US Oil Prices Plunge Below $60, Lowest Level Since July 2009

U.S. crude oil prices tumbled below $60 a barrel Thursday, a psychologically important level, for the first time since July 2009. On the New York Mercantile Exchange, West Texas Intermediate crude, the benchmark for U.S. oil prices, declined 1.85 percent, to $59.81 a barrel, for Jan. 15 delivery.

Following the decline in U.S. oil prices Thursday, the S&P 500’s energy sector closed flat, up just 0.03 percent, as shares of Chevron Corporation edged up 0.05 percent, to $104.91. Exxon Mobil Corporation’s stock price edged up 0.60 percent, to $89.20 per share, while Halliburton Company shares rose 0.29 percent, to $38.23. Wednesday, the S&P 500’s energy sector dropped more than 3 percent, led by declines from Chevron and Halliburton shares, which lost 2.01 percent and 3.5 percent, respectively.

“The average inflation rate in the G7 is likely to fall to only around 1 percent next year because of the collapse in oil prices. A growing number of economies will experience a period of outright deflation,” Capital Economics warned in its “Global Inflation Watch” research note Thursday. “However, even if the price of Brent crude remains in the $60- to $65-per-barrel range, inflation should rebound late next year as the earlier decline drops out of the annual comparison.”

The slide in U.S. oil prices come a day after OPEC cut its estimate of crude oil demand next year. OPEC reduced its forecast of 2015 production to 28.9 million barrels a day, or around 300,000 fewer barrels than previously expected, as concerns grow due to the uncertainty of demand after global oil prices tumbled over 40 percent since June.

“In nonrecessionary periods, the length of time following an oil price decline has corresponded with either strength in equities or sideways consolidation,” Piper Jaffray's Managing Director Craig Johnson and Research Analyst Leah Williams said in the firm’s “Outlook 2015: Bulls Are Rockin' in the Free World” report. “From an economic standpoint, the current environment closely corresponds with the 1986-1993 period which marked a major turnaround from a cyclical standpoint in economic data trends.”

On the London ICE Futures Exchange, Brent crude, the global benchmark, fell 0.75 percent on Thursday, to $63.76 a barrel.