Crude Oil Futures Plummet Below $42 a Barrel

Strategic Insights -

Crude oil futures took a nosedive on Monday, shedding last week's gains as worsening economic prospects and oil demand weighed heavily on markets. The slump sent light, sweet crude for April delivery plummeting $2.88 to $41.88 a barrel on the New York Mercantile Exchange. The decline was exacerbated by a dismal U.S. gross domestic product report and troubles at AIG, which posted a massive $61.7 billion loss, forcing the federal government to step in to prevent bankruptcy. Analysts are closely watching Wednesday's U.S. oil inventory numbers for a potential repeat of last week's bullish report, which could help support prices.

Key Takeaways:

  • Crude oil futures fell below $42 a barrel on Monday, shedding last week's gains due to worsening economic prospects and oil demand.
  • Light, sweet crude for April delivery dropped $2.88 to $41.88 a barrel on the New York Mercantile Exchange, a decline of 6.4%.
  • The slump was attributed to a dismal U.S. gross domestic product report and troubles at AIG, which reported a $61.7 billion loss.
  • Analysts are watching Wednesday's U.S. oil inventory numbers for a potential repeat of last week's bullish report.
  • A drawdown in crude stockpiles or a smaller-than-expected increase could help support prices and lend weight to OPEC's output cuts.
  • Oil demand remains weak, with the Energy Information Administration reporting a 6% drop in U.S. oil demand last year, the biggest since 1980.
  • Demand is expected to drop further this year.

Statistics:

  • Crude oil futures fell $2.88 to $41.88 a barrel on the New York Mercantile Exchange, a decline of 6.4%.
  • Light, sweet crude for April delivery dropped $2.88 to $41.88 a barrel, erasing last week's gains.
  • April Brent crude on the ICE futures exchange traded $2.62 lower at $43.73 a barrel.
  • AIG reported a colossal $61.7 billion loss, the biggest quarterly loss ever.
  • The U.S. economy showed little sign of recovery, with oil demand remaining weak.
  • The Energy Information Administration reported a 6% drop in U.S. oil demand last year, the biggest since 1980.

Sources:

- Dow Jones Commodities News via Comtex, Mar 02, 2009

- Hyun Young Lee, "Crude oil futures fall on dismal US economic report"

(Dow Jones Newswires)