Crude tumbles on doubts about economic rebound
NEW YORK — Oil prices tumbled to a five-week low Monday on growing evidence of an extended recession that could sap energy demand for some time.
Benchmark crude for August delivery fell $2.68 to settle at $64.05 a barrel on the New York Mercantile Exchange.
It was the fourth straight day of declines on Nymex and since hitting a midday high for the year last Tuesday. Crude prices have fallen nearly 13 percent since then.
Natural gas prices plunged as well.
Major natural gas users, like industrial manufacturers, have been hit hard by the recession and unemployment data released last week in both the U.S. and Europe doused hopes for a quick recovery.
The Labor Department reported Thursday, the final day of trading last week because of the July Fourth holiday, that U.S. economy lost a larger-than-expected 467,000 jobs in June. On the same day, a report from Europe indicated that in the 16 countries that use the euro spiked to a 10-year high in May.
“The recent evidence concerning the U.S. economy is terrible. The news regarding Europe seems no better,” said economist Philip Verleger. “This suggests oil use will continue to decline for another year.”
Oil prices had been rising for months on the belief that the economy would improve by the end of the year. Prices had also been pushed higher by the weak U.S. currency.
Because crude is bought and sold in dollars, it essentially becomes cheaper when the dollar falls. And the dollar has fallen steadily with the U.S. government spending billions to prop up major banks and the auto industry.
Doubts about how long the weak U.S. currency can sustain prices have begun to tamp down prices.
Even last week, when oil prices hit an eight-month high above $73 per barrel, it was another sign of how volatile the market has become. A barrel of oil fell midway through the day last Tuesday and prices have been declining since.
The soaring price of energy has baffled experts because demand for everything from crude to gasoline is dismal. The U.S. is mired in recession and Americans are driving billions fewer miles than they have in past years.
Retail gasoline prices rose every day for nearly two months as refiners slashed production. That streak finally ended two weeks ago and prices at the pump have fallen every day since.
Gasoline prices fell again overnight to a new national average of $2.611 a gallon, according to the Oil Price Information Service and AAA.
Prices for gasoline are likely to fall even further with the busiest driving weekends for the summer now over, said AAA spokesman Geoff Sundstrom.
“With the economy still limping along, we don’t really see a reason for gasoline demand to increase,” he said.
In other Nymex trading, gasoline for August delivery fell 5 cents to settle at $1.7404 a gallon and heating oil slid 7.5 cents to settle at $1.6266. Natural gas for August delivery shed 12.8 cents to settle at $3.487 per 1,000 cubic feet.
In London, Brent prices dropped $1.56 to settle at $64.05 a barrel on the ICE Futures exchange.
Associated Press writers Alex Kennedy in Singapore and Pablo Gorondi in Budapest contributed to this report.Filed under News, SAP | Tags: Commodity Markets, Energy, Holidays, New york, North America, Occasions, Prices, Products And Services, Recessions And Depressions, United States, Us-oil-prices | Comment Below