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Oil prices drop as jobs data add to demand worries
 Oil prices sank below $106 a barrel Friday as a jump in the U.S. unemployment rate signaled to traders that Americans might keep paring back their energy use to save money. The Labor Department said the economy lost jobs in August for the eighth consecutive month--and at a faster-than-expected pace. The unemployment rate spiked to 6.1 percent from 5.7 percent in July, above the 5.8 percent rate that analysts forecast. "There's been a terrific amount of growing concern about the outlook for demand globally," said John Kilduff, senior vice president of risk management at MF Global LLC. "Today's employment report emboldened that concern." Light, sweet crude for October delivery fell $1.93 to $105.96 a barrel in afternoon trading on the New York Mercantile Exchange, after falling to $105.13, its lowest trading level since early April. Since surging to a record $147.27 a barrel on July 11, crude has dropped by over $40, or more than 27 percent. What could possibly stanch the drop is a cutback in production. Investors are waiting to see if OPEC decides to restrict oil output at its meeting next week in Vienna in response to the two-month plunge in prices. The Organization of the Petroleum Exporting Countries has indicated it may take action to defend the $100-a-barrel level for crude. But with the dollar on the rebound, many analysts say even a production cutback could prove ineffectual in boosting oil prices. The dollar weakened modestly against the euro and pound on Friday after the employment report, but rose against the yen. The dollar's recent comeback has helped accelerate oil's price decline. Commodities were bought by many funds to hedge against inflation and weakness in the U.S. currency, so when the dollar rebounded, funds unwound those hedges, thereby driving commodities prices lower. Posted by: Fred 2008-09-06 |
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