Oil price declines below $37 on unpleasant news from US

More bad economic news from the US sent oil prices tumbling yesterday, with a barrel of crude briefly fetching less than $37 in thin Christmas Eve trading.

Expectations of further buildups in US stocks also kept a low ceiling on prices.

After dipping as low as $36.63, light, sweet crude for February delivery recovered slightly but was still down $1.87 at $37.11 a barrel by afternoon in Europe in electronic trading on the New York Mercantile Exchange.

The contract fell 93 cents overnight to settle at $38.98.

A steady stream of dismal US economic and corporate data during the past few months has hammered investor confidence and sent oil prices reeling 74 per cent since July.

More bad news emerged yesterday with consumer spending falling for a fifth straight month in November, the longest weak stretch in a half-century, while incomes declined under the weight of massive job layoffs.

Separately, new claims for unemployment benefits rose more than expected last week, as layoffs spread throughout the economy, more evidence the labour market is weakening as the recession deepens. The Labour Department reported that initial requests for jobless benefits rose to a seasonally adjusted 586,000 in the week ending December 20, from an upwardly revised figure of 556,000 the previous week. That's much more than the 560,000 economists had expected.

Additionally, orders to US factories for big-ticket manufactured goods fell again in November, reflecting further setbacks in the battered auto industry and a big drop in demand for commercial
aircraft.

The Platts survey has projects that oil inventories increased 900,000 barrels and distillates gained 1.4 million barrels last week.

Opec leaders, including President Chakib Khelil, have said Opec may meet in Kuwait City on January 19 to discuss further production cuts. The group's next official meeting is March 15.

The fall of benchmark crude on the Nymex has been paralleled by steep declines in Brent futures traded on London's ICE exchange. Trader and analyst Stephen Schork said Brent crude has dropped "in 79 of the last 123 sessions by $108.05 a barrel – a 73 percentage point loss.