Oil prices fell below $39 a barrel on Wednesday in Asia in light New Year's Eve trading as investors pondered a global economic slowdown that's dragged crude down some 60 per cent this year.
Light, sweet crude for February delivery fell 70 cents to $38.33 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract overnight fell 99 cents to $39.03.
Prices hit a record $147.27 a barrel on July 11, fueled by speculation that soaring growth in emerging economies, such as China and India, would boost demand for crude.
However, investor sentiment turned sour in the second half of the year as a credit crisis in the US mushroomed into a global slump in consumer spending and industrial production.
Prices rose 57 per cent in 2007 to $95.98 a barrel. This week, fears that the conflict between Israel and Hamas in Gaza could heighten tension in the oil-rich Middle East helped bolster prices, which had fallen to the lowest in almost five years at $33.87 earlier this month.
Going into next year, investors remained focused on signs of dwindling demand for crude as the US, Europe and Japan face recessions and most developing countries battle slowing growth. Traders will also be looking for evidence that OPEC is implementing the 4 million barrels a day of production cuts it has announced since October. The Organization of Petroleum Exporting Countries, which accounts for about 40 per cent of global supply, has not ruled out further output quota reductions if prices don't rebound in 2009.
One gauge of US oil demand, the weekly oil inventories report by the US Energy Department's Energy Information Administration, is expected to show on Wednesday that oil stocks fell 1.75 million barrels last week, according to the average of estimates in a survey of analysts by Platts, the energy information arm of McGraw-Hill Cos.
The Platts survey also projects that gasoline inventories rose 1.7 million barrels and distillates increased 1.3 million barrels last week.
In other Nymex trading, gasoline futures fell 0.38 cent to 88 cents a gallon. Heating oil dropped 1.65 cent to $1.27 a gallon while natural gas for February delivery decreased 2.4 cents to $5.64 per 1,000 cubic feet.
In London, February Brent crude fell 77 cents to $39.38 a barrel on the ICE Futures exchange.