Oil falls over five percent

Oil prices fell more than 5 percent on Thursday as thickening economic gloom added to worries world energy demand will keep shrinking this year. US crude fell $1.88 to settle at $35.40 a barrel, after falling as low as $33.20 - the lowest since December 19. London Brent fell 55 cents to $44.53 a barrel, maintaining an unusual premium to the US benchmark.
The losses came after US data showing the number of US workers filing new claims for unemployment benefits rose last week and US foreclosure activity jumped 81 percent in 2008, suggesting the recession in the world's largest energy consumer nation is deepening. Oil prices have fallen more than $110 since July due to the effects of the global financial crisis.
"We have gotten more dire economic news and the notion is that 2009 will not result in any significant turnaround, with sentiment mounting that may happen in 2010 instead," said Jim Wyckoff, independent energy analyst in Cedar Falls, Iowa. The gloomy global economic outlook prompted Opec on Thursday to forecast a fall of 180,000 barrels per day in world oil demand this year, 30,000 bpd steeper than its previous forecast.
The cartel, which has already cut 4.2 million bpd from the world market since September, could quickly deepen output cuts if needed, Opec President Botelho de Vasconcelos said Thursday. Earlier in the week, the US Energy Information Administration forecast a world consumption drop of more than 800,000 bpd this year as the global economic slowdown hits fuel demand.
US refiners facing the downturn have been putting crude oil into storage instead of into processing units, pushing stockpiles at the Cushing, Oklahoma, storage hub - the delivery point for US crude futures - to record highs. The brimming inventories at Cushing have upended US crude's relationship with Brent, driving the higher-quality grade well below its European counterpart.
The American Petroleum Institute on Thursday said US demand for crude oil and petroleum products slid 5.9 percent in December from a year earlier, with demand in 2008 dropping at the fastest rate in almost three decades.