- The Washington Times - Monday, March 2, 2009

SINGAPORE (AP) Oil prices fell to below $44 a barrel Monday as hopes for a quick end to the global slump evaporated amid dismal U.S. economic news and the prospect of another massive bailout of ailing insurer American International Group Inc.

Benchmark crude for April delivery fell $1.08 to $43.68 a barrel by midday in Singapore on the New York Mercantile Exchange. The contract fell 46 cents on Friday to settle at $44.76.

In another sign that the U.S. financial crisis continues to sap the government’s coffers, AIG will receive up to $30 billion in additional federal assistance, people familiar with the matter told The Associated Press on Sunday. The company previously received about $150 billion in loans from the government, which holds an 80 percent stake.

The Commerce Department said Friday that gross domestic product contracted 6.2 percent in the fourth quarter, the worst showing in a quarter-century.

“The fourth quarter GDP data out of the U.S. was simply terrible,” said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. “It’s the economic reality that’s correcting oil prices.”

Investors are concerned demand for oil will continue to weaken amid the worst global slowdown in decades. Prices could fall to $25 a barrel within the next three months, said Alan Plaugmann, head of futures and options trading at Denmark-based Saxo Capital Markets.

“We expect another leg down from here,” Plaugmann said. “Consumer demand is in a downward slope. I don’t think we’ll bring ourselves out of recession for at least three to five years.”

Iran’s Oil Minister Gholam Hossein Nozari said OPEC doesn’t plan to cut production at its next meeting on March 15, state news agency IRNA reported Sunday.

Leaders of the Organization of Petroleum Exporting Countries have for weeks said the group would likely add to 4.2 million barrels a day of output cuts pledged since September.

“It’s too early to say what they’ll do, but more of the OPEC chatter points to the possibility of cutting,” Shum said.

Many OPEC countries rely on oil revenue to fund their budgets, and leaders of the 13-member cartel have said they would like prices to rise to $70 a barrel. Higher oil prices, however, could choke off economic growth.

“OPEC is confronting a dilemma,” Shum said. “Assuming these cuts eventually work and prices go up, OPEC could prolong this global economic downturn.”

In other Nymex trading, gasoline for April delivery fell 3.15 cents to $1.36 a gallon, while heating oil declined 1.90 cents to $1.25 a gallon. Natural gas for April delivery gained 18.4 cents to $4.26 per 1,000 cubic feet.

Brent prices fell $1.16 to $45.19 on the ICE Futures exchange in London

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