Oil settles at 21-month low
Crude sinks closer to $54 a barrel as concerns about the economy continue to weigh on the market.
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NEW YORK (CNNMoney.com) -- The price of oil settled Tuesday at a 21-month low as the global economic slowdown continues to raise concerns about waning demand for energy.
Light, sweet crude for December delivery fell 56 cents to $54.39 a barrel - the lowest closing price since the $54.01 settlement on Jan. 29, 2007.
The contract fell $2.09 to settle at $54.95 a barrel on Monday.
"We expect the downtrend in energy prices to continue based on fresh signs of economic weakness," said Tom Pawlicki, an oil industry analyst at MF Global in Chicago.
A government report released Tuesday shows that energy prices posted the largest one-month decline since July 1986. In October, energy prices fell 12.8% on decreased demand, according to the Labor Department's Producer Price Index.
One indicator of the drop in demand is growing oil stockpiles, according to Rachel Ziemba, energy analyst with RGE Monitor. The Energy Information Administration and American Petroleum Institute release weekly oil-reserve data on Wednesday, and analysts surveyed by industry-tracking firm Platts expect it to show a 1.2 million barrel increase in U.S. commercial crude oil stocks.
Stocks: The oil market has closely tracked U.S. stock indexes as traders attempt to assess the severity and duration of what many economists say is a looming global recession.
When a nation's economy weakens, demand for oil plummets as consumers and industries cut back on spending.
Stocks rose Tuesday afternoon, with the Dow Jones industrial average (INDU) up 1.83%, the Standard & Poor's 500 (SPX) index level up 0.98% and the Nasdaq (COMP) composite flat at 0.08%.
Asian markets finished in negative territory and while European markets closed higher as grim economic data and weak corporate results weighed on the market.
On Monday, Japan became the latest country to announce that it has officially entered a recession. That followed announcements last week by German and European Union finance officials confirming recession has gripped the euro-zone.
OPEC: With the price of a barrel of crude falling off this summer's all-time high by more than 60%, the Organization of Petroleum Exporting Countries is reportedly considering an early meeting to discuss production quotas.
OPEC is currently scheduled to meet Dec. 17 in Algeria, but the group could reportedly meet as early as Nov. 29 in Cairo.
OPEC cut oil output by 1.5 million barrels a day on Oct. 24 in an effort to prevent further declines in oil prices. But so far the market's fear of weak global demand has outweighed the cartel's efforts to control the price by limiting supply.
Gas prices: As crude oil prices have fallen off record highs, so have retail gas prices. The cost at the pump fell for the 62nd consecutive day Tuesday to levels not seen in three-and-a-half years.
The Labor Department's Producer Price Index showed gas prices fell by 24.9% in October, compared with a drop of 0.5% in the prior month.
The national average price for a gallon of regular gas shed 1.9 cents to $2.068 a gallon, according to a daily survey by the American Automobile Association.
The last time the average price for a gallon of regular unleaded gasoline dropped below the current level was on March 18, 2005, when the national price averaged $2.0614 a gallon.
Tuesday's national average is down $2.046, or nearly 50%, from the record high price of $4.114 that AAA reported on July 17.
Tanker seized: A fully laden oil tanker was seized earlier this week by armed pirates off the coast of Somalia, according to a statement released Tuesday by the tanker's operator, Vela International Marine Ltd., which is owned by the Saudi Arabian-based Aramco.
Energy analyst Ziemba thinks new, longer shipping routes, to avoid attacks, and potentially higher costs of insuring cargos, could push up the cost of transporting oil.
The seizure "is a reminder of some of bottlenecks and vulnerabilities in energy trade," Ziemba said.
-- CNNMoney.com writers Catherine Clifford and Ben Rooney contributed to this report. 
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