Crude Oil Futures Drop

Crude oil fell below $45 a barrel after the U.S. Senate rejected a bailout plan for automakers, raising concern that a prolonged recession will cut fuel demand.

The failure of the $14 billion rescue package increases the risk General Motors Corp. and Chrysler LLC will file for bankruptcy, worsening job losses and cutting industrial production in the world’s largest oil consumer. Goldman Sachs Group Inc. cut its average oil price forecast for next year and said crude may drop to $30 a barrel in the first quarter.

Crude oil for January delivery fell as much as $3.13, or 6.5 percent, to $44.85 a barrel in electronic trading on the New York Mercantile Exchange. It was at $44.91 a barrel at 11:05 a.m. London time.

Brent crude oil for January settlement declined as much as $3.21, or 6.8 percent, to $44.18 a barrel on London’s ICE Futures Europe exchange. It was at $44.26 a barrel at 11:04 a.m. London time. It climbed $4.99, or 12 percent, to $47.39 a barrel yesterday, the biggest one-day gain since March 1998.

The Paris-based International Energy Agency, an adviser to 28 nations, said global oil demand will contract this year for the first time since 1983 and reduced its outlook for 2009.

Consumption worldwide will shrink 200,000 barrels a day, or 0.2 percent, in 2008, the IEA said in a report yesterday. Next year’s growth may be wiped out if the economic slump deepens, the agency said.

Oil rose yesterday after the Saudi Arabian oil minister said yesterday he had delivered cuts already promised to OPEC, a sign that world supplies are smaller than traders had estimated.

Saudi Arabia’s oil production was absolutely” in line with its Organization of Petroleum Exporting Countries’ quota, Minister Ali al-Naimi said in an interview yesterday.

Al-Naimi said the kingdom pumped 8.493 million barrels of oil a day in November, close to its OPEC production quota of 8.477 million barrels a day. That’s 287,000 barrels a day less than estimated by the IEA.

OPEC is set to meet on Dec. 17 in Algeria to discuss further cuts in production. The group agreed to slash output by 1.5 million barrels a day on Oct. 24.,
12/12/2008 5:26:11 AM