Oil sinks below $50
Price falls as weakening economic outlook raises the likelihood of a lower demand for energy.
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| Click the chart to track the latest commodity prices. |
NEW YORK (CNNMoney.com) -- Oil prices continued to plunge Thursday, dropping below $50 a barrel as growing concern about the economy pointed to weak demand for energy. The price marked the lowest level in three-and-a-half years.
On the final day of trading for the December contract, U.S. crude futures fell $4 to settle at $49.62 a barrel, the lowest settle price since May 23, 2005, according to CME Group, which operates the New York Mercantile Exchange.
Oil last dipped below $50 during a trading session in January 2007.
The January 2009 contract, which begins its front-month run on Friday, ended the day at $49.42 a barrel.
A week of negative economic reports, combined with falling stock prices and indecision from Congress on a bailout of major automakers GM (GM, Fortune 500), Ford (F, Fortune 500) and Chrysler LLC, have painted a dismal picture for energy demand.
News has been "pretty doomy and gloomy on the oil outlook front," said Phil Flynn, senior market analyst with brokerage Alaron Trading in Chicago.
Dour economy: On Thursday, the government reported that jobless claims reached a 16-year high.
Earlier in the week, the government said its measure of consumer prices had fallen the most since 1947.
A read on new-home construction also hit its lowest level since 1959, and the struggling U.S. auto industry continues to clamor for a government bailout that will keep it in operation.
Meanwhile stock markets continued to retreat this week, with the Dow Jones industrial average closing below 8,000 for the first time since March 2003 on Wednesday.
Crude prices have been on the decline as investors worry about recession in developed nations such as the United States, the world's largest oil consumer, and in the developing world, where fuel demand had been rising the fastest.
Looking forward: Goldman Sachs said Thursday that it expects oil prices to top $107 a barrel by the end of 2009. That's a step back from its late July outlook, which called for prices to top $149 a barrel by the end of this year.
Concern about demand for petroleum products has driven crude oil prices down from a record high of $147.27 a barrel in mid-July. The decline has also driven down the price of unleaded gasoline by over a half since July to $2.02 a gallon, motorist group AAA reported Thursday.
However, Goldman also said Thursday that it would not offer any more guidance for oil prices for the remainder of 2008, citing rapidly changing economic conditions. That might provide some near-term support.
"With them basically throwing in the towel, that's waving the white flag for a lot of oil bulls," said Flynn. It might "inspire more people more people to get out of the market," he added.
Shipping disruptions: Meanwhile the capture of a Saudi Arabian supertanker this week by pirates off the Somalian coast has prompted many tanker companies to consider routing their shipments around South Africa, avoiding the quicker route through Egypt's Suez Canal.
Rerouting could add to the cost and the length of time it takes for oil shipments to reach the U.S. from the Middle East. 
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