SIOUX FALLS, South Dakota: Oil prices fell below $41 a barrel yesterday as reports from manufacturers like Toyota and Caterpillar pointed to a worsening global economic climate and serious deterioration in energy demand.
Light, sweet crude for February delivery fell $1.72, or 4 percent, to $40.64 a barrel on the New York Mercantile Exchange. Crude prices have tumbled 70 percent since peaking above $147 in July. In other Nymex trading, gasoline futures slipped by 4 cents to 92.8 cents a gallon and heating oil fell 3 cents to $1.362 a gallon.
In London, February Brent crude shed $1.87 to $42.13 a barrel on the ICE Futures exchange.
Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, said even the continuing cold weather and a falling dollar haven’t been enough to sustain a rally. “I think the concerns about economic weakness still seem to be overshadowing the entire complex,” Flynn said.
Caterpillar Inc. said yesterday it would cut executive pay by up to 50 percent next year because of weakening demand. The world’s largest maker of mining and construction equipment also said it would slash pay for senior managers between 5 percent to 35 percent in 2009.
The January contract, which expired on Friday, fell $2.35 to settle at $33.87, the lowest level since early 2004. With US stockpiles rising at the key storage facility in Cushing, Oklahoma, the price dropped as brokers and traders attempted to unload supply for whatever price they could get.
“There’s so many prompt barrels sitting around that that’s really sitting on the market right now, especially the near contracts,” said Michael Lynch, president of Strategic Energy & Economic Research. “The cuts are really going to have an effect somewhere around February, March.”