Crude oil prices plunged to four-year lows on Friday as shockingly weak jobs data in the US raised prospects of a severe fall in energy demand.
The contract for light, sweet crude for January delivery closed at US$40.81 a barrel on the New York Mercantile Exchange, down a hefty US$2.86 from Thursday’s close.
The New York contract brushed the US$40 psychological barrier in intraday trading, sinking to US$40.50, its lowest level since December 2004.
In London, Brent North Sea crude for January slid US$2.54 to settle at US$39.74, a low last seen in January 2005.
Oil prices extended their slide after the US Labor Department reported employers slashed a staggering 533,000 jobs last month, sending the unemployment rate to a 15-year high of 6.7 percent, its highest level since October 1993. The number of job losses was the largest in 34 years and much higher than the 325,000 expected by private forecasters, suggesting the recession in the world’s largest economy would be longer and deeper than feared.
Oil prices have plunged by more than two-thirds since reaching record highs above US$147 on July 11 as global economic slowdown widened, weakening demand.
“The wild bull era is over,” Phil Flynn at Alaron Trading said.
Oil prices began the week sharply weaker after OPEC, which pumps 40 percent of the world’s oil, over the weekend postponed a decision on cutting output to a Dec. 17 meeting.
In a precipitous slide, oil prices sank on Wednesday below US$45 for the first time since 2005.
Flynn said the oil price spike had been driven by strong global economic growth, cheap money and available credit, conditions that have evaporated amid the global financial crisis that accelerated in September.
“We are now entering a new era of lower and more stable oil prices for years to come. That does not mean we will not see other bull markets along their way but get used to the markets trading different than they did throughout most of this decade,” he said.
The International Energy Agency (IEA) on Friday lowered its projections for global oil demand in 2008-2013, foreseeing annual growth of 1.2 percent instead of 1.6 percent amid the worldwide economic slump.
The IEA forecast demand for oil products would climb from 86.2 million barrels a day this year to 91.3 million in 2013, lowering its July forecasts.
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