Nov 20. In global petroleum market headlines, oil prices slid below USD 54/bbl Wednesday as stock markets across the globe fell and a US government report revealed disarray in the housing market. Light, sweet crude for December delivery fell 77 cents to settle at USD 53.62 a barrel on NYMEX, where prices were in January 2007. In London, January Brent crude fell 12 cents to settle at USD 51.72 on the ICE Futures exchange. US motorists, hit by record gasoline prices, job losses and declining home prices, logged almost 11 bn fewer miles in September, according to the Transportation Department. Governments, businesses and consumers have slashed energy expenditures, which has cut the price of crude in half since record highs in July. Stock markets have served in recent months as a barometer for crude traders about the health of the global economy. Wall Street turned sharply lower Wednesday, as a bailout of Detroit's Big-3 automakers stalled on Capitol Hill. The Dow Jones industrials fell more than 400 points. Markets overseas retreated as well. Macro forces stoked falling crude prices Wednesday, with investors selling off in a "herd mentality," not unlike the way they piled into the market over the summer. Consumer prices plunged by the largest amount in the past 61 years in October as gasoline pump prices dropped by a record amount. The US Labor Department said Wednesday that consumer prices fell by 1% last month, the biggest one-month decline on records that go back to February 1947. The drop was twice as big as the consensus forecast. For October, energy prices fell by a record 8.6%, led by a 14.2% drop in gasoline prices, also a record. Also dampening energy prices was more bad news from the housing industry. Construction of new homes and apartments fell by 4.5% in October to an annual rate of 791,000 units, the Commerce Department reported. It was the slowest construction pace on records going back to 1959. We also note that supply disruptions that once triggered upside failed to stem crude's decline as falling demand overrides supply issues. Yesterday Chevron invoked "force majeure" on 90,000 bpd of its Nigeria gross production after a pipeline was breached by militants in the Niger Delta. Investors took little notice. Investors have also been unfazed by the hijacking of a Saudi supertanker carrying USD 100 mn in crude this week. That ship is still under the control of Somalian pirates who are seeking ransom. The Energy Department's Energy Information Administration reported Wednesday that crude inventories rose by 1.6 mn barrels last week after stagnating in the prior period. We had expected a build of 1 mn barrels. Gasoline inventories rose by 500,000 barrels, which is squarely in line with our forecast. The one bullish signal in the petroleum market came from distillates such as heating oil. With winter cold reaching into the Northeast, inventories of distillate fuel plunged by 1.5 mn barrels for the week ended November 14. We had expected distillate stocks to rise by 700,000 barrels. Demand for gasoline over the four weeks ended November 14 was 2.2% lower than a year earlier, averaging 9 mn bpd, the EIA said in its weekly report. OPEC is holding an informal meeting later this month ahead of its regular December meeting. The cartel’s President Chakib Khelil has said the group will wait until the effects of a 1.5 mn-bpd production cut plays out and that another cut on November 29 is unlikely. More hawkish OPEC members like Iran have called for immediate production cuts and we believe they may get them only in the event that oil falls below USD 50. Moving forward, we can see that despite unbroken market turmoil the USD 50 resistance level appears to be holding up as we have not seen the huge price swings that have dominated the market for the past month. As we noted yesterday, market sentiment is still bearish, but not as bearish as a week ago, which means we could be close to the bottom, with volatility subsiding and the market perhaps on the road toward consolidation. Given yesterday’s major drawdown in distillates and the winter heating season right around the corner, fuel oil could act as the price driver to propel WTI and Brent back up to the USD 60-65 range within the next couple of weeks. The possible collapse of the Big-3 US automakers – with GM most likely to go under – poses a threat to the downside. A collapse would deepen the recession, dent demand and push crude prices down even further.