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NEW YORK: Oil prices fell on Wednesday in New York to the lowest level since February 2005 as the market focused on declining demand in the face of a barrage of weak global economic news.
On the New York Mercantile Exchange, a barrel of light sweet crude for January delivery dropped to 46.79 dollars, down 17 cents from Tuesday's close.
The New York contract hit an intraday low of 46.26 dollars and in London, Brent North Sea crude for January delivery fell as low as 44.87 dollars.
The Brent contract settled unchanged at 45.44 dollars on the InterContinental Exchange.
"Who could have imagined on the 4th of July that oil prices would retreat 100 dollars by Thanksgiving?" said Mike Fitzpatrick, analyst at MF Global.
"That knowledge alone might have kept consumers' hopes afloat enough to stave off the current gloom that seems to have descended over most financial markets," he said.
Oil prices have plunged by some 70 percent since striking record highs above 147 dollars in July as a widening global economic slowdown weighs on demand.
Weak US economic data Wednesday sparked renewed demand concerns. The oil market sank as a dismal private US employment report stoked concerns about the deepening recession in the world's largest economy, analysts said.
The US private sector lost 250,000 jobs in November, the largest decline in six years, according to the ADP National Employment Report on Wednesday.
"The macroeconomic backdrop to the oil market continues to worsen," said Barclays Capital analyst Paul Horsnell.
"We are now projecting that global (crude oil) demand will decline in both 2008 and 2009," he added.
The market shrugged off a US Department of Energy (DoE) report showing crude inventories fell by 400,000 barrels in the week ending November 28, confounding market expectations for a 1.4 million barrel increase.
The DoE said gasoline (petrol) stockpiles dropped 1.6 million barrels, in contrast to estimates for a gain of 1.6 million barrels.
US distillates, which include diesel and heating fuel, declined 1.7 million barrels, compared with market expectations for no change.
"Tightening US oil inventories is not the main factor in this bearish market. Operators will take into account the very bad OPEC discipline to consider that the cartel will not succeed its target to limit oil oversupply," said Thierry Lefrancois, analyst at Natixis.
The oil market began the week sharply lower after OPEC decided at a weekend meeting against cutting production to support prices, preferring to wait until a December 17 meeting before taking any action.
"Oil prices fell as questions about OPEC compliance raised another question on whether or not OPEC can actually follow through with the agreed upon production cut in December. As the OPEC pie continues to dwindle, tensions in the cartel continue to rise," said Phil Flynn at Alaron Trading.
The Organisation of the Petroleum Exporting Countries, which pumps 40 percent of the world's crude, has already slashed output twice this year, in September and October, by a total of two million barrels per day (bpd) in response to plunging prices. - AFP/de
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