- The Washington Times - Monday, March 30, 2009

KUALA LUMPUR, MALAYSIA (AP) - Oil prices tumbled Monday to below $52 a barrel as investors cashed in on recent gains, and in tandem with a pullback on Wall Street Friday.

Benchmark crude for May delivery fell $1.03 to $51.35 by midday in Asian electronic trading on the New York Mercantile Exchange. The contract dropped $1.96 to settle at $52.38 on Friday.

Further declines are expected as analysts say the recent rally in crude has not been supported by any real changes in market fundamentals, with supply building up while demand from industrial consumers is falling faster than expected.

“We are seeing some profit-taking because oil supply fundamentals really did not support the price rally to the mid-50s a barrel,” said Victor Shum, an energy analyst at consultancy Purvin & Gertz in Singapore.

Crude prices set new year highs last week, rising steadily from US$35 in February to closing above $54 a barrel last Thursday, partly lifted by the recent rally in global stock markets. Asian markets fell Monday.



Shum said there is growing skepticism about the level that prices have climbed to and foresees them sliding below $50 a barrel again.

The U.S. government last week said crude storage facilities were brimming with more oil than they’ve had in 16 years. Combined with strategic petroleum reserve, the nation now has 1.05 billion barrels of oil in storage _ enough to fuel roughly 44 million cars for a year.

Crude is piling up as airlines, manufacturers, automakers and just about every other sector slow down and millions of workers lose their jobs. U.S. stores of natural gas also rose by 3 billion cubic feet to about 1.65 trillion cubic feet for the week ended March 20.

The Organization of Petroleum Exporting Countries has promised to slash production by 4.2 million barrels per day. But companies that track supertankers show that OPEC exports have dropped to the lowest level since June 2003, according to analyst Addison Armstrong.

A new study by Cambridge Energy Research Associates also said plummeting crude prices has sent shock waves through the oil industry, discouraging enough exploration to cut future oil supplies in half.

The CERA report said that of the potential 14.5 million barrels per day in new production expected from 2009 to 2014, about 7.6 million barrels were “at risk.”

In other Nymex trading, gasoline for April delivery fell 1.89 cents to $1.4690 a gallon while heating oil dipped 1.58 cents to $1.4170 a gallon. Natural gas for April delivery remained flat at $3.737 per 1,000 cubic feet.

In London, Brent prices fell 95 cents to $51.03 a barrel on the ICE Futures exchange.

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