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NEW YORK: Oil prices crashed below 50 dollars a barrel on Thursday as plunging equities and weak US data sparked fresh fears that a worldwide recession would ravage energy demand.
In New York, light sweet crude for delivery in December plunged 4.00 dollars a barrel to close at 49.62.
The December contract expired at the close after hitting an intraday low of 48.64 dollars, a level last seen in May 2005.
The contract had not been below the 50-dollar level since January 18, 2007.
The New York contract broke the psychological barrier shortly after Brent North Sea crude for January crashed it in London.
Brent fell as low as 47.82 before settling 3.64 dollars lower at 48.08 dollars a barrel.
Analysts said sentiment was hammered by a dismal unemployment report in the United States, the world's biggest energy consumer.
Official data showed initial claims for unemployment benefits shot up to a 16-year high last week as the economy appeared to be heading into a deep recession.
"The hits to the economy keep on coming. Initial jobless claims rose 27,000 to 542,000 for the week, the highest since 1992. Energy prices were under pressure all night, and the losses have accelerated on the back of the claims data," said John Kilduff, analyst at MF Global.
"Given the rapidity of the decline, the current lows and lower are tentatively a value zone for us, and should be considered a buying opportunity," Kilduff added.
Oil prices have now plunged by about two-thirds since striking record highs above 147 dollars in July as a global economic slowdown slashes worldwide demand for energy.
"The oil market is reacting to yet more negative news on the prospects for the global economy," said IHS Global Insight oil analyst Simon Wardell.
"With stock markets continuing to fall around the world, and particularly in Asia, there is just no positive news out there which could help restore confidence in oil markets."
Wardell said that "the market is still searching for a floor and until there some stronger signs that supply is being cut, we are likely to see continued price weakness."
Oil market sentiment was also dampened this week after US bank Goldman Sachs said it would close all of its oil trading recommendations, saying it "did not expect significant upside potential.
"The volatility in the past few weeks has mostly been to the downside and the pressure on the oil complex has increased," Goldman Sachs said in a report.
In addition, the US Federal Reserve on Wednesday sharply cut its outlook for the US economy for 2009, highlighting the potential for recession over the next year while leaving the door open for more interest rate cuts.
The health of the US economy is vital for the oil market because the United States is the world's biggest oil consuming nation.
Torbjorn Kjus, analyst at DnB NOR Markets, said that he expected prices to fall even further in the coming months.
"We are expecting further price weakness in the short term," Kjus said in a research note to clients.
"Fundamentals (of supply and demand), psychology, sentiment and technicals are not looking good," he said.
"We are however expecting to see the market bottom out before year-end and a price recovery starting in January."
On Monday, the Organisation of the Petroleum Exporting Countries (OPEC), whose members produce 40 percent of the world's oil, said it was ready to intervene on a regular basis to help prop up prices. - AFP/de
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