ziggy You work for big oil? LOL J/K
Oil falls near $40
Concern about the recession and its impact on energy demand drive prices lower.
By Catherine Clifford and Kenneth Musante, CNNMoney.com staff writers
Last Updated: February 2, 2009: 3:34 PM ET
NEW YORK (CNNMoney.com) -- Oil prices fell Monday as investors remained concerned about a deepening recession and its impact on global demand for energy.
Light, sweet crude for March delivery settled down $1.60 at $40.08 a barrel. Prices had fallen as low as $39.83 during the session.
Crude oil prices have fallen more than $100 a barrel since the summer months, when oil topped $147 a barrel, as the weakening economy dragged down demand for energy.
"The economy is slowing more than expected, and we might see further decline in demand for fuel," said Antoine Halff, deputy head of research with trading firm Newedge USA.
In reports out Monday, the government said December personal spending declined 1% and spending on construction fell for the third straight month, while a private sector report showed the manufacturing sector in contraction for the 12th straight month in January.
Later this week, the government is expected to report that the unemployment rate rose to 7.5% in January. Last Friday, another government report showed that GDP fell at an annual rate of 3.8% in the fiscal fourth quarter.
The market is going to keep worrying about the economy and falling demand "for the foreseeable future," said Halff.
Strike worries recede: Also easing oil prices was the postponement of a possible oil strike by U.S. oil workers seeking a new labor contract.
Royal Dutch Shell (RDS) and the United Steelworkers union, which represents oil refinery workers, agreed to rolling 24-hour contract extensions. The two groups were negotiating a labor agreement that was originally scheduled to expire Sunday.
"In this market, it's crazy for unions to go on strike," said Halff. A lot of refiners are running in the red and would be happy to shut down, he explained.
Gas prices rise: Gasoline prices meanwhile rose 1.3 cents overnight to a national average of $1.88 a gallon, according to a daily survey of gas station credit card swipes from motorist group AAA.
Gas prices - which had fallen by more than half from the record highs set last July - have been on the rise in recent weeks, despite crude futures stabilizing just above $40 a barrel.
Production cuts have been the primary reason, according to Bob van der Valk, pricing analyst with fuel management company 4Refuel Inc. He said one California refinery closed because the low prices caused it to lose money on each gallon of gas.
van der Valk also said plants were retooling to begin producing summer-grade gasoline.
