HOUSTON: Oil prices neared $60 a barrel yesterday, the lowest point in about a year and a half, as a growing number of economic reports point to a long and painful recession. The number of Americans continuing to draw unemployment benefits surged to a 25-year high, the Labor Department said yesterday, and US retailers saw their sales plummet last month to the weakest October level since at least 1969.
When the economy slows, the demand for energy fades.
Light, sweet crude for December delivery fell more than 6.7 percent, or $4.36, to $60.94 a barrel on the New York Mercantile Exchange. Prices tumbled as low as $60.16 at one point, a level last seen in March 2007.
Many oil analysts still think a natural range for crude is closer to $80, but few saw the extent of deteriorating global economy.
Oil prices have now fallen nearly 60 percent since peaking at $147.27 a barrel in mid-July. They surged above $70 Tuesday as Americans elected Barack Obama their first black president, but a crude sell-off began the following day when prices dipped 7.4 percent. Also pressuring crude prices were interest rate cuts across Europe, where economic leaders were trying to spark growth.
Oil analyst Peter Beutel of Cameron Hanover said crude was falling because of a stronger dollar, renewed fears of recession and weaker equities market.
Meanwhile, the International Energy Agency (IEA) nearly doubled its forecast for the price of oil over the next 20 years, citing rising demand in the developing world as well as surging costs of production. According to a summary of the agency’s World Energy Outlook report due to be published in full next week, the IEA has hiked its forecast for the price of a barrel of oil in 2030 to just over $200 in nominal terms, compared to its forecast last year of $108 a barrel. Measured in constant dollars, the IEA forecasts oil at $120 a barrel in 2030, up from last year’s forecast of $62.
The IEA — an energy policy adviser for its 26 member countries, including the United States, Canada, Australia, Germany and Britain, as well as 17 other European countries — said spending on oil as a share of global economic output will rise to 5 percent over the period, compared to 4 percent last year.
“The only time the world has ever spent so much of its income on oil was in the early 1980s, when it exceeded 6 percent,” the IEA said. The IEA cut its forecast for global oil demand growth to 1 percent a year on average over the next two decades.