Oil prices tumble below $40 on dour economic news
SIOUX FALLS, S.D. -- Oil prices tumbled below $40 a barrel Monday as reports from manufacturers like Toyota and Caterpillar pointed to a worsening global economic climate and serious deterioration in energy demand.
Light, sweet crude for February delivery fell $2.45, or nearly 6%, to settle at $39.91 a barrel on the New York Mercantile Exchange. Crude prices have tumbled 70% since peaking above $147 in July.
In London, February Brent crude tumbled $2.55 to settle at $41.45 a barrel on the ICE Futures exchange
Phil Flynn, an analyst at Alaron in Chicago, said even the continuing cold weather in the U.S. and a falling dollar haven't been enough to sustain a rally.
"I think the concerns about economic weakness still seem to be overshadowing the entire complex," Flynn said.
Toyota Motor projected its first-ever operating loss since it began such reports, acknowledging Monday that its nine-year stretch of global vehicle-sales growth had stalled.
Crashing auto demand, especially in its key U.S. market, and the profit erosion from a surging yen proved too much for Japan's top automaker, which had been booming on the success of its fuel-efficient models, including the Camry sedan and Prius gas-electric hybrid.
Caterpillar said Monday it would cut executive pay by up to 50% next year because of weakening demand.
The world's largest maker of mining and construction equipment also said it would slash pay for senior managers 5% to 35% in 2009.
The world's biggest crude producers have not been able to slash output fast enough.
The Organization of Petroleum Exporting Countries said last week it would slash production by 2.2 million barrels a day in its largest cutback ever, trying to stem the rapid price decline.
But oil trader and analyst Stephen Schork said in order for OPEC to adhere to its January quota, the cartel first must adhere to its November cut of 1.5 million barrels a day.
"Given crude oil's weakness since OPEC's announcement, it is safe to assume the market is a bit skeptical regarding the group's ability to comply," Schork wrote in his daily publication, The Schork Report.
