Oil slumps 8% on demand woes

Crude prices dip below $38 a barrel as economic weakness continues to sap demand.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Ben Rooney, CNNMoney.com staff writer

v2-cnnmoney-chart1.jpg.mkw.gif
Click chart for current oil prices.
chart_oil_1_year.03.gif

NEW YORK (CNNMoney.com) -- The price of oil fell Monday as investors remained focused on last week's bad economic news and bet that demand for petroleum products will continue to decline.

Light, sweet crude for February delivery fell $3.24, or 7.9%, to $37.59 a barrel. Last week, oil fell nearly $8 a barrel as signs of economic weakness and waning demand weighed on the market.

A report from the Labor Department on Friday showed the nation's economy lost a total of 2.6 million jobs last year, the highest level in more than six decades. The report also showed that the unemployment rate jumped to 7.2% in December from 6.7% in November.

"The overall trend in the market, given the weak economy, is still to the down side," said Stephen Schork, an energy market analyst and publisher of the industry newsletter The Schork Report.

The price of oil lost more than half its value in 2008, and suffered a staggering decline of more than $100 a barrel from its peak last summer as the global economic slowdown undermined demand.

Oil prices had rebounded slightly during the first few trading days of the year, prompting some analysts to speculate that crude could drift higher this week. But that advance was due to year-end portfolio adjustments and "we're back into a bearish track," Schork said.

OPEC: Monday's decline comes despite reports Sunday that Saudi Arabia, the world's top oil exporter, plans to cut output by up to 300,000 barrels per day below its previously announced target reduction.

The Kingdom has already lowered supply this month to 8 million barrels per day as part of OPEC's agreement to reduce overall supplies by a record amount from Jan. 1.

Members of the Organization of the Petroleum Exporting Countries have been drastically scaling back supply in an attempt to stop the rapidly falling price of oil.

But the strategy has had limited success as supply levels remain high and demand continues to deteriorate.

Last week, the Department of Energy said the nation's stockpiles of crude rose by a whopping 6.7 million barrels for the week ended Jan. 2. That far surpassed experts' forecast of a 1.5 million barrel rise, according to a poll by research firm Platts.

"We know there's plenty of supply in the near term," Schork said. "OPEC is taking the appropriate steps, but this is a demand side problem, and there's very little OPEC can do."

Geopolitics: The oil market is also focusing on Israel's military campaign in Gaza, and a dispute between Russia and Ukraine over natural gas supplies.

While neither Israel nor Palestine produce any oil, some analysts worry that the conflict could result in supply disruptions if it escalates into a wider war involving neighboring countries like Iran.

Meanwhile, Russia's state-controlled energy monopoly, Gazprom, resumed delivery of natural gas to Europe via Ukraine Monday, after a weeks-long standoff between the two countries over unpaid bills.

Gasoline: Retail gas prices edged lower overnight, according to a survey from the American Automobile Association.

AAA said the national average price for a gallon of regular gas fell 2 cents to $1.790 a gallon, ending twelve days of consecutive increases of gas prices.

Over the last twelve days, the price of gas rose more than 16 cents, which prompted some analysts to speculate that U.S. demand for gasoline was beginning to recover.

Gas prices, however, usually trend higher at this time of year as refiners enter their scheduled maintenance period, according to Schork.

"It's a sign that the market is reverting back to cyclical pattern," he said.  To top of page

Features
They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.