Oil Prices Falling on Stimulus Skepticism, Demand

New York, NY, Feb. 12, 2009--Surging crude inventories and investor skepticism over the U.S. stimulus package sent oil prices below $36 per barrel Thursday.

Investors seemed more wary than relieved after U.S. lawmakers finally agreed overnight to a $790 billion stimulus bill designed to pull the economy out of recession.

Light, sweet crude for March delivery fell 53 cents to $35.41 a barrel by midday in Europe on the New York Mercantile Exchange. The contract fell $1.61 overnight to settle at $35.94.

U.S. crude oil inventories have jumped in recent weeks as rising unemployment erodes spending on gasoline.

A weekly report Wednesday from the Energy Information Administration showed that crude inventories jumped by 4.7 million barrels for the week ended Feb. 6, more than an increase of 3.4 million barrels expected by analysts surveyed by Platts, the energy information arm of McGraw-Hill Cos.

Including last week's build up, crude inventories have swelled by more than 30 million barrels in the past six weeks.

"Conditions in the West and globally remain quite weak," said Gerard Burg, minerals and energy economist with National Australia Bank in Melbourne. "Given the economic outlook, there's little to drive prices higher."

Forecasters continue to lower their expectations for crude demand. The Paris-based International Energy Agency said Wednesday that global oil demand in 2009 will likely be 84.7 million barrels per day, 570,000 barrels less than the previous estimate.

"It's still a market that's really focused on demand," Burg said. "I think there's potential for conditions to weaken further."