COLUMBUS, Ohio – Oil prices fell below $40 per barrel Friday for the first time this year as the government reported the nation's worst annual job losses since World War II.
People are traveling less, manufacturers are slashing production and there are job cuts across almost every sector of the economy, leading to a severe drop-off in energy use.
The Labor Department said employers slashed 524,000 jobs in December and 2.6 million jobs for all of 2008. It was the worst annual loss since 2.8 million jobs were loss in 1945, although the number of jobs has more than tripled since then. The nation's unemployment rate jumped to 7.2 percent, the highest since 1993.
Light, sweet crude for February delivery fell $1.72, more than 4 percent, to $39.98 on the New York Mercantile Exchange.
Friday's decline capped another bad week for oil prices, though crude at one point rose above $50 a barrel from a five-year low of $33.87 on Dec. 19.
Crude has closed lower every day with dire economic news overshadowing armed conflict in the oil-rich Middle East, a dispute that has shut off or disrupted natural gas supplies to more than a dozen European nations, and diminished crude exports from the Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global supply.
The unemployment report bolsters how the worst recession in decades has taken hold of the U.S. economy. At the same time, crude oil continues to flood the market with traders storing oil at sea in hopes that it can be sold later should prices rise.
Oil analyst Peter Schork notes in his daily report how weak the economy has become, especially in the auto and steel industries.
The Detroit Three automakers have announced extended holiday shutdowns. Chrysler has said it is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week in January, and General Motors will temporarily close 20 factories — many for the entire month of January — to cut vehicle production.
Meanwhile, U.S. Steel is idling plants in Granite City, Ill., Keewatin, Minn., and its Great Lakes Works near Detroit.
"These two anecdotes from the auto and steel industries tell us all we need to know about how dicey the current economic situation is," he wrote.
On Friday, KB Home, one of the nation's largest homebuilders, reported that lower housing revenue drove sales down 56 percent to $919 million in the fourth quarter from $2.07 billion in the 2007 fourth quarter. Homes delivered totaled 3,192 in the quarter, less than half the 8,132 delivered a year earlier as foreclosures mounted and mortgage lending dried up.
On Thursday, president-elect Barack Obama said the recession could "linger for years" unless Congress pumps unprecedented sums from Washington into the economy.
"This all supports the demand deterioration argument we've been talking about for months," said Jim Ritterbusch, president of Ritterbusch and Associated.
"In hindsight this pop from $35 to $50 was a normal market correction within a bear market," said Ritterbusch, who looks for prices to head back down toward last month's lows in the next few days.
Oil prices at one point Tuesday reached $50.47, the highest price since Dec. 1, before the continuing raft of lousy economic news took hold.
First, it the National Association of Realtors reporting that pending home sales fell to the lowest level on record in November. Then the government reported that orders to factories fell for a record fourth straight month in November.
On Wednesday, prices fell 12 percent after the Energy Information Administration said that crude oil inventories rose 6.7 million barrels, well above the 1.5 million-barrel build expected by analysts, followed by Friday's unemployment news.
Rising U.S. inventories show just how badly demand for energy has eroded.
Despite the decline in crude, prices at the pump continued to inch up, climbing 2 cents overnight to $1.782 a gallon after bottoming at $1.61 a gallon Dec. 30, according to auto club AAA, Oil Price Information Service and Wright Express. Prices now a dime higher than a month ago, but still $1.318 below prices a year ago today.
Ritterbusch said gasoline prices have followed crude higher, but he looks for those prices to come down now that oil is moving lower.
In other Nymex trading, gasoline futures slipped just over a penny to fetch $1.0767 a gallon. Heating oil fell about 7 cents, selling at $1.45 a gallon while natural gas for February delivery lost 12.7 cents at $5.456 per 1,000 cubic feet.
In London, February Brent crude fell $1.47 to $43.20 a barrel on the ICE Futures exchange.
http://news.yahoo.com/s/ap/20090109/ap_on_bi_ge/oil_prices
Topic: Crude falls below $40 for first time in 2009 (Read 345 times)