Oil falls on U.S. jobless data

MARK WILLIAMS

The Associated Press

April 3, 2009 at 4:19 PM EDT

COLUMBUS, Ohio — Oil prices dipped Friday after the U.S. government reported that the nation's unemployment rate rose to the highest rate since late 1983 as employers eliminated 663,000 jobs.

Benchmark crude for May delivery fell 13 cents (U.S.) to settle at $52.51 barrel on the New York Mercantile Exchange.

With the U.S. and other nations hemorrhaging jobs, demand for gasoline and other fuels has plummeted. The unemployed are not commuting, factories are not producing as many consumer goods, and heat or electricity at millions of homes has been shut off.

“We are swimming in oil,” analyst Stephen Schork said. “We are swimming in oil because production is strong and demand is weak ... and it is going to remain that way in the short run.”

Still, Mr. Schork acknowledges that more people are buying into oil markets on “any positive thread.”

On Thursday, the same futures contract rose $4.25 to settle at $52.64 on word that the world's major powers would provide $1.1-trillion in loans and guarantees to developing countries.

In London, Brent prices rose 72 cents to settle at $53.47 a barrel Friday on the ICE Futures exchange.

Even with the jump in prices Thursday, benchmark U.S. crude ended the week essentially flat.

“We're getting a well-deserved pullback ahead of the weekend,” said Jim Ritterbusch of Ritterbusch and Associates.

The U.S. Labour Department reported Friday that the nation's unemployment level is now at 8.5 per cent. If part-time and discouraged workers are factored in, the unemployment rate would have been 15.6 per cent in March, the highest on records dating to 1994.

Since the recession began in December, 2007, the economy has lost a net total of 5.1 million jobs, with almost two-thirds of the losses occurring in the last five months.

The number of unemployed people climbed to 13.2 million in March. In addition, the number of people forced to work part time for “economic reasons” rose by 423,000 to 9 million. Those are people who would like to work full time but whose hours were cut back or who were unable to find full-time work.

Oil prices in recent weeks have begun to follow Wall Street, however, and stocks have been rising for three weeks. The stock market has historically bottomed out before the economy.

Crude futures began to rise at the beginning of March, rising about $10 from a low of close of $40.15 on the first trading day of the month.

Still, oil inventories are at 16-year highs, suggesting an extraordinary lack of appetite for energy.

Phil Flynn of Alaron Trading Corp. said that, for now, optimism about the economy has trumped concerns of oversupply. He also said actions taken by central banks in the U.S. and Europe could push the dollar lower, and thus push oil prices higher. Oil is traded in U.S. currency and foreign investors can buy more when the dollar drops.

“Right now the oil market has made it clear that supplies are way down on the list of what's moving the market right now,” he said.

Investors bought into oil despite some very bearish supply numbers released by the government.

Prices at the pump, meanwhile, fell 0.4 cents a gallon overnight to $2.041, according to auto club AAA, Wright Express and Oil Price Information Service. Prices are 10.8 cents higher than a month ago, but $1.248 below last year's prices.

In other Nymex trading, gasoline for May delivery rose 2.26 cents to settle at $1.4924 a gallon and heating oil rose less than a cent to settle at $1.4460 a gallon. Natural gas for May delivery rose 1.9 cents to settle at $3.801 per 1,000 cubic feet.