Brent oil, the benchmark that prices two-thirds of the world's crude, fell below US$50 a barrel for the first time since May 2005 yesterday as global energy demand slumped.
Brent has crashed 66 percent from a record US$147.50 a barrel on July 11 as the credit crisis spread through the global economy, cutting industrial output and consumer spending.
The International Energy Agency expects world oil demand to rise at its slowest pace for 23 years in 2008 as the United States, Europe and Japan face their first simultaneous recessions since 1945, according to Bloomberg News.
''Oil at US$147 was purely a speculative bubble,'' Gareth Lewis-Davies, an analyst at Dresdner Kleinwort Group Ltd, said before prices breached US$50. ''It was cheap money chasing opportunities that were evaporating in other asset classes. What would bring it down further is any indication of demand growth being weaker than already dampened expectations.''
Brent for January settlement fell as much as 3.7 percent to US$49.80, the lowest since May 31, 2005, yesterday on London's ICE Futures Europe Exchange. The contract traded at US$49.85 at 1:26pm London time.
Oil's decline has accelerated. Crude fell 33 percent in October, the most in one month since at least 1988, as fuel demand dropped. US fuel use during the past four weeks averaged 19.1 million barrels a day, down 7 percent from a year ago, an Energy Department report said.
BASF SE, the world's largest chemical company, lowered its 2008 profit forecast for the second time on Wednesday and said it planned to idle 80 factories after customers in the auto, construction and textile industries reduced orders. US crude oil supplies rose 1.6 million barrels to 313.5 million barrels last week, the Energy Department said.
Brent first rose above US$50 on October 11, 2004.
The IEA lowered its 2009 estimate by 670,000 barrels a day, or 0.8 percent, to 86.5 million barrels a day, it said in a monthly report last week. That's the biggest reduction since 1996. The agency's expectation that demand will expand next year remains more optimistic than those of some other analysts.
