BLBG: Oil Falls as U.S. Unemployment Surges, Signaling Lower Demand
Crude oil fell to a two-week low 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 after the Labor Department said payrolls fell by 598,000, the biggest monthly decline since December 1974. U.S. fuel consumption over the past four weeks averaged 19.5 million barrels a day, 2.8 percent lower than the same period last year, according to an Energy Department report on Feb. 4.
“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 $1.74, or 4.2 percent, to $39.43 a barrel at 10:24 a.m. on the New York Mercantile Exchange. Futures touched $38.60, the lowest since Jan. 20. Prices are down 12 percent this year and 55 percent lower than a year ago.
Gasoline futures for March delivery dropped 3.37 cents, or 2.6 percent, to $1.2411 a gallon in New York. Heating oil declined 4.11 cents, or 3 percent, to $1.3261.
Oil futures in New York have traded between $38.60 and $42.31 this week as the recession in the U.S., Europe and Asia has led to layoffs and reduced spending.
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.
OPEC Cuts
The Organization of Petroleum Exporting Countries is monitoring the result of it series of production cuts to decide whether more reductions are needed at a March 15 ministerial meeting, President Jose Maria Botelho de Vasconcelos said in an interview yesterday.
OPEC, which supplies more than 40 percent of the world’s oil, already agreed to three supply cuts 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.
Brent crude oil for March settlement fell $1.21, or 2.6 percent, to $45.25 a barrel on London’s ICE Futures Europe exchange. Brent futures traded at a $5.82 premium over West Texas Intermediate, the grade that’s traded in New York.
