Oil Falls on Speculation Slowing Economies Will Use Less Fuel

Jan. 19 (Bloomberg) -- Crude oil fell in New York on speculation recession in the world’s largest developed economies will cut demand for fuel and energy this year.

A report this week in the U.S., the world’s largest oil consumer, will probably show housing starts last month fell to the lowest annual rate since at least 1959, according to a Bloomberg News survey of economists. Global oil demand will shrink 0.6 percent to 85.3 million barrels a day this year, the first two-year decline since 1983, the International Energy Agency said Jan. 16.

“The near-term economic news and data is going to remain extremely weak and that’s just going to continue to test sentiment in energy and metals markets,” David Moore, commodity strategist at Commonwealth Bank of Australia Ltd., said by phone from Sydney today.

Crude oil for February delivery fell 60 cents, or 1.6 percent, to $35.91 a barrel in after-hours electronic trading on the New York Mercantile Exchange at 8:18 a.m. in Singapore.

The contract, which expires tomorrow, rose 3.1 percent to $36.51 on Jan. 16 as investors who had expected further declines in February crude bought oil back to limit losses ahead of today’s holiday in the U.S. Oil fell 11 percent last week as U.S. stockpiles rose and OPEC forecast a decline in demand.

The more actively traded March contract dropped 25 cents to $42.32. It fell 2.2 percent to $42.57 on Jan. 16.

‘Out of Synch’

Brent crude oil for March settlement fell 39 cents, or 0.8 percent, to $46.18. The contract dropped 2.3 percent to $46.57 on London’s ICE Futures Europe exchange on Jan. 16.

The Nymex February contract “is out of synch with the rest of the world, not just Brent,” Commonwealth’s Moore said. Weak economic data around the world is likely to place March prices under the same selling pressure, and it may be some time before production cuts by the Organization of Petroleum Exporting Countries are felt, he said.

The margin between the two contracts was at $6.01, having reached $8.14 at the Jan. 15 settlement. The spread between the January and February contracts reached a record $8.49 on Dec. 19.

OPEC produces about 40 percent of the world’s oil. The group agreed to cut output by 9 percent starting this month to prevent a glut and stem a six-month decline in prices.

Saudi Arabia, the group’s biggest producer, last week said it will reduce output further in February. Ministers should agree to fresh cuts at the group’s March 15 meeting if prices continue to slide, Algerian Oil Minister Chakib Khelil said Jan. 17.

There will be no floor trading in New York today because of the Martin Luther King Day holiday.