Crude oil swoons to 5-year low, gas prices to follow

Crude oil prices accelerated their six-month slide Monday, plunging to fresh five-year lows after a key investment bank bearclawed the energy market, a major producer slashed its drilling and exploration budget by more than 20% and fresh reports pointed to slowing global economic growth.

The 4% drop in crude oil prices crimped Wall Street, pushing the Standard & Poor’s 500 Index down 0.7% to 2060 and igniting big losses among already hard-hit energy producers and oil patch stocks. The latest drop in oil is likely to fuel fresh cuts in gasoline prices in the weeks ahead, saving consumers, shippers and airlines billions. Oil prices have yet to find a bottom.

“We’re in a tailspin,” says Tom Kloza, global head of energy analysis at the Oil Price Information Service. “The world is facing a possible glut of oil in 2015. Consumers typically paid $470 billion-$480 billion for motor fuel between 2011 to 2013. We’re on track for about $449 billion this year and likely to pay $75 billion to $100 billion less next year.”

Gasoline prices, averaging $2.67 a gallon nationwide — vs. $3.26 a year ago — are likely to fall to about $2.50 before year’s end, Kloza says.

West Texas Intermediate crude — the benchmark for U.S. oil prices — ended at $63.05 a barrel, down 4.3%, its lowest close since July 2009. Brent crude — which reflects the broader, global market — sank 4% to $66.10, its lowest since September 2009. Since peaking at about $107 a barrel in June, West Texas crude has dropped more than 40%.

“It’s just the path of least resistance right now,” says Tamar Essner, lead energy analyst for NASDAQ. “Until the market senses that (investors) don’t need to be long crude, it’s going to go lower.”

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