Oil Prices Begin the New Year by Slipping 4%

Crude oil prices were lower and gold prices rose as trading resumed after the New Year holiday.

Crude oil prices fell in New York, extending their worst yearly drop, on concern that a global economic contraction would limit fuel demand.

Crude oil for February delivery dropped as much as $2.06, or 4.6 percent, to $42.54 a barrel in after-hours electronic trading on the New York Mercantile Exchange.

Gold rose in Asia after an eighth straight annual gain as demand increased for the metal as a hedge against inflation and an alternative asset.

Gold advanced 5.8 percent in 2008 on demand for a store of value, as a financial crisis pushed major economies into recession and drove equity markets lower.

Bullion for immediate delivery gained $2.10 an ounce to $881.55 at 9 a.m. in Singapore, after earlier rising as much as 1 percent to $888.35. Gold for February delivery fell 0.2 percent to $882.40 in after-hours electronic trading on the Comex division of the New York Mercantile Exchange.

Among other precious metals for immediate delivery, silver fell 0.4 percent to $11.345 an ounce, platinum was little changed at $935 an ounce, and palladium rose 1.1 percent to $189 an ounce as of 8:54 a.m. in Singapore.

Oil fell 54 percent in 2008, the first annual decline since 2001 and the biggest drop since futures trading started in 1983. The February contract rose $5.57 to $44.60 a barrel on Dec. 31, the highest settlement since Dec. 12.

Fuel consumption in the United States was down 3.7 percent during the four weeks ended Dec. 26 from a year earlier, according to the Department of Energy. Oil rose 14 percent on Dec. 31 after a report showed American fuel stockpiles climbed less than expected and the conflict between Israel and Hamas raised concern that Middle East supplies may be disrupted.

“That rally on the 31st didn’t have too much behind it so we’re seeing crude come back to a level more reflective of the fundamentals,” said Toby Hassall, an analyst with Commodity Warrants Australia in Sydney. “We still don’t have a clear picture of when a global recovery is going to take place.”

Crude oil may rise next week as the Organization of the Petroleum Exporting Countries makes record production cuts to counter the deepest economic slump since World War II.