Crude Oil Trades Near $37 on Slowing Global Demand for Fuel

Feb. 17 (Bloomberg) -- Crude oil traded near $37 a barrel in New York on speculation a deepening recession in Europe and Asia will stifle demand for energy and fuel.

Brent crude, a benchmark for European, Africa and Russian grades, fell to a three-week low yesterday after U.K. bank stocks dropped and the Bank of England said the economy’s first quarter contraction may match last quarter’s 1.5 percent decline. Japan, the world’s third-largest oil consumer, yesterday said its economy contracted the most since 1974 in the fourth quarter.

“The market data from the U.S. and the other major economies is not painting a picture of an imminent recovery,” said Toby Hassall, research analyst at Commodity Warrants Australia Pty in Sydney. “The Japanese data was pretty bad.”

Crude oil for March delivery traded at $36.85 a barrel, down 68 cents from the Feb. 13 close, in electronic trading on the New York Mercantile Exchange at 10:38 a.m. in Sydney. Floor trading was closed for the Presidents’ Day holiday in the U.S. and yesterday’s transactions will be booked today for settlement.

Brent crude for April settlement fell $1.53, or 3.4 percent, to $43.28 a barrel on London’s ICE Futures Europe exchange yesterday. It slumped as much as 3.7 percent as the U.K.’s FTSE 100 Index fell to a two-week low, led by Lloyds Bank Plc.

“What is really driving it lower is the actual reduction in demand,” Peyton Feltus, president of Randolph Risk Management Inc. in Dallas, said yesterday. “The front-months are still taking the brunt of it.”

The March Nymex oil contract expires on Feb. 20. The more actively traded April contract was at $41.50 today, down 47 cents from last week’s close.

Japan, U.K.

Japan’s gross domestic product contracted at an annual 12.7 percent pace in the fourth quarter of 2008, the Cabinet Office said yesterday. That followed a 13.9 percent drop in exports from the third quarter.

The U.K. economy will probably contract 3.3 percent in 2009, up from the 1.7 percent decline predicted in November, the Confederation of British Industry said yesterday. The nation is headed for its worst recession in almost 30 years.

World oil demand may not rebound until 2010, when it may begin rising by about 1 percent a year through 2013, International Energy Agency Executive Director Nobuo Tanaka said in London yesterday.

Production cuts by the Organization of Petroleum Exporting Countries and cold weather are helping rebalance the oil market, bringing the low point for prices closer than previously expected, Goldman Sachs Group Inc. analysts said yesterday.

“As a result, the bottoming in prices and time spreads could be closer than we originally expected,” Goldman analysts including Giovanni Serio and Jeffrey Currie said in a report.

New York crude oil fell to $32.40 a barrel Dec. 19, the lowest for the near-month contract since February 2004.