Oil Set for Biggest Weekly Fall Since March 2003 on Demand Drop

By Christian Schmollinger

Dec. 5 (Bloomberg) -- Crude oil is set for its biggest weekly decline since March 2003, trading near an almost four- year low, as the economic contraction and job losses in the U.S. cause a slump in fuel demand.

Oil is set for a 19 percent drop this week after the U.S. was declared in a recession on Dec. 1. Energy, wheat and copper led a plunge in commodities yesterday as the Standard & Poor’s GSCI raw materials index fell to the lowest since February 2005. A report today will probably show U.S. November payrolls dropped the most since the 2001 terrorist attacks. Equities plunged yesterday as oil stocks dropped on forecasts of $25 crude.

“The equities market will be looking at the jobs data and the fact that it will affect stocks means it will affect the energy market,” said Clarence Chu, a trader at options dealer Hudson Capital Energy in Singapore. “People are looking at the economies in recession and they know oil demand will go down.”

Crude oil for January delivery was at $43.60 a barrel, down 15 cents at 9:25 a.m. Singapore time on the New York Mercantile Exchange. Yesterday, futures tumbled $3.12, or 6.7 percent, to $43.67 a barrel, the lowest settlement price since Jan. 5, 2005.

Oil prices have fallen 70 percent since reaching a record $147.27 on July 11. Crude’s 19 percent weekly drop is the largest since a 24 percent decline during the week ending March 21, 2003.

The U.S. entered a recession in December 2007, the National Bureau of Economic Research, a private, non-profit panel of economists that dates American business cycles, said on Dec. 1.

Copper Tumbles

The Labor Department will probably say today that payrolls in November dropped the most since the 2001 terrorist attacks, a Bloomberg news survey showed.

U.S. fuel demand during the four weeks ended Nov. 28 was down 6.2 percent from a year earlier, an Energy Department report showed Dec. 3.

The GSCI raw materials index has slumped 63 percent from its peak on July 3 as a credit crunch and global recession slash demand for energy and raw materials.

Copper tumbled 5.1 percent yesterday, bringing its drop this week to almost 10 percent and sending the price to its lowest in more than three years. Gold for immediate delivery was little changed today at $768.90 an ounce.

Brent crude oil for January settlement was at $42.13 a barrel, down 15 cents, on London’s ICE Futures Europe exchange. The contract yesterday fell $3.16, or 7 percent, to $42.28 a barrel yesterday, the lowest settlement since Jan. 5, 2005.

To contact the reporter on this story: Christian Schmollinger in Singapore at christian.s@bloomberg.net.