Crude oil fell after unemployment in the U.S. climbed in January to the highest level since 1992, signaling that the recession in the world’s biggest energy- consuming country is deepening. Prices dropped as much as 6.2 percent following the Labor Department’s announcement that payrolls fell by 598,000, the largest monthly decline since December 1974. U.S. fuel demand over the past four weeks averaged 19.5 million barrels a day, 2.8 percent lower than a year earlier, an Energy Department report on Feb. 4 showed. “Increasing unemployment takes demand out of the system, especially for gasoline,” said Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York. “Even when a recovery of economic growth occurs, unemployment will remain high, so we won’t see energy demand rebound soon.” Crude oil for March delivery fell $1, or 2.4 percent, to settle at $40.17 a barrel at 2:50 p.m. on the New York Mercantile Exchange. Oil is down 3.6 percent for the week and 9.9 percent this year. Gasoline futures for March delivery dropped 2.41 cents, or 1.9 percent, to settle at $1.2507 a gallon in New York. Heating oil declined 0.74 cent, or 0.5 percent, to end the session at $1.3598. Oil futures in New York have traded between $38.60 and $42.68 this week as the recession in the U.S., Europe and Asia has led to layoffs and reduced spending. Stock Market Rally Prices rebounded from today’s lows after U.S. stocks gained on speculation the unemployment number will force Congress to pass an economic stimulus package. “When the Dow rises by 200 points it’s hard for the oil market to completely ignore the move,” said Jim Ritterbusch, president of Ritterbusch & Associates, a Galena, Illinois, energy consultant. “The news is still overwhelmingly bearish, though.” The Dow Jones Industrial Average added 217.52 points, or 2.7 percent, to 8,280.59, after rising as much as 249.30 points. The Standard & Poor’s 500 Index rose 2.7 percent to 868.60. “The key to oil-demand recovery has to come from the economy,” said David Pumphrey, deputy director of the energy and security program at the Center for Strategic and International Studies in Washington. “It looks like demand will be depressed for the next several years.” U.S. crude-oil supplies increased 7.2 million barrels to 346.1 million last week, according to the Energy Department. Inventories have gained in 17 of the past 19 weeks, leaving stockpiles 15 percent higher than the five-year average for the period, the department said. Cushing, Oklahoma Supplies at Cushing, Oklahoma, where oil traded on Nymex is stored, climbed 2.5 percent to 34.3 million barrels last week, the highest since at least April 2004, when the department began keeping records for the location. The price of oil for delivery in April is $5.98 a barrel higher than for March, up from a $3.99 premium yesterday. December futures are $15.35 higher than the front-month contract, versus $13.90 yesterday. This structure, in which the future month’s price is higher than the one before it, is known as contango, and is often an indicator of oversupply. “The contango tells you that people either expect a recovery in demand during the second half of the year, which is lifting the back end of the curve, or there’s too much crude oil on hand, depressing the front month,” Pumphrey said. Volume in electronic trading on the exchange was 765,450 contracts as of 3:03 p.m. in New York. Volume totaled 469,239 contracts yesterday, down 4.4 percent from the average over the past three months. Open interest yesterday was 1.25 million contracts. The exchange has a one-business-day delay in reporting open interest and full volume data. OPEC Cuts The Organization of Petroleum Exporting Countries is implementing pledged production cuts and is committed to restoring balance to the market as the spreading recession reduces demand for oil, the group’s president said. “OPEC is determined to play its part in restoring balance to the market,” OPEC President Jose Maria Botelho de Vasconcelos said in a statement issued today in Luanda, the Angolan capital. “To this end, OPEC reaffirms its readiness to take whatever further decisions that may be necessary during the forthcoming March meeting of the ministerial conference.” OPEC, which supplies more than 40 percent of the world’s oil, agreed to three supply cuts in 2008 to halt sliding prices as world oil demand heads for its second year of contraction. The last was agreed to on Dec. 17 and took effect Jan. 1. The group is scheduled to hold its next policy-setting ministerial meeting on March 15, in Vienna. Brent crude oil for March settlement fell 25 cents, or 0.5 percent, to end the day at $46.21 a barrel on London’s ICE Futures Europe exchange. Brent futures traded at a $6.04 premium over West Texas Intermediate crude oil, the grade that’s traded in New York.

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