for electronic trading only today because of the U.S. Thanksgiving holiday.

Brent crude oil for January settlement fell as much as $1.94, or 3.6 percent, to $51.98 a barrel on London’s ICE Futures Europe exchange. It was at $53.23 a barrel as of 4:40 p.m. U.K. time.

Gasoline for January delivery advanced as much as 0.9 cent, or 0.8 percent, to $1.21 a gallon in New York, and last traded at $1.201 a gallon.

Crude oil consumption may climb as refineries boost processing. U.S. refineries increased operating rates by 1.3 percentage points to 86.2 percent of capacity last week, the highest since September. A 0.1 percentage-point gain was forecast.

The Organization of Petroleum Exporting Countries, which controls more than 40 percent of the world’s crude supply, is due to meet in Cairo on Nov. 29.

OPEC nations may cut output for the second time in as many months after recessions in the U.S. and Europe dragged oil below $50 a barrel last week. Last month, they agreed to reduce production by 1.5 million barrels a day.

The oil market is oversupplied, OPEC Secretary-General Abdalla el-Badri said today in an interview in Cairo. Crude stockpiles are high, he said, adding that we should not panic.”

OPEC members need to convince the world that they will have removed at least 3 million barrels a day from the market by the beginning of next year from September levels,” David Hufton of London-based PVM Oil Associates Ltd. said in a note today. They need a ringing endorsement from the Saudis and supportive cuts from Russia.”

Russia will coordinate” with OPEC nations to keep oil prices from being too low or speculatively high,” President Dmitry Medvedev said yesterday in Caracas.

In other energy trading in New York, heating oil and natural gas also declined.

Gas for January delivery fell 3.7 cents, or 0.5 percent, to $6.841 a million British thermal units. Heating oil for December delivery lost 1.7 cents, or 1 percent, to $1.72 a gallon.

TradingEconomics.com, Bloomberg.com
11/27/2008 10:09:18 AM