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Oil steady near $39 as investors eye bad US news

Oil prices were steady near $39 a barrel in Asia as investors digested more bad economic news from the US in thin Christmas Eve trading.

business Updated: Dec 24, 2008 14:30 IST

Oil prices were steady near $39 a barrel on Wednesday in Asia as investors digested more bad economic news from the US in thin Christmas Eve trading.

Light, sweet crude for February delivery dipped 9 cents to $38.89 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore. The contract fell overnight 93 cents to settle at $38.98.

A steady stream of dismal US economic and corporate news during the last few months has hammered investor confidence and sent oil prices reeling 74 percent since July.

More bad news emerged Tuesday as the Commerce Department said sales of new homes fell in November to the slowest pace in nearly 18 years, while new home prices dropped by the biggest amount in eight months.

The department also said that the gross domestic product, the broadest measure of economic health, declined at an annual rate of 0.5 per cent in the July to September quarter.

Some economists believe the US economy's decline in the October to December period could be as large as 6 per cent. If so, that would be the worst quarterly drop since 1982.

Investors will be watching for more evidence of slowing US demand in the weekly oil inventories report to be released Wednesday by the US Energy Department's Energy Information Administration. The report is expected to show that oil stocks rose 1.5 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 increased 900,000 barrels and distillates gained 1.4 million barrels last week.

Traders have so far brushed off attempts by OPEC to boost prices through production cuts. The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global supply, said last week it would slash production by 2.2 million barrels a day, its largest cutback ever, adding to a 1.5 million output quotas reduction in November.

OPEC leaders, including President Chakib Khelil, have said OPEC may meet in Kuwait City on Jan 19 to discuss further production cuts. The group's next official meeting is March 15 in Vienna. In other Nymex trading, gasoline futures rose 0.7 cent to 86 cents a gallon. Heating oil gained 0.5 cent to $1.33 a gallon while natural gas for January delivery was steady at $5.74 per 1,000 cubic feet.