Oil prices fell below $53 and almost a two-year low early Thursday as global stock markets prices in a deepening recession.
The global recession appears to be shaping up as the worst in decades. Many people are saying it will be the worst since the great depression. Concerns in the US are mounting that Congress may not authorize a bailout of the automakers or at least not with terms the automakers will be willing to accept.
The Dow fell -5.1% on economic fears as pessimism grew at an alarming rate. On Thursday Japan's Nikkei fell -4.7% in early trading and Hong Kong's Hang Seng was off -5.1%.
Crude fell under $53 after the US DOT said Americans drove 11 billion fewer miles in September. Projecting this into October/November the DOT believes the slowdown in driving will be the worst since 1980 and cheap gasoline now is not promoting an increase in travel.
OPEC members appear powerless to control the price of oil with several warning again today that they could cut production at both the November and December meetings. The market completely ignored their whining as all talk and no action. Tanker trackers pointed out that actual production so far in November has barely declined from October levels despite the tough talk from OPEC members. This is a perfect case of "do as I say, not as I do." One OPEC spokesman said oil could fall into the $40s if prompt action on the production cuts is not seen.
Chevron declared force majeure on 90,000 bpd of Nigerian crude after rebels blew up a pipeline. Somali pirates hijacked a Saudi supertanker carrying $100 million in crude. Neither event sparked an uptick in oil prices.
Weekly crude inventories in the US rose by 1.6 million barrels and slightly more than analysts expected. Gasoline stocks rose for the third consecutive week. Overall petroleum demand has fallen below 19 million barrels per day and the Mastercard Spending Pulse survey showed gasoline consumption has declined for 30 consecutive weeks.
Add in a deepening fear of a severe global recession and you have the perfect storm for crude prices. A prolonged sharp decline in demand has created a temporary glut in supply and no amount of tough talk is going to push prices higher.