After months of cutting oil production it appeared this week that oil producing nations had finally captured some control in the crude markets, at least until the latest batch of economic news sent oil prices falling yet again, according to AP.
Benchmark crude for April delivery fell 80 cents to settle at $44.44 a barrel on the New York Mercantile Exchange.
That is an 11 percent increase from Monday`s open, but many oil traders say there is little chance prices will hold in the current economic environment, which has led to an anemic demand for energy.
The Commerce Department said Friday that the economy contracted at a staggering 6.2 percent pace at the end of 2008, the worst showing in a quarter-century.
The report showed the economy sinking much faster than the 3.8 percent annualized drop for the October-December quarter first estimated last month. It also was considerably weaker than the 5.4 percent annualized decline economists expected.
Oil prices had risen for two consecutive days on government reports showing that oil imports were falling.
The Organization of Petroleum Exporting Countries appears to have stuck to production cuts of 4.2 million barrels a day. Most believe another cut of at least 1 million barrels will be announced during the next OPEC meeting on March 15.
In addition, the Abu Dhabi National Oil Company said this week it would cut as much as 17 percent of its output on various grades of oil. Reductions of 10 percent to 15 percent were announced late January.
With the economy contracting so fast, however, it is unclear if those cuts are enough to match falling demand.
Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates, said it will be a while before crude prices increase substantially, comparing the market to turning a big barge around in the middle of the Mississippi.
"I think the market is having a hard time coming to grips with everything," said another analyst, Alaron Trading Corp.`s Phil Flynn. "We`re still dealing with a historic drop in demand and historic retraction on the economy."
Late Thursday, federal regulators launched an investigation into the United States Oil Fund, which at times controls enough oil contracts to supply the world with crude for a day.
Oil traders have become increasingly critical of the fund, which at one point built a stake equal to 20 percent of contracts traded on the open market.
Retail gasoline prices were essentially unchanged overnight at $1.883 a gallon, according to auto club AAA, the Oil Price Information Service and Wright Express.
In other Nymex trading, gasoline for March delivery fell 1.97 cents to settle at $1.28 a gallon, while heating oil declined 2.82 cents to settle at $1.265 a gallon. Natural gas for April delivery gained 13.2 cents to settle at $4.203 per 1,000 cubic feet.
