DENVER -- Oil prices fell Tuesday a day before the government releases its weekly crude inventory report that recently has shown in stark numbers how much Americans are cutting back on energy costs, said the Associated Press. Although oil prices typically decline in the fall, analysts expect the prices to continue falling, perhaps as low as $50 a barrel, before they hit bottom.
U.S. crude stockpile increases have been greater than expected every week in October, which has led to rapid selloffs in the oil markets.
Oil prices have shadowed the direction of Dow Jones industrial average [image-nocss] for weeks, but that was not the case Tuesday. With the Dow up 630 points, light, sweet crude for December delivery fell 49 cents to settle at $62.73 a barrel on the New York Mercantile Exchange, the lowest closing price since May 15, 2007.
Demand is off about 7% compared with last year, said Fred Rozell, retail pricing director at Oil Price Information Service. The U.S. Department of Transportation reported the biggest monthly decline in miles driven since World War II on Friday.
"We are going to see a pretty sizable recession here," said Rozell.
Consumer pullbacks are showing up in the U.S. crude inventory reports released each Wednesday, with unexpected builds catching investors off guard.
Prices have continued to fall despite an announcement last week that the Organization of Petroleum Exporting Countries (OPEC) would cut oil production by 1.5 million barrels a day. OPEC, which controls about 40% of global crude oil production, has not ruled out another cut when it meets in December. OPEC members warned Tuesday that low oil prices have created a crisis situation that threatens key investment in production.
At an annual oil and money conference in London, Qatar's energy minister, Abdulla bin Hamad Al Attiyah, defended OPEC's cut last week, saying it was necessary amid falling demand due to the global economic turmoil. But many analysts say OPEC has lost its grip on oil prices, and that it is demand, not supply, that is driving crude downward.
U.S. consumers have drastically altered their behavior, and gasoline prices continue to tumble. Over the past week, a gallon of regular gasoline fell more than 25 cents, the Department of Energy reported Monday. Retail gasoline fell another 4 cents overnight to $2.629, according to auto club AAA, the Oil Price Information Service and Wright Express. That's roughly a dollar less than what was paid just a month ago.
United Arab Emirates energy minister Mohammed Bin Dhaen al-Hamli said the current crude prices were "very dangerous for the world's economy."
With the falling price of crude, gasoline prices will continue to fall, into the $2.25 to $2.50 a gallon range, said Jim Ritterbusch, president of energy consultancy Ritterbusch & Associates. "Normally, if you would see gas prices cut in half you could almost assume there would be a pick up in driving miles and consumer demand."
In other Nymex trading, gasoline futures fell 2.14 cents to settle at $1.455 a gallon and heating oil slipped to $1.91 a gallon. In London, December Brent crude lost $1.12 to settle at $60.29 a barrel on the ICE Futures exchange.
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