Crude oil was again trading below a key threshold of $35 a barrel Tuesday as an avalanche of bad economic news and scant faith in a quick recovery continued to batter the commodity's value.
Light, sweet crude for March delivery ended the day down $2.58 to $34.93 a barrel on the New York Mercantile Exchange.
Analysts said another major tumble in prices probably would occur if oil closed below $32 a barrel in the next day or so. When economies slow to a crawl, demand for oil dries up and its price drops, oil analysts said.
"Gasoline prices should go down, but other than that, there is no economic good news," said John Kilduff, vice president of risk management at MF Global in New York.
He added, "We're looking at $32 a barrel as the sign of the next big tumble in oil. If it goes below that, oil could drop into the $20s a barrel by the end of the week."
Japan, a bellwether for oil demand, reported Monday that its economic downturn was the worst it had faced in 35 years. That announcement came after the Group of 7 industrialized nations ended a weekend meeting without any consensus on what to do about the global recession.
Fadel Gheit, senior energy analyst for Oppenheimer and Co., said the oil markets were responding to the desire to see immediate improvements when that just was not likely.
"We have an emergency here. This is not going to be cosmetic surgery. Everyone wants to see something immediate, but the recovery is not going to happen overnight," Gheit said.
Phil Flynn, oil analyst for Alaron Trading Corp. in Chicago, said, "With the economies so bad, everyone is wondering where the demand for oil is going to come from."
Gasoline prices at the pump, however, continued to edge higher in California and throughout the rest of the nation over the last week, the Energy Department said in its weekly survey of filling stations. The price of a gallon of self-serve regular gasoline rose 3.8 cents to $1.964 a gallon. That was still $1.078 below last year.
California continued to lead the continental U.S. in gasoline prices by a wide margin, with the cost climbing an additional 7.6 cents to $2.291 a gallon. That was still 90 cents below the year-earlier price.
The rise in gasoline prices has largely been the result of planned refinery maintenance and cutbacks in production, analysts said.