Oil drifts below $35 amid waning demand
Slowing global economy and waning fuel demand pushes prices down on final day of January contract.

December 19, 2008: 11:06 AM ET

NEW YORK (CNNMoney.com) -- Oil prices fell in morning trading Friday, on the final day of the January contract, as the global economic slowdown continues to damper demand for oil.

U.S. crude for January delivery slipped $1.46 to $34.76 a barrel. Earlier in the session, prices dipped as low as $33.44 a barrel.

The February contract, which begins its front-month run on Monday, rose 58 cents to $42.25 a barrel.

On Thursday, oil fell to a 4-1/2 year low, shedding $3.84 to $36.22 a barrel.

Trading was muted as investors continued to shrug off an OPEC production cut, which will take effect in January.

On Wednesday, the Organization of Petroleum Exporting Countries, an international trade organization whose members supply about 40% of the world's oil, elected to cut production by 2.2 million barrels a day, starting next month.

OPEC's action, and investor concern about the slowing global economy's impact on crude demand, sent the price down $3.54 to $40.06 a barrel on that day, marking its lowest close since July 2004.

"They're wondering whether OPEC can enforce this cut," because the budgets of many OPEC nations are already stretched incredibly thin, said Nimit Khamar, analyst with Sucden Financial in London.

Investors have largely ignored other OPEC production cuts made since September, totaling an additional 2 million barrels a day.

There was also little reaction to the U.S. government's announcement of a rescue plan for General Motors (GM, Fortune 500) and Chrysler LLC that makes $13.4 billion in federal loans available almost immediately.

Falling demand: Oil prices have shed more than $100 a barrel since hitting a record high of $147.27 a barrel in July as worldwide demand began to decline.

In the United States, the world's largest oil consumer, supplies have been building as Americans cut back on driving.

U.S. crude inventories increased by 500,000 barrels last week, according to the Energy Department.

"We've got more oil than we know what to do with at the moment," said Bob Thomas, head of the energy group at Porter & Hedges, a Houston-based law firm that represents oil companies.

Consumer in the U.S. drove 100 billion fewer miles over the past year, according to a government report.

"We're seeing demand slip everywhere, including China," said Khamar.

Rapidly expanding export-based economies of nations such as China and India are beginning to suffer as much as their counterparts in the developed world, where cash-strapped citizens are consuming less of everything.

"It may take a while for supply and demand to match up," said Thomas.

Looking forward, the Energy Department said Wednesday that crude prices could reach $130 a barrel in 2030 as global supplies diminish. But it also predicted that demand for fuel would rise by only 1 million barrels a day during that time period.

So. Jersey is holding at $1.45. Funny how Texas was cheaper than Jersey a few weeks ago. Must be that Suppy and Demand thing.

Another curious thing. Regular is $1.45, Plus is $1.75, Super is $1.95. It use to be 10 cents separating each grade. Then the gap started to widen. Supply and Demand? or What the Market will bear?

85p a litre in the UK now!

That is something like $4.75/gallon

Yep!

Sucks eh?

That is the story in all the non-oil countries world over except in US. Here we have oil pretty cheap now. I fill my tank for something like $16 now and my Corolla has awesome fuel efficiency too. I just hope I don't lose my job

It costs us about £60 to fill our tank

Hey Yogi, what car do you have?

Back down to 1.58

I would kill for prices like that.

What is the rate in your city now?

$1.47.

Vauxhall Zafira,2 years old.

I need a 7 seater for all the damned kids

Now what does that mean?

I don't know what you mean when you ask what it means?

Unless you mean i have a big car so it is no surprise it costs a lot to fill the tank? To that i would say, fair enough, but i have 4 kids and a mother to run around and i can't afford 2 cars so i need a big bus!

- this.

Means he needs another beer

Price of regular has been stuck at $1.47 for a week now. It was dropping twice a day previously.

I saw no-name gas going for $1.35 in NJ yesterday. Other stations were around $1.42-$1.47

$1.43.

It's gone back up to 1.89. WTF?

$1.49 here.

Still in the $1.30's in NJ, and down to the $1.80's on Staten Island.

Here it's holding at $1.51. It's good to get a full tank again.

Costco here has stabilized at $1.44 for regular for the past 10 days. $1.63 for high test--filled the Bimmer last Friday, what a relief!
BUT: Motor oil prices haven't come down at all. Standard oil price is still $2-2.50/qt. here. The Bimmer requires Castrol RS 10W-60 Formula One Synthetic: $9.49/liter.

South Jersey went up 10 cents from 12/31/08 to 1/5/09. What happened? New Year Tax?

Yeah, I noticed that, too. Last time I got gas (last week) it was around $1.33 and now it's back up to $1.49+ -- maybe they thought we wouldn't notice...

That's because you got your car inspected. They had to recover the cost of that test somehow.

While I was visiting my F-I-L in the hospital this weekend I seen on Fox news that they want to raise the gas tax 50%. I hope NOT!!

They're saying that it's the only way to pay for the road repairs that we desperately need. What happened to all the taxes we DID pay? And what happened to the tolls we've been paying for years?