Crude Oil Falls Below $55 as Slowing Economies Curb Consumption

By Christian Schmollinger and Nesa Subrahmaniyan

Nov. 13 (Bloomberg) -- Crude oil fell below $55 a barrel in New York, the lowest in 21 months, as slowing economies in major consuming nations cuts demand for fuels.

U.S. gasoline purchases dropped 4.2 percent last week, the 29th consecutive week of decline, MasterCard Inc. reported yesterday. Asian stocks slumped and China's industrial production grew at the slowest pace in seven years.

``Right now there is nothing that can stop the bears,'' said Victor Shum, senior principal at Purvin & Gertz Inc. in Singapore. ``The fears about reduced oil demand extending through 2009 are putting a lot of downward pressure on oil.''

Crude oil for December delivery declined as much as $1.49, or 2.7 percent, to $54.67 a barrel, the lowest since Jan. 30, 2007. The contract traded at $54.84 at 3:30 p.m. Singapore time on the New York Mercantile Exchange. Futures have dropped 63 percent from the record $147.27 on July 11.

The MSCI Asia Pacific Index tumbled as much 4.9 percent to 82.20. China's industrial output rose 8.2 percent in October from a year earlier, after gaining 11.4 percent in September. None of 18 economists surveyed by Bloomberg News had predicted such a small increase.

Oil has also fallen on speculation that the International Energy Agency will cut its global demand estimate today and the U.S. will report that stockpiles gained.

IEA Forecasts

The IEA is ``more than likely'' to lower its oil-demand forecast for the coming year in its next monthly oil report, according to Executive Director Nobuo Tanaka. The U.S. Energy Department cut its oil-demand and price forecasts yesterday. A department report today may show that crude-oil supplies rose last week.

Oil and commodity producers fell in Asian trading. BHP Billiton Ltd., the world's biggest mining company, tumbled as much as 12 percent to A$25 in Sydney trading. The shares have fallen 40 percent in the past year.

Cnooc Ltd., China's biggest offshore oil and gas producer, dropped as much as 8.2 percent to HK$5.57 in Hong Kong trading.

Nippon Oil Corp., Japan's biggest refiner, is considering cutting capital spending in the next three years because of weaker demand for oil products and a tight credit market, a spokesman said today.

``People are perceiving the economy as the state of demand and the stock market is seen as an indication,'' said Clarence Chu, a trader with options dealer Hudson Capital Energy in Singapore. ``The whole market sentiment is just so bearish.''

Gold, Corn

Gold traded little changed near a three-week low as gains by the dollar and falling oil prices reduced the appeal of the metal as an alternative asset.

Bullion for immediate delivery was at $713.12 an ounce, up 0.1 percent, at 3:32 p.m. in Singapore. Silver for immediate delivery was little changed at $9.3525 an ounce.

The Reuters/Jefferies CRB Index of 19 raw materials yesterday touched the lowest since November 2003.

Corn futures for December delivery were down 0.7 percent at $3.67 a bushel on the Chicago Board of Trade. Copper for December was down 0.9 percent at $3,590 a metric ton on the London Metal Exchange.

``The economy has changed quite a lot in the past three months,'' said Toby Hassall, an analyst at Commodity Warrants Australia Ltd. in Sydney. ``All commodities are being dragged lower by the deteriorating economic outlook.''

Consumer Pessimism

Japan's consumers are the most pessimistic they've been in at least 26 years, making it unlikely they will spend to support an economy weakened by slower global demand and falling stock prices. The confidence index dropped to 29.4 last month from 31.4 in September, the Cabinet Office said yesterday in Tokyo.

The U.S. government reduced its forecast for oil prices next year by 43 percent as the economic slowdown cuts energy use.

West Texas Intermediate crude oil, the U.S. benchmark, will average $63.50 a barrel in 2009, down from $112 estimated in October, the Energy Department said in its monthly Short-Term Energy Outlook released yesterday in Washington.

Global oil consumption will average 85.89 million barrels a day this year, up 80,000 barrels from 2007, according to the report. The estimate is down 250,000 barrels from the forecast a month ago. Demand will average 85.93 million barrels a day in 2009, down 990,000 barrels from last month's forecast.

U.S. Inventories

U.S. crude-oil stockpiles probably increased 1 million barrels in the week ended Nov. 7 from 311.9 million the week before, according to the median of 13 analyst estimates before the Energy Department report.

The department is scheduled to release its weekly report today at 11 a.m. in Washington. The report is being delayed by a day because the Veterans Day holiday on Nov. 11.

Brent crude oil for December settlement fell as much as $1.77, or 3.4 percent, to $50.60 a barrel on London's ICE Futures Europe exchange. It was at $51.04 a barrel at 3:33 p.m. Singapore time.

The December future expires today. The more-active January contract was at $53.57 a barrel, down 95 cents.

To contact the reporters on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net; Nesa Subrahmaniyan in Singapore at nesas@bloomberg.net.