Oil slips below $50 as demand decreases

Oil dropped more than three per cent yesterday, touching the lowest level since May 2005 as record US job losses intensified concerns of a long and deep global recession and further crushed demand expectations.

The US government reported the number of workers making new claims for jobless benefits last week surged to the highest in 16 years, helping to push down global equity markets.

US crude fell $1.81 to $51.81 a barrel by 1251 p.m. EST (1751 GMT) after earlier touching $49.75, marking the lowest level since May 25, 2005, when prices hit $49.58.

London Brent crude shed $1.39 to $50.33 a barrel.

Oil has tumbled nearly $100 from record highs over $147 a barrel struck in July, as the economic crisis strangles demand growth in large consuming nations such as the United States.

US stocks advanced yesterday after a Senate Democratic aide said senators reached a bipartisan agreement on aid for automakers.

Citigroup Inc's shares tumbled another 25 per cent as investors questioned the bank's ability to withstand what are expected to be billions in additional loan losses in 2009.

As demand slumps, oil companies plan to store millions of barrels of crude in the hope economics will improve.

Shipping brokers yesterday said US oil trader Koch and Royal Dutch Shell had booked supertankers capable of storing 10 million barrels of crude, more than top exporter Saudi Arabia produces in a day.

Libya's top oil official said yesterday Opec may decide to reduce supply further at its meeting in Cairo next week if it finds members have implemented a previous decision to lower output.

The comments follow remarks from other Opec members including Kuwait, Iran and Venezuela raising the possibility of a further cut in supply to prop up oil prices.

Since early September, Opec has said it will remove around two million barrels per day from international markets, but the market has taken the view that falling demand is a bigger factor than tightening supply.