Oil prices fell below $53 to almost a two-year low on Thursday in Asia as investors, egged on by plummeting stock markets, priced in lower crude demand from a global economic downturn that's shaping up as the worst in decades. Light, sweet crude for December delivery was down 81 cents to $52.81 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract Wednesday fell 77 cents to settle at $53.62, the lowest since January 2007. "People are saying this slowdown could be the worst since the Great Depression," said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney. "There's definitely fear out there that it's going to be pretty severe."
Concerns that Congress may not approve a $25 billion rescue package for ailing US carmakers General Motors Corp., Ford Motor Co., and Chrysler LLC helped drag the Dow Jones industrial average down 5.1 per cent on Wednesday to its lowest level since March 2003. Asian stocks opened down on Thursday with Japan's benchmark Nikkei index falling 4.7 per cent, Hong Kong's Hang Seng index off 5.1 per cent and the Korea Composite Stock Price Index sliding 5.4 per cent
"The stock markets are representing investor pessimism regarding the economic outlook and what we have in store over the next year," Hassall said. "I think we're going to see oil test $50 sooner rather than later."
On Wednesday, the US Department of Transportation provided more evidence that the slowdown continues to hurt gasoline consumption, even as prices fall. Americans drove almost 11 billion fewer miles in September, the department said.
A production cut by OPEC may keep prices from falling further. The Organization of Petroleum Exporting Countries is holding an informal meeting later this month ahead of an official meeting in December. OPEC President Chakib Khelil has signaled the group may announce production cuts at the December meeting, but some members, such as Iran, have called for earlier cuts.
"It's gonna take a pretty big supply side response from OPEC at their next meeting to provide some support," Hassall said. "The focus of the market is definitely on the demand side." Investors have been brushing off news that earlier in the year would have sent prices higher. Chevron Corp. invoked "force majeure" Tuesday on 90,000 barrels a day of Nigerian production after a pipeline was breached by militants in the Niger Delta. Earlier this week, Somali pirates hijacked a Saudi supertanker carrying $100 million in crude.
In other Nymex trading, gasoline futures fell 1.35 cents to $1.09 a gallon. Heating oil gained 0.28 cent to $1.76 a gallon while natural gas for December delivery was steady at $6.74 per 1,000 cubic feet.
In London, December Brent crude fell 72 cents to $51.00 on the ICE Futures exchange.