Crude oil prices plunged to US$54.67- its lowest level since Jan 2007, on reports that the world's biggest economies are in recession and that energy demand has declined to decade-ago levels. Later, light, sweet crude for December delivery rose to settle at US$58.24 on the New York Mercantile Exchange. Oil prices oscillated violently in line with the movement on Wall Street - wherein the Dow Jones industrials dipped 300 points before boosting over 500 points on return of the investors into the market. Gasoline prices have fallen nearly 50% since hitting a record national average of US$4.11 per gallon in July. The Labor Department reported a larger-than-expected jump in unemployment claims and Wal-Mart Stores- an indicator for consumer spending, cut its full-year outlook.
OPEC has said that USA, Europe and Japan are in a recession, the first time all three have been in a downturn together since 1974-5. The recession three decades ago was caused by an Arab oil embargo and extremely bearish stock markets. OPEC's 1.5 mln bpd production cut announced last month has had virtually no effect on tumbling crude prices. Energy analysts believe ever more- that demand, not supply, is in control of the market. The drastic fall in prices in this week is an outcome of economic predictions that industries and consumers have cut back on spending. With gas prices halving, some relief has been felt by consumers stunned by job losses and declining home prices. However, economists fear that the resulting decline in exploration and production by oil companies will lead to a massive price spike when economies rebound. The International Energy Agency has cutback its demand forecast more than it has in a decade, expecting global oil demand to average 86.2 mln bpd this year, nearly flat compared with 2007, and 86.5 million bpd next year.