actually this was quite predictable, only the indoctrinated feverish fools could not see commodities were in a bubble, and that the economy could not support the bubble, on top of that, demand is falling world wide, quite predictable, because decoupling is a myth:Oil Falls Below $44 as Demand Drops:Prices may dip below $25 a barrel next year if the contraction spreads to China, which it is:)




http://www.bloomberg.com/apps/news?pid=20601087&sid=accAnQOFlb54&refer=home

Oil Falls Below $44, Lowest Since January 2005, as Demand Drops


By Mark Shenk
Dec. 4 (Bloomberg) -- Crude oil fell below $44 a barrel to the lowest
price since January 2005 and gasoline futures dropped under $1 a
gallon as the recession in the U.S., Europe and Japan cuts fuel
consumption.
Prices may dip below $25 a barrel next year if the contraction spreads
to China, Merrill Lynch & Co. said in a report today. 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 yesterday.
“We’ve got the U.S., U.K., Europe and Japan all in recession for the
first time since World War II, and the oil market is reacting,” said
Chip Hodge, a managing director at MFC Global Investment Management in
Boston, who oversees a $5 billion energy-company bond portfolio.
Crude oil for January delivery fell $3.12, or 6.7 percent, to $43.67 a
barrel at 2:40 p.m. on the New York Mercantile Exchange, the lowest
settlement price since Jan. 5, 2005. Oil prices have tumbled 70
percent since reaching a record $147.27 on July 11.
Gasoline for January delivery declined 7.2 cents, or 6.9 percent, to
96.95 cents a gallon in New York, the lowest settlement since the
contract was introduced in October 2005.
Pump prices have followed futures lower. Regular gasoline, averaged
nationwide, dropped 1.4 cents to $1.789 a gallon, AAA, the largest
U.S. motorist organization, said on its Web site today. It’s the
lowest since January 2005. The fuel has fallen 57 percent from the
record $4.114 a gallon reached on July 17.
‘No Sign’
“There is no sign where it will stop,” said Tom Bentz, senior energy
analyst at BNP Paribas in New York. “We are now looking at $41.15,
which was the pre-Gulf-War high, and after that at the $40 and $37
level.”
Oil reached a then-record $41.15 on Oct. 10, 1990, when Iraqi troops
were occupying Kuwait. The milestone held until May 2004. Prices were
last below $40 a barrel in July 2004.
“A temporary drop below $25 a barrel is possible if the global
recession extends to China and significant non-OPEC cuts are
required,” Merrill commodity strategist Francisco Blanch said in
today’s report. “In the short run, global oil-demand growth will
likely take a further beating as banks continue to cut credit to
consumers and corporations.”
Royal Dutch Shell Plc said that a fire broke out today at its Pernis
refinery in the Netherlands, the largest in Europe. The blaze started
at the gasoline-making catalytic cracker at the 416,000 barrel-a-day
plant, the Rotterdam fire department said.
Heating Fuels
Prices of heating fuels also dropped today. Heating oil for January
delivery fell 7.49 cents, or 4.7 percent, to settle at $1.5091 a
gallon in New York, the lowest since Jan. 22, 2007. Natural gas for
January delivery fell 33 cents, or 5.2 percent, to $6.017 per million
British thermal units, the lowest settlement since Sept. 20, 2007.
The four-week average of petroleum products supplied in the U.S. was
19.3 million barrels a day, down from 20.5 million barrels a day a
year ago, yesterday’s report showed.
“Nothing except a major shock is going to revive this market as long
as risk aversion predominates,” said Andrey Kryuchenkov, an analyst
with VTB Group in London. “Demand numbers were down again yesterday,
reflecting the economic crisis.”
The U.S. Labor Department will probably say tomorrow that payrolls in
November dropped the most since the 2001 terrorist attacks, a
Bloomberg news survey showed. 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.
European Economy
European Central Bank President Jean-Claude Trichet said the euro
region’s economy will shrink next year for the first time since 2003.
Qatar’s oil minister said yesterday that the Organization of Petroleum
Exporting Counties will “definitely” cut output at its next meeting in
Algeria on Dec. 17.
“OPEC is sure to cut quotas at the next meeting,” MFC Global’s Hodge
said. “If OPEC wants to have the desired impact on the market, they
are going to have to show us in a physical sense, not just talk about
cuts.”
OPEC oil ministers agreed on Oct. 24 in Vienna that the 11 members
with quotas would lower supply by 1.5 million barrels a day starting
in November. Production by the 11, excluding Iraq and Indonesia,
declined 725,000 barrels to 28.24 million barrels a day last month,
according to data compiled by Bloomberg News.
Inventory Reductions
“Prices won’t rebound until either the financial crisis is fixed or
oil-market fundamentals tighten,” said Michael Lynch, president of
Strategic Energy & Economic Research, in Winchester, Massachusetts.
“We will have to see substantial inventory reductions and OPEC cuts.”
U.S. crude-oil supplies fell 456,000 barrels to 320.4 million barrels
last week, the Energy Department said yesterday. It was the first
decline in 10 weeks.
Brent crude oil for January settlement fell $3.16, or 7 percent, to
$42.28 a barrel on London’s ICE Futures Europe exchange, the lowest
settlement since Jan. 5, 2005.
To contact the reporter on this story: Mark Shenk in New York at
mshenk1@xxxxxxxxxxxxx
Last Updated: December 4, 2008 18:12 EST
.

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