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Oil tumbles below $50 as recession called

(Agencies)
Updated: 2008-12-02 09:19

Preceding the sell-off on Wall Street, the results from a pair of economic reports surprised economists, and sent oil falling. 

Traders work on the floor of the New York Stock Exchange, December 1, 2008. US stocks stayed near session lows on Monday after Federal Reserve Chairman Ben Bernanke said that the US economy remained under considerable stress. [Agencies]

The Institute for Supply Management said its gauge of manufacturing activity fell to a reading of 36.2 in November. That was a steeper-than-expected drop from the October reading of 38.9 and underscored that the hard economic times were beginning to have a major effect manufacturing. A reading below 50 indicates the sector is contracting.

The Commerce Department reported that construction spending dropped by 1.2 percent in October, much bigger than the 0.9 percent decline many analysts expected.

Survey of manufacturing activity in the euro zone and Britain also points to sharper-than-expected contraction in output. In China, an equivalent survey of its manufacturing sector also made for grim reading, generating fears that one of the main engines of global growth over the last few years is slowing sharply.

Sucden Research in London cited data from the United Nations, which now expects the global economy to grow by just 1 percent in 2009, compared with an earlier forecast expecting growth of 2.5 percent.

Meanwhile, prices at the pump continued to fall, but at a slower rate. The price fell half a cent overnight to $1.82 per gallon, according to auto club AAA, the Oil Price Information Service and Wright Express. That is 64.3 cents lower than a month ago and $1.248 lower than a year ago.

Prices also have been falling in Europe though they remain much higher than in the US.

In Germany, Europe's largest economy, a liter of gasoline sold for $1.47 per euro, or about $5.59 per gallon, according to TCS, the Swiss automobile club. That is down 26 percent from July 16.

Prices have fallen 24 percent since July 16 in France where gas sold for $1.40 per euro Monday.

In other Nymex trading, gasoline futures tumbled 9.8 cents to settle at $1.1112 a gallon. Heating oil dropped 11.2 cents to settle at $1.6151 a gallon. Natural gas for January delivery, however, rose 9.4 cents to settle at $6.604 per 1,000 cubic feet.

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