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OIL: Oil prices extend losses on weak economic outlook

AFP , NEW YORK

Crude oil prices fell further on Friday on concerns over slowing energy demand following a dismal report on the US labor market that sparked renewed recession worries.

New York’s main contract, light sweet crude for October, fell US$1.66 to close at US$106.23, capping a week in which the benchmark contract slid US$9.23.

Brent North Sea crude for delivery in October dropped US$2.21 to settle at US$104.09 a barrel.

The downward trend was fueled by news that the US jobless rate jumped to a five-year high of 6.1 percent — a sign of recession-like conditions that will limit energy demand.

“The rapid rise in the unemployment rate points to a US recession, as such an increase has never occurred outside of one,” said Peter Kretzmer, economist at Bank of America.

The decline was tempered somewhat by the slow pace of recovery of oil operations in the Gulf of Mexico after the passage of Hurricane Gustav. US officials said about 10 percent of production had resumed on Friday after a near-total shutdown.

“Crude prices featured on the downside on persistent concerns over weakening oil demand and as the US dollar continued to appreciate,” said Nimit Khamar, an analyst at the Sucden brokerage in London.

“The outlook for global economies is looking far from rosy, and is fueling concerns over demand destruction and pushing oil prices lower,” Khamar said.

The dollar struck a near 11-month high versus the euro on Friday on news of slumping industrial output in Germany, Europe’s biggest economy, and as the market awaited key US jobs data, traders said.

The US currency’s swift rise was then checked when the disappointing US unemployment figures came.

A strong US currency makes dollar-priced oil more expensive for buyers holding weaker currencies, dampening demand for crude, which is already falling because of a global economic slowdown.

Some caution persisted ahead of Tuesday’s meeting of the OPEC oil cartel with many market participants expecting them to reduce production.

Crude oil, which hit a record high of US$147.27 on July 11 in New York, has lost nearly US$40 in less than two months.

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