Oil falls below $46 as US warns of worse recession

SINGAPORE – Oil prices fell below US$46 a barrel yesterday in Asia after White House officials warned the US recession will likely worsen in coming months, undermining demand for crude.

Light, sweet crude for March delivery fell 95 cents to US$45,52 a barrel by afternoon in Singapore in electronic trading on the New York Mercantile Exchange. The contract rose Friday US$2,80 to settle at US$46,47.
The US economy, the world’s largest consumer of crude, will ‘get worse before it gets better,’ Vice President Joe Biden said Sunday, dampening expectations that a massive government stimulus package will quickly spur growth.
Congress is working on an US$825 billion plan – about two-thirds new government spending and the rest tax cuts – that proponents expect will create as many as four million jobs.
Weak global demand for crude will likely continue to weigh on prices, said Clarence Chu, a trader at market maker Hudson Capital Energy in Singapore. US crude inventories have soared in the last three weeks, a sign that drivers are cutting consumer spending amid the worst recession in decades.
‘The demand isn’t there yet, and I don’t think it will come back until the second half of 2009,’ Chu said. ‘Unless there is a geopolitical event or some very positive economic news, oil should drift down to the US$35-$40 range.’
Trading volumes were low yesterday in Asia as many countries in the region celebrated the Lunar New Year holiday.
Investors will be looking to US earnings results this week for signs of the economy’s health. Hundreds of companies will issue reports including Procter & Gamble Co., Kimberly-Clark Corp. and Starbucks Corp.
Crude investors often use equity markets as a gauge of sentiment about the economy. Oil has fallen about 69 per cent since peaking at US$147,27 a barrel in July, joining a steep decline in stock markets around the world. -Nampa-AP