By Mark Shenk
Dec. 18 (Bloomberg) -- Crude oil fell below $39 a barrel for the first time since July 2004 on speculation that OPEC hasn’t trimmed production enough to bolster prices as demand drops.
Futures have tumbled 74 percent from a record $147.27 on July 11 as inventories increased and consumption declined. The Organization of Petroleum Exporting Countries agreed to cut output by 2.46 million barrels to 24.845 million barrels a day at a meeting yesterday in Oran, Algeria.
“Even though OPEC announced a substantial cut yesterday, the market doesn’t seem to have any confidence in their ability to manipulate the market,” said Tom Bentz, senior energy analyst at BNP Paribas in New York. “Even if they make the promised cuts, it will be a long time before we see evidence of it here.”
Crude oil for January delivery fell $1.97, or 4.9 percent, to $38.09 a barrel at 9:43 a.m. on the New York Mercantile Exchange. Futures touched $38.01, the lowest since July 1, 2004.
JPMorgan Chase & Co., the largest U.S. bank by assets, reduced its 2009 average oil price forecast to $43 a barrel from $69 as a global economic slowdown causes a contraction in demand. The prospect of oil falling to $25 is “hard to dismiss amid a serious deterioration of economic conditions and building stocks,” the bank said in a report released yesterday.
Oil companies have booked 25 supertankers to store crude, enough to supply France for almost a month. The vessels, equal to about 5 percent of the global fleet, can carry as much as 50 million barrels.
“The market is failing to find any support,” Bentz said. “The worries about demand are still out there because of the recession. We’ve got at least 45 million barrels of excess floating storage out there on top of all the storage we’ve got on land.”
Brent crude oil for February settlement increased 11 cents to $45.64 a barrel on London’s ICE Futures Europe exchange.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net.
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