OIL FUTURES: Crude At One-Week Low; Unsettled By U.S. Jobs Data
11/06/2009 02:23PM
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NEW YORK (Dow Jones)--Crude-oil futures dropped to a one-week low Friday after the U.S. unemployment rate rose to a 26-year high, unsettling previous hopes that the fledgling economic recovery would boost flagging oil demand.
Light, sweet crude for December delivery settled $2.19, or 2.8%, lower at $77.43 a barrel on the New York Mercantile Exchange. This was the lowest settlement since October 30. Brent crude on the ICE futures exchange closed $2.12, or 2.7% lower, at $75.87 a barrel.
U.S. unemployment climbed to its highest level in more than 26 years, rising 0.4 percentage point to 10.2%, the Labor Department reported. This surpassed economists forecasts of an increase to 9.9%.
"Today's unemployment figure was shocking and more than most expected and the oil market is adjusting now. Reality is setting in," said Carl Larry, analyst with Oil Outlooks and Opinions in Houston.
The report caused oil-market participants to reflect on lackluster oil demand in the U.S. rather than recent stock draws that had rallied the market this week. The U.S Department of Energy reported Wednesday that total products supplied over the past four-weeks was running 4.5% lower over the same period a year ago, at 18.8 million barrels a day, but this was largely overlooked.
"Today it's all about the demand numbers and whether rising unemployment will lead to a lack of demand for transportation fuels," said Larry.
Continued high unemployment in the U.S. could curb discretionary spending, dragging on gasoline and diesel demand.
"We have some green shoots showing in the economy, but unemployment is a lagging indicator and, as it's getting worse, it sends mixed signals about the economy," said Antoine Halff, analyst with Newedge in New York.
He noted that, with the jobless figures getting worse, this doesn't bode well for household consumption and gasoline demand in particular. Gasoline demand is directly driven by household spending and income, which makes it very sensitive to employment.
Oil joined a general fall in prices across most of the commodity spectrum, as investors took flight from riskier assets and back into the safe-haven of the dollar, which strengthened against the euro. Oil prices tend to fall when the dollar rises, as it makes the dollar-denominated commodity more expensive to other currency holders.
Front-month December reformulated gasoline blendstock, or RBOB, settled 6.34 cents, or 3.2%, lower to $1.9243 a gallon. December heating oil settled 5.41 cents, or 2.6%, lower to $2.0035 a gallon.
More information on settlements and highs and lows for futures on Nymex and ICE platforms can be found by searching for the following headlines:
Nymex Light Crude Oil Close
Nymex Harbor RBOB Gasoline Close
Nymex Heating Oil Close
ICE Brent Crude Oil Close
ICE Gas Oil Close
-By Claire Rangel, Dow Jones Newswires; 212-416-2846; claire.rangel@dowjones.com