Oil drops 8 pc to 3-1/2 yr low below $50 | business | Hindustan Times
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Oil drops 8 pc to 3-1/2 yr low below $50

Oil dropped 8 per cent to below $50 a barrel on Thursday as a bearish US jobs report intensified concerns of a long and deep global recession and further crushed demand expectations.

business Updated: Nov 21, 2008 01:29 IST

Oil dropped 8 per cent to below $50 on Thursday as a bearish US jobs report intensified concerns of a long and deep global recession and further crushed demand expectations.

The US government reported the number of workers making new claims for jobless benefits last week surged to the highest level in 16 years, helping to push down global equity markets.

US crude fell $4.56 to $49.06 a barrel by 1424 EST (1924 GMT) after touching $49.00, marking the lowest level since May 24, 2005, when prices hit $48.92.

London Brent crude shed $3.48 to $48.24 a barrel.

"The unemployment data was yet another ugly data point in a seemingly never ending stream of poor economic numbers," said Michael Wittner, global head of oil research at Societe Generale.

"What makes it hard to call a bottom is that even when oil fundamentals firm up, if we're still having these waves of deleveraging, it can overwhelm even the oil fundamentals."

Oil has tumbled nearly $100 from record highs over $147 a barrel struck in July, as the economic crisis strangles demand growth in large consuming nations such as the United States.

Citigroup Inc's shares tumbled another 25 percent as investors questioned the bank's ability to withstand what are expected to be billions in additional loan losses in 2009.

As demand slumps, oil companies plan to store millions of barrels of crude in the hope economics will improve.

Shipping brokers on Thursday said US oil trader Koch and Royal Dutch Shell had booked supertankers capable of storing 10 million barrels of crude, more than top exporter Saudi Arabia produces in a day.

Libya's top oil official said on Thursday OPEC may decide to reduce supply further at its meeting in Cairo next week if it finds members have implemented a previous decision to lower output.

The comments follow remarks from other OPEC members including Kuwait, Iran and Venezuela, raising the possibility of a further cut in supply to prop up oil prices.

Since early September, OPEC has said it will remove around 2 million barrels per day from international markets, but the market has taken the view that falling demand is a bigger factor than tightening supply.

(Additional reporting by Matthew Robinson, Robert Gibbons and Gene Ramos in New York; Chris Baldwin in London; Editing by Christian Wiessner)