Crude Oil Plunge Continues

By Mark Williams

Oil continued its downward march Thursday as mass layoffs pushed the U.S. economy deeper into recession, signaling a drastic pullback on energy spending.

Light sweet crude for February delivery, fell $1.07 to $43.54 barrel on the New York Mercantile Exchange. The January contract, which closes on Friday, fell $1.42 to $38.64 after dropping as low as $37.68, levels last seen in the summer of 2004.

There is no demand for oil right now, said analyst Peter Beutel of Cameron Hanover.

Higher prices for the February contract suggest that oil brokers and traders believe OPEC's unprecedented 2.2 million-barrel daily production cut, announced Wednesday, will tighten supply. The Organization of Petroleum Exporting Countries had already taken 2 million barrels of oil out of production, bringing total cuts to more than 4 million barrels per day.

"The market is saying OPEC cuts will have an impact but just not right away," he said.

As companies and consumers spend less, analysts continue to whittle away energy demand expectations.

JPMorgan on Thursday cut its 2009 price target for oil to $43 a barrel from $69, citing "ongoing deterioration in the world economic environment and the ensuing sharp contraction in global oil demand in both 2008 and 2009."

Oil prices have tumbled 73% since July. What started as a crisis in the U.S. subprime mortgage sector last year has mushroomed into a recession in most developed countries and a sharp downturn in emerging nations.

Actions by OPEC and tumbling fuel prices have failed to stimulate demand.