Light, sweet crude for January delivery is down to US$40.06 on the New York Mercantile Exchange- a price last seen in July 2004. Despite an announcement by OPEC of a record production cut of 2.2 mln bpd, oil prices have collapsed below US$40 for the first time since the summer of 2004. More economic data being released points to a long and severe recession globally. It was previously thought that China and other developing countries are impervious to a global recession, but recent happenings prove otherwise.
US gasoline inventories continued to rise, on a major pullback by American motorists. Demand for gasoline over the four weeks ended Dec. 12 was 2.7% lower than a year earlier. The dollar suffered its biggest one-day decline against the euro after the Federal Reserve cut a key lending rate target to historic lows. That would typically lead more investors into the crude market, but not this time because they feel that global demand is not enough to support higher crude prices.
Doubts also remain about the willingness of some OPEC members to adhere to price-boosting production quotas.