Oil falls below $60 a barrel on concerns about global slowdown

On Monday, news of China's $586-billion stimulus package seemed very bullish for the oil market and likely to help kick-start the global economy.

But today, the sentiment reversed direction on speculation that the global economy must be much worse than previously believed if even the Chinese government has to step in to stimulate growth, analysts said.

"You might think that the stimulus package will mean more energy demand. And maybe, in the long run, it will, but near term it isn't looking that way," said Phil Flynn, vice president and senior market analyst for Alaron Trading Corp. in Chicago.

"Today, people are seeing it as a sea change from what has been going on in China. The Chinese boom was not built on government intervention. It was built on strong economic growth all over the world."

Crude oil for December delivery fell $3.08 to $59.33 a barrel on the New York Mercantile Exchange. That was the lowest close in 19 months; the price had dipped below $59 earlier in the session. Flynn said oil could drop to $50 a barrel.

Following oil's cue, retail gasoline prices continued to slide.

Nationwide, a gallon of self-serve regular gasoline sold today for an average of $2.22, down by $1.03 in just the last month, according to AAA's daily price survey. The average is based on credit card receipts at 10,000 filling stations around the U.S. gathered by Oil Price Information Services and Wright Express.

Four states -- Indiana, Missouri, Ohio and Oklahoma -- had average gasoline prices that were less than $2 a gallon.

In California, the average dropped today to $2.52, or 97 cents lower than one month ago.

Truck drivers and any business that pays to have its goods collected or delivered by diesel-powered vehicles saw even more relief.

From its high point of $5.15 a gallon on May 30, the average for diesel in California has dropped to $3.02. The national average, which peaked at $4.85 on July 17, was $3.09 today.

But the mood among consumers and businesses remained grim, turning the wholesale price for partially refined, unfinished gasoline into a barometer of pessimism in the U.S., said Tom Kloza, chief oil analyst for Oil Price Information Service.

"In the Gulf Coast, wholesale gasoline was selling for $5 less a barrel than the cost of crude, the raw stuff it's refined from. That's just not supposed to happen," Kloza said. "California wholesale gasoline was trading only $1 above the cost of crude. Demand is low, and if you're a refiner, you are not making any money."

White is a Times staff writer.

ron.white@latimes.com