Oil prices slid to near $55 a barrel on Thursday in Asia as more bad economic news from the U.S. heightened fears of a severe global downturn that will pulverise demand for crude.
Light, sweet crude for December delivery was down 81 cents to $55.35 a barrel, after falling as low as $55.03, in electronic trading on the New York Mercantile Exchange by midmorning in Singapore.
"There are fears of reduced demand through 2009," said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore. "Market sentiment is extremely bearish. It seems like there's nothing that can stop the bears."
The crude futures contract overnight fell $3.50 to settle at $56.16, the lowest closing price since January 2007, after the U.S. Energy Department slashed its 2009 oil consumption forecast.
The department said Wednesday it expects U.S. consumption of petroleum to next year drop more severely than any time since 1980. The department's Energy Information Administration said 2009 petroleum consumption is projected to sink by 250,000 barrels per day, or 1.3 percent, more than twice that projected in its previous outlook.
Signs that U.S. consumer spending has plummeted also fueled pessimism. Department store retailer Macy's Inc. said sales fell more than 7 percent in the third quarter and consumer electronics retailer Best Buy Co. slashed its fiscal 2009 guidance on fears that consumer spending will erode.
Morgan Stanley said it plans to cut 10 percent of staff at its institutional securities group_the bank's biggest business that covers everything from investment banking to stock trading.
"It's not just gloom and doom sentiment, it's indeed real," Shum said. "Companies are showing poor earnings and announcing major job cuts. There's a lot of bad news putting downward pressure on oil."
The grim company news helped send the Dow Jones industrial average down 4.7 percent Wednesday, and Asian stocks followed suit Thursday. Japan's benchmark Nikkei 225 index fell 5.1 percent, Hong Kong's Hang Seng index plunged 6.1 percent, and the Korea Composite Stock Price Index dropped 5.3 percent.
Oil traders have looked to stock markets for guidance on investor expectations about economic growth.
The Organization of Petroleum Exporting Countries, which produces about 40 percent of world supplies, has signaled it may cut production before its next meeting in December on top of a 1.5 million barrel reduction in output quotas last month.
"I think OPEC considers $50 a must-defend price," Shum said. "There are bullish elements that the market has been ignoring."
In other Nymex trading, heating oil futures fell 1.39 cents to $1.82 a gallon, while gasoline prices dropped 0.3 cents to $1.24 a gallon. Natural gas for December delivery slid 8.6 cents to $6.32 per 1,000 cubic feet.
In London, December Brent crude fell 41 cents to $51.96 a barrel on the ICE Futures exchange.