Paula Dittrick
Senior Staff Writer
HOUSTON, Dec. 8 -- Crude oil futures prices dipped to 4-year lows on the New York Mercantile Exchange Dec. 5 as the US Department of Labor reported that 533,000 people lost their jobs in November and that the unemployment rate soared to 6.7%—a 15-year high.
During trading Dec. 5, the January contract for benchmark US light, sweet crudes reached $40.50/bbl before rebounding slightly to settle at $40.81, down $2.86 from the Dec. 4 closing price.
Analysts said that Dec. 5 marked the sixth consecutive day of oil price declines. Meanwhile earlier in the week, the National Bureau of Economic Research reported that the US has been in a recession for a year.
Since the recession started, DOL reported that the number of unemployed people increased by 2.7 million. Prolonged drops in oil prices could cause more job losses in oil and gas producing states.
Fuel price analyst Bob van der Valk said, "The daily dose of bad economic news still continues to weigh down heavily on gasoline prices. They will stay well below $2/gal and head towards the $1.75 mark by Christmas."
Van der Valk doubts that oil prices will drop below $40/bbl in the near term because gasoline demand already has started to pick up for holiday-related travel.
Pritchard Capital Partners LLC noted, "The best cure for low commodity prices is low commodity prices." In a Dec. 8 research note, Pritchard noted that Chesapeake Energy Corp. plans to go to 115 operated rigs from 130 rigs, meaning lower 2009 production volumes for Chesapeake and other producers who decide to lower their rig counts.
The International Energy Agency reduced its 2009 global oil demand forecast because of the slowing economy. IEA reduced its demand forecast by 170,000 b/d to 86.37 million b/d. For 2013, IEA lowered its forecast to 91.25 million b/d, down 2.9 million b/d from a July estimate for 2013 global oil demand.
Energy prices
The February contract for benchmark crudes fell $2.28 to $42.93/bbl on NYMEX. On the US spot market, West Texas Intermediate at Cushing, Okla., was down $2.86 to $40.81/bbl.
Heating oil for January delivery lost 8.26¢ to $1.4265/gal on NYMEX. The January contract for reformulated blend stock for oxygenate blending (RBOB) lost 6.83¢ to 90¢/gal.
Natural gas for the same month fell 27.5¢ to $5.742/MMbtu on NYMEX. On the US spot market, gas at Henry Hub, La., lost 58¢ to $5.97/MMbtu.
In London, the January IPE contract for North Sea Brent crude was down $2.54 to $39.74/bbl. The December gas oil contract was down $43.25 to $437/tonne.
The Organization of Petroleum Exporting Countries' offices in Vienna were closed Dec. 5 and Dec. 6 for religious festivals.
Contact Paula Dittrick at [email protected].