Crude oil fell to a two-year low on expectations of slowing demand from a weakening US economy.
The US unemployment rate soared in October to a five-year high of 5.4 percent and new orders at US manufacturers fell to the lowest level since March 1997, the government said. Oil prices have fallen 27 percent since the Sept. 11 terrorist attacks, as companies cut workers and energy use.
"The employment number underscores the weakness of the US economy," said Lynn Reaser, chief economist at Banc of America Capital Management in St. Louis, which manages US$280 billion.
"There will be a spillover effect to other countries, adding to the downward pressure on the economy, and this will weigh on oil demand."
Crude oil for December delivery fell US$0.21, or 1 percent, to US$20.18 a barrel on the New York Mercantile Exchange, the lowest closing price since July 22, 1999. Prices fell 8.4 percent this week. Oil fell below US$20 a barrel for the first time in two years during the session, dropping as low as US$19.69.
Lower demand in the US, the biggest energy consumer, has helped send the Organization of Petroleum Exporting Countries' crude oil index to US$18.25 a barrel, the lowest level since July 21, 1999.
With the so-called basket price down 31 percent since Sept. 11, OPEC members may vote for another output quota reduction at a Nov. 14 meeting.
OPEC has already reduced its production targets three times this year, by a total of 13 percent, to keep inventories from mounting. The producers exceeded their quotas last month, analysts said. The OPEC basket has been stuck below a target range of US$22 to US$28 a barrel for more than a month.
Crude oil inventories in the US stand at 304.6 million barrels, up about 8 percent from a year ago, according to the American Petroleum Institute.
OPEC may reduce daily production quotas by as much as 1 million barrels to avoid further price declines, Ali Rodriguez, the group's secretary-general, said after meeting with Norway's oil minister yesterday.
``If we don't make a decision in time, we will suffer the effects like in 1998,'' when oil dropped below US$10 a barrel, Rodriguez said.
Heating oil for December delivery fell US$0.061, or 1 percent, to US$0.5826 a gallon on the Nymex, the lowest closing price since Oct. 29, 1999. Prices dropped 6.6 percent this week.
Gasoline for December delivery rose US$0.027 to US$0.544 a gallon on the exchange after falling to a two-year low yesterday.
Prices still were down 6.7 percent this week.
The US jobless rate increased from 4.9 percent in September, the Labor Department said. Payrolls fell by 415,000 -- the most since President Jimmy Carter was coping with a recession in May 1980.
The economy contracted at an annual rate of 0.4 percent in the third quarter, the first decline since 1993, as consumer and business spending slumped. The decline may signal the start of a recession, which is commonly defined as two straight quarters of contraction.
"We are giving up all the gains of the past two years," said Tom Bentz, an oil broker at BNP Paribas Futures Inc in New York. "We had a growing economy and production was being outpaced by demand and that isn't the case now."
Oil company stocks followed crude oil lower. Exxon Mobil Corp, the largest publicly traded oil company, fell US$0.75 to US$39.74 in afternoon trading. ChevronTexaco Corp, the No. 2 US oil company, fell US$2.35 to US$87.51.
RSS