Oil sank below $50 a barrel, reaching its lowest point since May 2005 amid fears over the outlook for demand in the face of a global recession. The drop in oil prices led a broader retreat in raw materials, with the Reuters-Jefferies CRB commodity index, a global benchmark, falling to a five-year low. December West Texas Intermediate fell $4 to $49.62 a barrel.January WTI traded $4.68 lower at $49.42 a barrel. ICE January Brent dropped $3.64 to $48.08. "Oil prices are searching for an elusive bottom," said Antoine Halff of Newedge brokerage in New York. "Demand destruction today rivals that caused by the oil shocks of the 1970s."
The options market is pricing in a growing likelihood that oil prices could sink as low as $40-$45 a barrel before the end of the year, with the cost of insuring against such an event jumping more than 90 per cent overnight.