Crude Oil May Fall as Recession Cuts Fuel Use, Survey Shows

By Mark Shenk

Dec. 5 (Bloomberg) -- Crude oil may fall next week as the first simultaneous recession in the U.S., Europe and Japan since World War II cuts fuel consumption.

Seventeen of 35 analysts surveyed by Bloomberg News, or 49 percent, said prices will decline through Dec. 12. Eight respondents, or 23 percent, said oil will rise and 10 forecast markets will be little changed. Last week 37 percent expected futures to decline.

“It’s more of the same, the economy weighing on the oil market,” said Tom Bentz, senior energy analyst at BNP Paribas in New York. “There is no sign where it will stop.”

Prices may dip below $25 a barrel next year if the recession in developed countries spreads to China, Merrill Lynch & Co. said in a report yesterday. U.S. fuel demand fell 5.2 percent in the first 10 months of this year, the biggest drop since 1981, the American Petroleum Institute said last month.

The crude oil contract for January delivery has fallen $10.76, or 20 percent, to $43.67 a barrel so far this week on the New York Mercantile Exchange. Futures are heading for the biggest one-week drop since the U.S.-led invasion of Iraq in March 2003. Prices have dropped 70 percent from the record $147.27 a barrel reached on July 11.

The oil survey has correctly predicted the direction of futures 50 percent of the time since its start in April 2004.

     Bloomberg’s survey of oil analysts and traders, conducted
each Thursday, asks for an assessment of whether crude oil
futures are likely to rise, fall or remain neutral in the coming
week. The results were:

                   RISE      NEUTRAL    FALL
                    8          10        17

To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.