Oil drops below $60 per barrel; gasoline continues plunge

— -- Crude oil prices sank 5% Tuesday on another round of dismal global economic news, dipping below $60 a barrel — a 20-month low — and raising the prospect of even-cheaper gasoline.

Peter Beutel, president of Cameron Hanover, an energy risk management firm, says the decline was largely sparked by news that Chinese imports of refined petroleum products dropped to a two-year low in October, 21% below September's imports.

"What had started as a decline in demand in the U.S. has now become declines in Europe and Asia," he says. "It's showing how rapidly demand destruction is spreading across the globe."

Crude oil for December delivery fell $3.11 a barrel to settle at $59.30 on the New York Mercantile Exchange, the lowest since March 2007. Oil prices now have plunged 60% since hitting a record-high $147 in mid-July.

Oil has traded in the $60 to $70 range in recent weeks, with rallies — spurred partly by OPEC's recent decision to cut oil production — quickly squashed by a drumbeat of dreary economic reports, Beutel says.

Gasoline prices are likely to follow oil lower. The nationwide average price of a gallon of regular gasoline slipped another 2 cents Tuesday to $2.22 a gallon, AAA says. Gas prices have tumbled 46% since peaking at $4.11 in July. In Kansas City, Mo., average prices were $1.80 a gallon.

Tom Kloza, chief oil analyst at the Oil Price Information Service, says he hasn't yet seen the kind of panic selling typical of a market bottom. As a result, he says, there's a reasonable chance crude could sink as low as $45 a barrel, if only briefly, by year's end, with gasoline prices falling to $1.50 to $1.75 a gallon.

"I think there's no real conviction out there that the price is going to bounce back in 2008, and nobody wants to plow money in, fearing the next 90 days look like a return to cheap oil," Kloza says. "Sentiment can drive these things, and it develops its own gravitational pull."