Oil price slumps to $41 as global gloom deepens

PRICE FALL: Oil slumped to $41 amid new fears over rising unemployment in the US. (Getty Images)

Oil prices slipped below $41 a barrel on Friday as data showing a big rise in US unemployment deepened gloom over the outlook for the world's biggest oil consumer.

US employers slashed payrolls by 524,000 in December, driving the national unemployment rate to its highest level in almost 16 years, a government report showed on Friday, suggesting the year-long recession was deepening.

The US unemployment rate rose to 7.2 percent in December, the highest since January 1993. Analysts polled by Reuters had predicted a reduction of 550,000 jobs in December.

US crude for February delivery fell to a low of $40.63, down $1.07 per barrel, before recovering to $41.35 by 6pm UAE time. London Brent crude was down 6 cents at $44.61.

Analysts said the payrolls data helped focus the oil market on the deteriorating state of the world economy but prices appeared to be range-bound.

"Short-term, oil is held within a fairly narrow range between $40 and $45. I don't see $50 in the near future," said Frank Schallenberger, head of commodity research at Landesbank in Stuttgart.

The market appeared to be largely ignoring evidence that oil producers were cutting output in an attempt to support prices.

Top crude exporter Saudi Arabia is the latest member of the Organisation of the Petroleum Exporting Countries to show it is cutting output in line with a deal agreed in December.

It will deepen its supply cuts in February from January to at least three Asian crude buyers, industry sources said on Friday.

Earlier this week, Kuwait and Iran also told customers of bigger supply curbs this month, after the cartel agreed its biggest ever production cut in December in a bid to bolster prices.

One prop of the recent rally that had lifted oil prices since the start of the year looked likely to be removed, after Russia reached an agreement to deploy European Union monitors to ensure the smooth flow of gas via Ukraine.

The threat of widening supply disruptions in Europe from the Russia-Ukraine gas row, as well as Israel's invasion of Gaza, had boosted oil to a one-month high of $50.47 on Tuesday.

While the Gaza conflict does not directly threaten oil supplies, Middle East unrest can bolster prices because countries in the region pump about a third of the world's oil.

Oil has fallen more than $100 from a record peak of over $147 a barrel in July, as the global economic downturn hits demand for fuel. It settled at $33.87 a barrel on Dec. 19, the lowest level since Feb. 10, 2004. (Reuters)

Print | Email | Discuss this article

| Share |

READERS' COMMENTS

Click here to post a comment

Add your Comment All posts are sent to the administrator for review and are published only after approval. ArabianBusiness.com reserves the right to remove any comment at any time for any reason. Please keep your responses appropriate and on topic. Arabian Business would like to point out that only comments relevant to the story will be published. Any containing personal insults or inappropriate language will not be approved.
Name *
Remember me on this computer
Email *	(Your email address will not be published)
City
Country
Subject *
Comment *
Notify me of further comments
Enter the words above *
Please click post only once - your comment will not be published immediately.

MORE FROM ARABIANBUSINESS.COM