Oil prices dashed by bleak news

Oil prices tumbled below $50 a barrel Monday as National Bureau of Economic Research reported that the U.S. economy has been in a recession since December 2007 and the Dow Jones industrial average fell nearly 700 points.

A tandem of bleak economic reports led to an early decline even before the NBER report was released, and a huge sell-off on Wall Street was enough to send crude prices down fast on the belief that energy demand is deteriorating.

A panel of the NBER believes the current downturn will last until the middle of 2009 and will be the most severe slump since the 1981-82 recession.

Light, sweet crude for January delivery fell more than 9 percent, or $5.15, to settle at $49.28 a barrel on the New York Mercantile Exchange.

Crude has lost nearly 70 percent of its market value since July, when it peaked near $150 per barrel.

Analyst Phil Flynn with Alaron Trading Corp. said the $50 price remains significant psychologically for traders.

“It opens up the possibility of further declines,” he said.

In a note to investors Monday, Raymond James Equity Research slashed its 2009 oil price forecast from $90 per barrel to $60 per barrel.

In London, January Brent crude fell more than 10 percent, or $5.52, to settle at $47.97 on the ICE Futures exchange.

Dour economic news in the U.S. comes on the heels of a meeting over the weekend in Cairo, Egypt, where the Organization of Petroleum Exporting Countries said it would not cut production before it meets on Dec. 17 in Algeria.

Saudi Oil Minister Ali Naimi said Saturday that OPEC will work to shore up oil prices.

OPEC seems to have lost much of its power to control prices by cutting supply.

A report on Iranian state TV Monday in which OPEC Secretary-General Abdullah El-Badri was quoted as saying that a daily oil production cut of between 1 million and 1.5 million barrels was likely in December did little to halt declines.