Oil futures slumped under US$40 a barrel on Friday at the end of a tough week for the commodity, as a weakening US economy hit demand causing energy inventories to pile up.
Unemployment in the US — the world’s biggest economy and a major consumer of commodities — surged last month to 7.6 percent, the highest since 1992, as 598,000 jobs were cut, the Labor Department reported on Friday.
The number of job losses for the recession-hobbled economy was the worst since 1974, according to the monthly report on nonfarm payrolls, seen as one of the best indicators of economic momentum. The department also revised up its estimate of December job losses to 577,000 from 524,000.
“Overall, another awful payrolls report and, with initial jobless claims still edging higher, February could be even worse,” Capital Economics’ US specialist Paul Ashworth said.
The market was rocked this week by heightened concerns that the US — the world’s biggest energy consuming nation — will slash energy demand to cope with a dramatic downturn, analysts said.
The price of New York’s light sweet crude oil tumbled as low as US$38.60 a barrel on Friday after the latest bad news from across the Atlantic.
“Crude oil fell on concern that fuel demand in the US ... may decline, as a report showed the number of newly jobless climbed,” BetOnMarkets analyst Dave Evans said.
The market was also dragged lower this week by news of rising American crude inventories. US government data showed on Wednesday that crude stockpiles had soared by 7.2 million barrels last week, more than double the 2.9 million barrels forecast by analysts. It was the fifth consecutive week of gains, and the sharp rise underlined slack demand amid the global financial crisis that has brought the world economy to a near-halt.
OPEC signaled last week that it would consider more reductions in output as its member countries try to lift prices and in turn their incomes. OPEC, which pumps about 40 percent of the world’s oil, announced production cuts totalling 4.2 million barrels per day late last year. The cartel is to meet again next month.
After plunging from record highs above US$147 last July, oil prices touched multi-year lows in December, at one point nearing US$32 a barrel.
By Friday on the New York Mercantile Exchange, light sweet crude for delivery in March tanked to US$39.54 a barrel from US$41.74 a week earlier. On London’s InterContinental Exchange, Brent North Sea crude for March sank to US$45.23 a barrel from US$46.00 a barrel.